Shipping Margin Calculator
Calculate whether your shipping charges cover actual fulfilment costs, and find the free shipping threshold that protects margin.
🚚 Ecommerce📐 Shipping margin = shipping revenue − (carrier cost + packaging + handling)💼 Business
Shipping charged to customer
Actual carrier cost
Packaging cost
Pick and pack labour
Average order value
Gross margin on goods (%)
Please enter valid values.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| Shipping Margin Calculator | — | Shipping margin = shipping revenue − (carrier cost + packaging + handling) | currency |
Step-by-Step Examples
Example 1
Subsidised Shipping
Charged 6.95, carrier 9.20, packaging 1.10, labour 2.40, AOV 62, 45% margin.
- Total fulfilment cost = 12.70
- Shipping margin = 6.95 − 12.70 = −5.75
- Goods contribution = 62 × 45% = 27.90
- Order profit = 27.90 − 5.75 = 22.15
- Free shipping breakeven = 5.75 / 0.45 = 12.78
✓ −5.75 subsidised per order
Example 2
Profitable Shipping
Charged 12.00, carrier 7.80, packaging 0.90, labour 2.00.
- Total cost = 10.70
- Shipping margin = +1.30
- Shipping is a small profit centre rather than a cost
✓ +1.30 per order
Example 3
Free Shipping Threshold
Fulfilment cost 12.70, nothing charged, 45% goods margin.
- Shipping margin = −12.70 per order
- Breakeven order value = 12.70 / 0.45 = 28.22
- Free shipping below roughly 28 erodes contribution
✓ Threshold around 28.22
Real-World Applications
Hidden Margin Leak
Shipping subsidy is a per-order cost that rarely appears as its own line, quietly reducing contribution on every sale.
Threshold Setting
Free shipping thresholds should be set where goods margin covers fulfilment cost, not at a round number.
Packaging Optimisation
Dimensional weight pricing means package size often matters as much as weight for carrier cost.
Order Value Incentive
Free shipping thresholds set above average order value reliably lift AOV as customers add items to qualify.
Common Mistakes to Avoid
⚠️
Counting only carrier cost
Packaging materials and pick-and-pack labour are real per-order costs. Omitting them understates fulfilment cost substantially.
⚠️
Setting free shipping thresholds arbitrarily
A threshold below the breakeven order value means every qualifying order erodes contribution. It should be calculated, not chosen for roundness.
⚠️
Ignoring dimensional weight
Carriers price on volumetric weight when it exceeds actual weight. Oversized packaging for light goods can multiply shipping cost.
Frequently Asked Questions
How do I calculate shipping margin? ▾
Subtract carrier cost, packaging, and pick-and-pack labour from what you charge the customer for shipping.
What is a good free shipping threshold? ▾
At minimum, the order value where goods contribution covers your full fulfilment cost. Setting it somewhat above average order value also encourages larger baskets.
Should shipping be a profit centre? ▾
Not usually. Most ecommerce businesses treat it near breakeven, since visible shipping charges reduce conversion more than they contribute margin.
What is dimensional weight? ▾
Carriers charge on the greater of actual weight or volumetric weight calculated from package dimensions, so bulky light items cost more than their weight suggests.
Does free shipping increase sales? ▾
Generally yes, and it is among the most cited conversion factors. The question is whether the conversion lift exceeds the subsidy cost.