Shipping Cost Margin Impact Calculator
See how shipping erodes your profit: compare margin with and without free shipping, and find the order value where absorbing shipping still pays.
How it works
Profit after = price + customer-paid shipping − COGS − shipping cost · Margin after = profit after ÷ (price + customer-paid shipping) × 100
Free shipping is a marketing choice with a direct margin cost: every dollar of shipping you absorb comes straight off profit. Because shipping is roughly a flat cost per order, it hurts low-priced orders far more than high-priced ones — which is why free-shipping thresholds exist. Comparing margin before and after shipping shows exactly how much each order gives up, and whether the price can carry the cost.
Worked example
An order sells for $60 with $30 COGS — a 50% margin, $30 gross profit. Offering free shipping while paying $9 to ship drops net profit to $21 and margin to 35% — a 15-point hit absorbed entirely by you.
Frequently asked questions
Should I offer free shipping?
Free shipping lifts conversion but eats margin, so it works best when your order values are high enough to absorb the flat cost — or when a minimum-order threshold pushes basket sizes up. On low-priced orders it can erase profit entirely.
Why does shipping hurt small orders more?
Shipping is close to a fixed cost per parcel, so on a $20 order a $9 shipping cost is 45% of the price, while on a $200 order it is under 5%. The same dollars are a much larger share of a small sale.
How do I set a free-shipping threshold?
Find the order value where the extra margin from a larger basket covers your shipping cost. Set the threshold a little above your average order value to nudge customers to add items.
Related calculators
Educational estimate, not financial advice.