How to Determine Delivery Fees for Your Grocery Store. UPDATE

How to Determine Delivery Fees for Your Grocery Store. UPDATE
How to Determine Delivery Fees for Your Grocery Store

Determining the right delivery fees for your grocery store can be a complex yet critical component of your e-commerce strategy. With increasing consumer demand for online grocery shopping, setting optimal delivery charges is essential for balancing customer satisfaction and profitability.

In this blog, we’ll delve into various pricing strategies, the significance of order minimums, and the role of promotional offers to help you attract and retain customers while managing your bottom line effectively. Whether you’re a small independent store or a large supermarket chain, understanding these dynamics will ensure your delivery service is both competitive and sustainable.

Let’s examine what grocers need to know when setting fees, minimum order quantities, and prices for subscription delivery.

Low Fees or No Fees?

Coresight Research found that 60.6% of online shoppers find low shipping fees to be more important than price, quality, or product availability. That’s why grocers are now testing very small fees (like $2) or even free delivery. As this makes online shopping significantly cheaper, it helps attract larger customer groups and lowers the threshold for customers to frequent orders. 

However, the expenses for low or no fees are substantial for the stores, especially for independent supermarkets where customers’ shopping carts tend to be smaller. When customers don’t have to put down even a penny for home delivery, it can encourage them to buy fewer products more often. In the end, this puts more pressure on staff and the whole delivery system.

If you’re worried about breaking the bank or overburdening your staff by eliminating fees, you could instead use free delivery as a promotional tool. It’s a great marketing instrument on certain occasions, such as the holiday season or Mother’s Day. Also, free first-time order helps attract new customers.

Minimum Order Value 

One way to encourage higher-order volumes is to set a minimum order value for online delivery. This option is quite popular in the food and beverage industry: Kroger, for example, charges a $2.99 fee and requires a $10 minimum order for 30-minute deliveries.

Yet, minima might encourage customers who enjoy ordering more frequently and placing smaller orders. But for most stores, larger orders generate more profit, while less order volume increases labor costs. For independent grocers, it is best to offer additional promotions to increase the minimum order size.

Subscriptions

Many major chains offer subscription options to their customers, such as a $25 monthly fee for free delivery, daily specials, and other services. In Colombia, for instance, delivery giant Rappi offers a premium subscription along with an HBO video streaming service. 

Subscription fees are great for retaining customers and covering delivery service costs. For stores that have lower variable expenses (due to higher volume), subscriptions may be a better option. However, as subscriptions may not be the right tool to retain infrequent customers, you should always offer them only to your best customers. While the most preferred for frequent shopping customers, this option would be the most difficult to manage for independent grocers.

Instant Delivery Fees

Instant delivery may be the latest craze in the delivery industry. Though instant delivery is much more costly for stores due to higher labor utilization, it also allows setting a higher price for instantly delivered products or delivery fees.

Nevertheless, the actual customer demand for 30-minute delivery is much lower than many think. Only 40% of customers view fast delivery as a priority. 

From our experience, most customers prefer scheduled delivery with no items missing rather than fast delivery with missing items. It’s better for stores to fulfill their promise instead of overselling their capabilities. A safe one-hour delivery is much better seen than a belated 30-minute one.

Why There Is No Right Answer

When it comes to setting the right price for your delivery options, there is no right answer for all supermarkets. Ultimately, each store must experiment with different models, test their customers’ behavior, and balance the trade-off between:

1. Driving customer loyalty

2. Paying for the cost of delivery

3. Not overburdening the delivery staff

To fight these challenges, there is also a strong need to optimize delivery schedules and train staff properly. For example, the more customer orders staff can pick up at once, the less congestion from pickers in the grocery aisles. And the more efficient and faster your delivery will be. And here’s where another correlation comes into play. The better the customer experience, the more likely customers are to pay more for the same services. 

Looking to take your e-commerce business to the next level? Local Express can help! We offer fast, reliable, and affordable shipping services that will help you optimize your customer experience and boost profits. With a wide range of shipping options to choose from, we can find the perfect fit for your business.

Sign Up

Give us a call or fill in the form below and we will contact you. We endeavor to answer all inquiries within 24 hours on business days.