How to Set a Free-Delivery Threshold Without Losing Your Margin
Free delivery is a discount, not a gift. Use this formula, worked example and test plan to pick a free-delivery threshold your margin can carry.
The short answer: free delivery is a price cut on the delivery part of an order, so set the threshold at the order value where the margin on that order still covers the delivery cost and leaves the profit you want. The formula is: threshold = delivery cost divided by (your margin before delivery minus the profit share you want to keep). With a 40% margin, a ₦2,500 delivery cost and a 15% profit target, the threshold is ₦10,000. But a threshold only makes money if it changes behaviour, so test it before you commit.
Last updated 28 October 2026.
Many sellers pick a round number, such as free delivery over ₦20,000, because competitors do. That is how a promotion that feels generous becomes a quiet loss. This guide gives you a calculation, an illustrative example with every sum shown, a way to estimate how much extra business you need, and a test plan. For the basics of zones, partners and pricing delivery from your real costs, see how to handle delivery for your online store in Nigeria.
Step 1: find the three numbers you need
1. Average delivery cost. What you pay the rider or courier per order, not what you charge. Use an average per zone if costs vary a lot, because a Lagos island drop and an interstate parcel are very different.
2. Your margin before delivery. For each product, take the selling price and subtract product cost, packaging and payment charges. Divide what is left by the selling price. If an item sells for ₦10,000 and these costs total ₦6,000, your margin before delivery is ₦4,000, or 40%. How to calculate the real profit on each online order walks through each of these costs.
3. The profit share you want to keep. After delivery, what percentage of the order value must remain as profit? Pick a target, such as 15%. Remember advertising, discounts and failed orders also come out of that profit, so do not set it to zero.
Step 2: the formula
Minimum order value for free delivery = delivery cost divided by (margin before delivery minus target profit share).
All sums below use illustrative numbers. They are not Webift customer results.
| Delivery cost | Margin before delivery | Target profit | Threshold |
|---|---|---|---|
| ₦2,500 | 40% | 15% | ₦10,000 |
| ₦2,500 | 40% | 20% | ₦12,500 |
| ₦4,000 | 40% | 15% | ₦16,000 |
| ₦4,000 | 40% | 20% | ₦20,000 |
Check each row:
- 40% minus 15% is 25%. ₦2,500 divided by 0.25 is ₦10,000. Proof: 40% of ₦10,000 is ₦4,000. Subtract ₦2,500 for delivery to get ₦1,500, which is 15% of ₦10,000.
- 40% minus 20% is 20%. ₦2,500 divided by 0.20 is ₦12,500. Proof: 40% of ₦12,500 is ₦5,000. Subtract ₦2,500 to get ₦2,500, which is 20% of ₦12,500.
- ₦4,000 divided by 0.25 is ₦16,000. Proof: 40% of ₦16,000 is ₦6,400. Subtract ₦4,000 to get ₦2,400, which is 15% of ₦16,000.
- ₦4,000 divided by 0.20 is ₦20,000. Proof: 40% of ₦20,000 is ₦8,000. Subtract ₦4,000 to get ₦4,000, which is 20% of ₦20,000.
Two things stand out. A higher delivery cost pushes the threshold up quickly. And a lower margin pushes it up even faster: if your margin before delivery is only 25% and you want to keep 15%, the gap is 10 points and the ₦2,500 threshold becomes ₦25,000. Low-margin products may simply not support free delivery.
Step 3: look at your real baskets
The formula tells you the lowest threshold that is safe per order. It does not tell you whether the threshold is smart. For that, look at what customers actually buy. Sort your last 100 or so orders by total and group them. Your store's order list can be sorted by order total, or you can use your spreadsheet.
Here is an illustrative month of 100 orders where customers currently pay a delivery fee of ₦2,500, equal to what you pay:
| Order value band | Orders | Average order | Total sales |
|---|---|---|---|
| Under ₦8,000 | 45 | ₦6,000 | ₦270,000 |
| ₦8,000 to ₦9,999 | 25 | ₦9,000 | ₦225,000 |
| ₦10,000 to ₦14,999 | 20 | ₦12,000 | ₦240,000 |
| ₦15,000 and above | 10 | ₦18,000 | ₦180,000 |
| Total | 100 | ₦9,150 | ₦915,000 |
Check: 45 x 6,000 = 270,000. 25 x 9,000 = 225,000. 20 x 12,000 = 240,000. 10 x 18,000 = 180,000. The sum is 915,000, and 915,000 divided by 100 is 9,150.
