Free shipping from what amount? This is how you calculate your threshold
,
by Verpakkingdeals.nl
5 min reading time
Almost every webshop applies a threshold for free shipping, but rarely based on a calculation. This is how you determine yours using your margin, your order value, and your actual packaging costs.
If you look at ten Dutch webshops, you'll generally find three different thresholds: free shipping from €25, from €50, or from €75. Ask the owner where that number comes from, and the answer is often: that's what everyone else does. Yet, your threshold determines how much profit you retain per order and how many customers add more items to their cart. It's one of the few levers you can adjust yourself, and it's quantifiable.
Now is a good time to do that calculation: if you do it in September, your threshold will be well-adjusted for the busy months ahead.
Free doesn't exist; someone else just pays for it
An order shipped without shipping costs will cost you three things: the carrier's fee, the packaging material, and the time of the person packing it. Everyone knows the first item; the other two are almost always underestimated.
Therefore, first calculate your packaging costs per order, using the prices you pay yourself. A few examples from our assortment:
From one roll of tape (66 meters), with an average use of about one meter per package, you can get about 60 shipments. So, calculate five cents of tape per order. Add to that filling material—a roll of bubble wrap 500 mm wide costs €12.95—and a possible VOID security seal for €9.95 per 60 pieces, which is just over sixteen cents per package.
Step 1: Determine your cost per order
Add up what you spend on one average shipment. For example, a webshop that sends letterbox parcels:
Shipping rate from your carrier: the amount stated in your contract
Box: €0.18 to €0.24
Tape and filling: approximately €0.10
Packing time: calculate five minutes per order at your hourly rate
For a parcel instead of a letterbox shipment, only the first item increases, but significantly. This is precisely why the box size you choose is a financial decision, not just a practical one.
Step 2: Look at your current average order value
In your webshop statistics, find out what a customer currently spends on average. That average order value is your starting point. If you set your threshold below it, you're giving away shipping to customers who already spent enough. If you set it ten times higher, no one will reach it, and you'll only have an empty promise on your site.
The practical bandwidth is between 20 and 40 percent above your average order value. If your average is €32, then a threshold of €40 is realistic: close enough for customers to add another item, and high enough to boost your average.
Step 3: Check if your margin can bear it
Now for the most important test. At your threshold amount, your gross margin must be able to cover the full shipping costs. An example calculation with fictitious numbers—fill in your own figures:
Item
Example
Order value at the threshold
€ 40.00
Gross margin 35 percent
€ 14.00
Shipping rate (example)
€ 4.50
Packaging
€ 0.35
Margin after shipping
€ 9.15
In this example, free shipping costs you more than a third of your margin on the threshold order. That is manageable. If your margin at that point falls below ten percent, then the threshold is too low—or your box is too expensive for what's inside it.
Ensure your packaging doesn't undermine the threshold
The pitfall lies in the jump from letterbox to parcel. A customer who orders exactly at your threshold and purchases three items may no longer fit through the letterbox. Your margin then erodes precisely on the orders you've incentivized with your threshold.
Two solutions. Align your threshold with what still fits into a letterbox box of 255 x 160 x 28 mm, so that the majority of threshold orders remain in the inexpensive category. Or set the threshold higher, so that an order shipped as a parcel also brings in enough margin to cover that cost. What doesn't work is a threshold that is exactly on the borderline: then half of your orders will fall into the expensive category.
Alternatives if free shipping isn't feasible
A tiered system. Below €25, the full rate; above that, half; from the threshold, free. Customers see movement, and you retain margin.
Free only for the Netherlands. Shipments to Belgium or Germany cost more; exclude them from your offer or give them their own threshold.
Free for pickup or from a parcel point. Costs you less and works well if you have local customers.
An extra instead of a shipping discount. Sometimes a small free addition is cheaper than bearing the shipping costs.
Check it after a month
Before making any changes, record your average order value, the proportion of orders above the threshold, and your margin per order. Recheck four weeks later. If the average order value increases while your number of orders remains the same, you're on the right track. If the number of orders lags, your threshold is too far off. Always change one thing at a time; otherwise, you won't know what caused the effect.
If you want to lower your cost side before adjusting your threshold, look at the bundle prices at Advantage Packaging for Webshops and the flat sizes at Letterbox Packaging. The full range of boxes, tape, and filling is available at Packaging & Shipping. If you're unsure which box sizes suit your assortment or would like to discuss a fixed stock, please send an email to info@verpakkingdeals.nl.
Choosing a USB hub for working from home: 2.0 or 3.0, how many ports, and with switches
· 3 min reading time
Choosing a USB hub for working from home: 2.0 or 3.0, how many ports and with switchesYour desk needs three USB devices, but your laptop only has two ports. Or...
Power outages in autumn: emergency supplies you'll actually use
· 2 min reading time
Autumn Power Outages: Emergency Supplies You'll Actually Use October to December. Heating isn't in full swing yet, but the nights are getting long and cold. If a power outage strikes...
Choosing a power bank: capacity, charging speed, and weight compared
· 2 min reading time
Choosing a Power Bank: Capacity, Charging Speed, and Weight Compared Your phone dies when you're out and about. The classic emergency solution is a power bank. But what capacity do...
