The free shipping threshold is the cart subtotal above which a storefront stops charging for shipping. A common starting point is 10–25% above current AOV, but that’s an anchor, not a rule — the right number is whichever maximizes contribution margin per visitor in test.
Two postures get conflated. A brand at $58 AOV with a $75 threshold is using it as an AOV lever: most orders fall short, the shopper sees the gap, and a portion top up. The same brand with a $50 threshold is using it as a brand promise — almost every order ships free, and the cost is absorbed as a margin hit. Both are valid; not the same decision.
Raising the threshold pulls three numbers in opposing directions. AOV rises on threshold-aware orders, but only partially — modeling it as a full pull-up overestimates the lift. Contribution margin per below-threshold order improves by the saved ship cost. Conversion falls on price-sensitive segments. The honest read is contribution margin per visitor, not any of the three in isolation. Pre/post comparisons won’t survive seasonality and channel mix — use an A/B test.
The discount trap is worth naming. Most storefronts should evaluate the threshold against the pre-discount subtotal, but some platforms default to post-discount. Concretely: threshold $75, cart $75, customer applies a 20% promo code, post-discount subtotal lands at $60, the order silently drops below threshold and the customer hits an unexpected shipping charge at payment. Conversion dies and nothing in the funnel report explains it. Check which subtotal the storefront uses before testing anything else.
Below-threshold fee structure is a separate lever. A flat $7.95 fee and carrier-calculated rates at the same average cost behave differently because the flat rate is predictable; predictability lowers cart abandonment. Pick the threshold and the fee as two decisions, not one.