Setting a Free Shipping Threshold

There is no correct threshold for apparel in general. There is a correct threshold for your catalog, your prices and your shipping costs. Work it out this way:

1. Pull three months of orders. Group them by number of units: one, two, three, four or more.
2. For each group, find the average order value and the average fulfillment plus shipping cost. A line-item invoice makes this possible. See cost per order, line by line.
3. Find where the margin after fulfillment and shipping is healthy. Usually it is at two or more units, because shipping cost per unit falls as units are added.
4. Look at the gap between your most common order value and that point. The threshold should sit just above where most orders land today, close enough to reach with one more item.
5. Check the add-on. Make sure there is a low-cost item that gets most carts over the line.
6. Test it for a full month, then compare average order value, conversion and margin after shipping with the month before.

A surf brand finds that most of its orders are one or two units. One-unit orders carry the highest fulfillment and shipping cost relative to their value, because the per-order fee and the label are spread across a single item. Two-unit orders carry the shipping cost across two items, and the margin after shipping improves.

The brand sets its threshold just above the price of its best-selling tee, so a customer buying one tee is one hat or one pair of socks away from free shipping. It adds a section of add-on items to the cart page.

The numbers in your version will differ. The shape usually does not.

Free shipping thresholds interact with returns. A customer who orders two sizes to cross the threshold and returns one has cost you an outbound label, a return and a restock. That is not a reason to avoid thresholds. It is a reason to watch return reasons by style and size, and to make exchanges easier than refunds.

At OC3PL, monthly return reports show reasons and SKU-level detail, so you can see whether a threshold change moved your return rate. See what apparel returns really cost and exchanges vs refunds.

Many brands drop or remove the threshold during Black Friday and the holidays. Before you do, check carrier peak surcharges, which are passed through and itemized at OC3PL. A threshold that works in March can lose money in December if peak surcharges are not in your math.

• Model the threshold with peak shipping costs, not everyday costs.
• Set an end date for any holiday free shipping offer before you announce it.
• Watch the share of one-unit orders during the promo; it tells you whether the offer is lifting order size or only giving away shipping.

If you want help pulling the numbers, ask your account manager. They work on site and can walk you through the line items on your invoice. We are here. We got you.