Free shipping thresholds: when they pay and when they only move cost

Why shipping cost matters at checkout

Baymard Institute calculates an average documented cart abandonment rate of 70.22% across 50 studies, and in its survey of reasons, 40% of shoppers who abandoned, excluding those just browsing, said extra costs such as shipping, tax and fees were too high. That is why a free shipping threshold looks attractive. The question is whether it changes behavior enough to pay for itself.

A transparent example

Assume a store earns 40% contribution margin on products and pays 45 units to ship an order. The threshold is 500. A customer with 420 in the cart adds a 90 item to qualify. That item adds 36 in contribution, but the store now absorbs 45 in shipping: the order is 9 units worse than if the customer had paid shipping and stopped at 420.

Change one assumption and the answer flips. At a 60% margin the same item adds 54 and the order ends 9 units better. Every customer who would have spent more than 500 anyway now receives shipping they would have paid for, which is a pure cost.

What to measure before you set the number

Look at the distribution of cart values, not the average order value. A threshold just above a dense cluster of carts nudges many people; one far above it changes little. Compare contribution per visitor, not revenue or order count, because a threshold can raise both while lowering profit.

The cleanest answer comes from comparison: show the threshold to some visitors and not to others, then compare conversion, order value and contribution per visitor. Without that, a rising order value may be seasonality, not the offer.