Why a threshold raises average order value
Many customers don’t like paying for shipping. A threshold gives them a way out: add one more item, and shipping is free. Some customers below the line top up to reach it. Their orders get bigger, and so does your average order value.
There’s a catch. Every order above the line now ships free. That includes orders that were already big enough and would have paid for shipping anyway.
How to pick a threshold
A common starting point is a bit above your current average order value. Treat that as a rule of thumb, not a proven number. A customer near your average then needs one small item to qualify. Set it far above, and few will bother. Set it below, and many orders ship free with no top-up at all.
- Look at your order values. Count how many recent orders already sit above each threshold you’re weighing. Those orders stop paying for shipping from day one.
- Check what fills the gap. If your threshold is $15 above your average, you need products around $15 that people want to add.
- Work out the margin on top-ups. A $15 top-up at a 50% margin adds $7.50 of gross profit. Not sure of your margin? Use our profit margin calculator.
The cost of shipping you no longer charge
Your carrier charges the same with or without a threshold. What changes is who pays. Each order above the threshold stops paying for shipping, so that income is gone. Shipping is one of the costs that decide your profit per order, so this matters on every sale.
Net effect = extra gross profit from top-ups − shipping income you give upExtra gross profit = top-ups × margin × amount added. Shipping given up = free orders × what customers paid for shipping.
Example: out of 100 orders, 20 are already above a $65 threshold. Of the other 80, 30% top up from a $50 average. That’s 24 top-ups, each adding $15 at a 50% margin.
| Line | Per 100 orders |
|---|---|
| Orders already above $65 | 20 |
| Orders that top up, 30% of 80 | 24 |
| Extra gross profit, 24 × 50% × $15 | $180.00 |
| Shipping income given up, 44 × $4 | −$176.00 |
| Net effect | $4.00 |
A result this thin can flip with a small change in the top-up rate. So it helps to know the rate where the threshold breaks even.
Break-even top-up rate = share above × shipping charge ÷ (share below × (margin × amount added − shipping charge))Example: 0.2 × $4 ÷ (0.8 × ($7.50 − $4)) = 28.6%
If margin × amount added is smaller than the shipping charge, no top-up rate works. Each top-up then gives away more in shipping than it earns.
Free shipping threshold calculator
Enter your own numbers, without VAT. The result updates as you type.
A simple model. It assumes customers who top up start at your average order value and add what they need to reach the threshold. It assumes the threshold doesn’t change how many orders you get, and orders below it stay as they are. Your carrier charges the same either way, so the loss is the shipping customers stop paying. Nothing you type leaves this page.
How to set it up in WooCommerce
WooCommerce has free shipping with a minimum order amount built in. You don’t need an extra plugin.
In WordPress, go to WooCommerce → Settings → Shipping. Your shipping zones are listed there.
Edit the zone you want, such as your home country. Each zone needs its own free shipping method.
Press Add shipping method, pick Free shipping and continue.
Under Free shipping requires, choose A minimum order amount. Enter your threshold in Minimum order amount.
Decide how coupons count. Tick Apply minimum order rule before coupon discount to check the threshold before a coupon comes off.
Save. Then test with a cart below the threshold and one above it, and check the shipping options at checkout.
Your other methods, such as flat rate, still show next to free shipping. Customers above the threshold can pick the free option.
Check how your store shows prices. WooCommerce compares the threshold with the cart subtotal as your store displays it. If your shop shows prices with VAT, enter the threshold with VAT too. Example: $65 before 25% VAT is $81.25 with VAT.
Test it and watch it
- Note the start date. Keep prices, ads and the threshold steady for a few weeks, so you can read the result.
- Compare before and after. Look at average order value, order count and the share of orders above the threshold. Compare the same weekdays, since a Monday can sell differently from a Saturday.
- Watch the top-up rate. Compare it with the break-even rate from the calculator.
- Check what shipping costs you. Bigger orders can weigh more and cost more to ship.
When free shipping hurts
- Heavy or bulky products. Carrier costs rise with weight. A top-up that adds weight adds shipping cost that you now carry.
- Low margins. Example: at a 20% margin, a $15 top-up adds $3. If customers paid $5 for shipping, every top-up loses money.
- A threshold below your average order. Most orders then ship free without adding anything.
- Many orders near the line already. If a large share is above it, you give up shipping income on all of them.
- Costly zones. Shipping zones each have their own methods. You can offer free shipping only where parcels are cheap to send.