Flat Rate vs Free Shipping Threshold

Flat rate shipping and a free shipping threshold answer the same question in opposite ways. A flat rate says every order pays the same amount, whatever it weighs and wherever it goes. A threshold says orders above a certain value pay nothing and everyone else pays something. Most stores end up with a mix, and the mix is worth designing on purpose. This page puts all three policies against one parcel and one set of order sizes, so you can see what each recovers, what each does to the smallest orders, and when running both is the sensible answer.

What a flat rate recovers against a real parcel

Start with a number that is not a guess. The USPS price list in Notice 123, effective October 4, 2026, gives USPS Ground Advantage Retail prices by weight and zone. For a parcel in the 2 pound row, the notice lists 12.00 dollars to Zone 2, 14.85 dollars to Zone 5 and 19.80 dollars to Zone 8. Those are the public retail prices; if you ship with a negotiated or commercial rate, replace them with your own, which you can read from your last 90 days of invoices. The point of the exercise does not depend on the exact price. It depends on the spread: the same box costs 7.80 dollars more to send to the farthest zone in the example than to the nearest.

Assume, for the rest of this page, that orders ship evenly across those three zones. The average parcel cost is then (12.00 + 14.85 + 19.80) divided by 3, which is 15.55 dollars. A flat rate of 9.95 dollars therefore recovers 64 percent of the average parcel cost, and it falls short on every one of the three zones: by 2.05 dollars to Zone 2, 4.90 dollars to Zone 5 and 9.85 dollars to Zone 8. Because the price is the same everywhere, near customers cover a bigger share of their parcel than far ones do. That is not an argument against a flat rate; it is the price of its simplicity.

What a threshold costs on orders above it

The threshold's cost shows up on the orders that cross it, because they pay nothing for a parcel that costs you 15.55 dollars on average. The formula for placing a threshold, including how to measure your own cost per zone, lives in Free Shipping Threshold: The Formula, and this page does not repeat it. What matters here is the comparison. If a flat rate already collects 9.95 dollars from every order, moving to a threshold gives up exactly 9.95 dollars on each order that was already above the line, and on each order pulled above it.

One table, three policies, 100 orders

Assume 100 orders: 40 of them at 40 dollars, 35 at 60 dollars and 25 at 110 dollars, each shipping as the 2 pound parcel above. These are assumptions, not data; swap in your own order mix. Money is in dollars.

The third row collects 75 times 9.95, or 746.25 dollars, because 75 of the 100 orders are under 75 dollars. Against the flat rate, the threshold costs 248.75 dollars more per 100 orders, which is 25 orders times 9.95. For that money you are buying something other than shipping revenue, and it has to show up as bigger orders, more orders, or both. If none of that happens, the threshold is just a discount on your best customers.

Small orders under each policy

Small orders are where the policies separate. Take three order values at a 40 percent gross margin, so the contribution before shipping is 10, 16 and 24 dollars. Subtract the net shipping cost from the table, and the result looks like this.

A store that offers free shipping on every order loses money on a 25 dollar order and earns nothing on a 40 dollar one. A flat rate keeps both positive. The combined policy, charging 9.95 dollars under 75 and nothing above it, treats those three orders exactly as the flat rate does, because all three fall under the line. So when your small orders are the worry, the useful comparison is not flat versus threshold. It is whether small orders pay anything at all.

When an order moves to the threshold

The common pitch for a threshold is that shoppers add items to reach it. The arithmetic of that move is worth doing once. Suppose a 60 dollar order is pushed to 80 dollars to get free shipping. You gain 20 dollars of revenue and, at a 40 percent margin, 8 dollars of contribution. You give up the 9.95 dollars that order would have paid. The move costs you 1.95 dollars. At a 50 percent margin the extra 20 dollars is worth 10 and the move breaks even. So at these assumptions a threshold earns its keep only when margins are high, when the cart keeps growing past the line, or when it brings in orders that would not have happened. Each of those is testable, and How to Measure Whether a Promotion Worked shows how to test.

Flat rate under the line, free above it

The combined policy is not a compromise for people who cannot decide. It is a policy with two jobs. The flat rate does the work of recovering a share of cost on small orders and keeping them profitable. The threshold does the work of rewarding the larger orders you want. The design question is the gap between them: how much would a shopper at 60 dollars have to add to reach 75, and is that a product they would want anyway? The smaller the gap, the more the threshold works as a nudge; the larger the gap, the more it works as a loss on whoever happens to be above it. Keep the free tier for an order size your data says is above your typical order, not on it. The setup and the on-page messaging are in Free Shipping Over $50 on Shopify: Setup and Free Shipping Progress Bar: Setup and Copy.

Setting both in Shopify

Shopify's Help Center describes both pieces on its page about shipping rates. For a flat rate, you choose the Flat rate type and enter the price you charge in the Price field. For rates that change with the order, you choose the Order amount type and set ranges, each with a Minimum, a Maximum and a Price. To offer free shipping with a minimum, the page says to select the option to offer free shipping and enter the minimum amount for an order to qualify. It also warns that orders outside your ranges get a shipping error at checkout, and advises leaving the Maximum field empty on your highest tier so larger orders are covered. The page does not say whether the order amount is measured before or after discounts, so place a test order with a discount code and read the result before you rely on it.

The second route is a free shipping discount. Shopify's Help Center says its minimum purchase amount counts product prices only, never taxes, and that when another discount can be combined with the free shipping discount, products are counted at their discounted price. The same page lets you exclude shipping rates over a certain monetary value, which applies to rates only and is unrelated to order amounts. That option matters for the zone spread in this example: you could limit the free offer to rates up to a ceiling so that it does not apply to your most expensive zone. Alaska, Hawaii and territories are a case of their own, covered in Free Shipping to Alaska and Hawaii: Rules.

Building shipping tiers

Tiers extend the combined policy into more than two steps, for example 9.95 dollars under 75, 4.95 dollars from 75 to 125, and free above that. In Freebies Engine by Log Studio Lab, the Shipping discount tiers template is described as discounted or free shipping above a cart value. Start from the table above with your own parcel cost, your own order mix and your own margin. Choose the flat rate you can defend on small orders first. Then place the first free tier where the move cost is smallest, run it for a fixed window and compare it with the weeks before. If the net shipping cost per order rises and the average order value does not, you have built a discount, not a nudge.

Plan requirements for the template are on the pricing page.