Step 4: count who gets the discount for free
Free delivery will be claimed by every customer above the line, including those who would have bought anyway and paid the fee. That is the real cost. Compare two thresholds using the same month:
| Threshold | Orders already above it | Cost of free delivery | Extra orders to break even |
|---|---|---|---|
| ₦10,000 | 30 | ₦75,000 | 50 |
| ₦15,000 | 10 | ₦25,000 | 8 |
How the numbers work:
- At ₦10,000, 20 + 10 = 30 orders already qualify. 30 x ₦2,500 = ₦75,000 of delivery fees you would stop collecting.
- A new order at exactly ₦10,000 earns ₦4,000 of margin minus ₦2,500 delivery, so ₦1,500. ₦75,000 divided by ₦1,500 is 50. You would need 50 extra orders on top of your current 100 just to stand still.
- At ₦15,000, only 10 orders qualify. 10 x ₦2,500 = ₦25,000.
- A new order at ₦15,000 earns ₦6,000 of margin minus ₦2,500, so ₦3,500. ₦25,000 divided by ₦3,500 is 7.14, so you need 8 extra orders. Check: 8 x ₦3,500 = ₦28,000, which covers ₦25,000, while 7 x ₦3,500 = ₦24,500 does not.
The lower threshold looks friendlier to customers and is far more expensive. The higher one needs a much smaller lift. This does not mean ₦15,000 is right for every shop. It means the question to ask is not "what do competitors do" but "how many extra orders do I need, and is that realistic?"
Step 5: the top-up test
Free delivery also works by nudging customers to add items. Suppose a customer has ₦12,000 in the basket and adds ₦3,000 of items to reach ₦15,000. That ₦3,000 earns 40%, or ₦1,200. But you now carry a ₦2,500 delivery cost you used to collect. Net effect: 1,200 minus 2,500 is a loss of ₦1,300.
For a top-up to pay on its own, the extra items must earn more than the delivery fee you give up. At a 40% margin that means a top-up of more than ₦6,250, because 40% of ₦6,250 is ₦2,500. So thresholds work best when they land just above the typical basket and the products you suggest are decent-value add-ons, not a handful of low-margin items. They also pay if the offer brings in customers who would otherwise leave at checkout, which only a test can show.
Options if the maths does not work
- Build part of delivery into your prices. If most customers will not pay a visible delivery fee, you might raise product prices slightly and charge less delivery. Keep the total fair and check you are still competitive.
- Offer a delivery discount, not free delivery. For example, ₦1,000 off delivery above a threshold rather than all of it.
- Limit it by area. Free delivery in your cheapest zone, a flat fee elsewhere. On Webift you set the free-delivery amount on each delivery option, so you can offer it in your cheapest zone and charge a flat fee elsewhere. It is compared with the item total before any discount code.
- Offer free local pickup. Customers who can collect cost you no delivery. The store-side pickup setting is a real option.
- Make free delivery a time-limited offer tied to a promotion, then measure it. How to measure whether an online promotion made a profit shows how.
- Do nothing. If your delivery fee is not what customers complain about, free delivery may be solving a problem you do not have.
Test it for four weeks
- Write down the last four weeks' number of orders, average order value, share of orders above the planned threshold, and order profit. These are your baseline.
- Choose the threshold from the formula and your basket data.
- Announce it clearly. Webift stores have an announcement bar for this kind of message, and you can also put it on product pages and in your chat replies.
- Run it for four weeks. Do not change prices or run other big promotions at the same time, or you will not know what caused the result.
- Compare: did orders rise by at least the break-even number? Did average order value go up? Did profit after delivery go up or down?
- Decide: keep it, raise it, lower it or end it. Note the date and what you learned.
A note of caution: four weeks of one shop's sales will not prove a rule, and seasons, paydays and holidays change buying. Treat the result as evidence for your shop, not a law.
FAQs
What is a good free delivery threshold?
There is no universal number. A workable threshold is one that your margin can carry per the formula and that sits above where most customers already buy, so you are not giving away delivery you were being paid for.
Should I charge the customer the full delivery fee below the threshold?
Usually, you should charge close to your real cost. If you charge less, you are subsidising every small order. Pricing delivery from your actual costs is covered in the delivery guide.
Does free delivery increase sales?
Sometimes. It can raise order counts and basket sizes, but it can also just give away margin to customers who would have bought anyway. That is why this guide asks you to calculate the break-even lift and test it, instead of assuming it works.
Do I include payment fees in the calculation?
Yes. Include payment charges in the costs that make up your margin before delivery, since they are taken from every paid order. Your payment provider lists its current rates on its own pricing page.
Setting it up
Webift stores let you set delivery zones grouped by state, with fees and estimated delivery times, a free-delivery threshold and local pickup. Look at how the threshold applies in your dashboard before you announce it. If you are about to open a store and want these controls, you can create a free Webift store. If you already deliver, the formula above works with any tool, including a notebook.
