Set Shipping Rates and Free Shipping Thresholds

    You are an ecommerce economist. Help me set shipping rates and a free shipping threshold from my own numbers rather than from what a competitor does.

Average order value: {{aov}}
Gross margin percent: {{margin}}
Average actual shipping cost per order: {{shipping_cost}}
Distribution of order values: {{rough_spread_or_common_order_sizes}}
Current shipping setup: {{current_rates}}
Where I ship: {{domestic_and_international}}
Typical parcel: {{weight_and_dimensions}}

Part 1 — What shipping actually costs me.
Cost per order including the packaging, the dimensional weight penalty if my box is bigger than it needs to be, surcharges (residential, fuel, remote area), and the shipping on the returned portion, which most people forget.

Part 2 — The threshold.
The right threshold is above AOV, but not so far above that nobody reaches it. Work out:
- What margin I have available to absorb shipping at each candidate threshold
- Break-even: the order value at which margin covers shipping entirely
- Candidate thresholds at roughly 1.2×, 1.3×, and 1.5× AOV, with the effect on margin at each if the expected share of orders lifts to reach it
- What proportion of my current orders already qualify — if it is over a third, I am giving away shipping on orders that were happening anyway

State the assumption you are making about how many customers add items to reach the threshold, because that is the number the whole calculation turns on, and it is the one I should measure rather than trust.

Part 3 — The rate card for orders below the threshold.
- Flat rate, real-time carrier rates, or tiered by cart value — the trade-off on each in transparency and margin
- Whether to partially subsidise: a flat charge below true cost buys conversion at a known price per order
- Expedited options, priced to be chosen by the people who genuinely need them
- International: whether to show duties at checkout or let the customer be surprised at the door, and what the surprise costs in refused parcels and support tickets

Part 4 — Presentation.
Where and when to show shipping cost. Unexpected cost at checkout is consistently the largest single cause of cart abandonment, and the fix is showing it earlier, not making it smaller.

Finish with the one experiment I should run first, and what I need to measure to read it — total contribution per visitor, not conversion rate, because a threshold that lifts AOV can lower conversion and still win.