What should you charge for delivery?

Are you a takeaway or restaurant struggling to get your delivery charges right?

We are regularly asked by our customers how best to go about this, and the simple answer is this;  “Work out your costs, decide how much pain you can take, and charge the rest to the customer”.

Many businesses have been round long enough to remember when you charged nothing for delivery, or a nominal fee like £1.50, no matter how much the order was, or how far away the coverage area.

These days delivery costs have spiralled due to increased labour costs, fuel, transport, and insurance, and if costed out properly (which you should), it wouldn’t be surprising to see a real-world delivery cost of around £8 to £9 per order.

However, adding £9 to every delivery order isn’t the right thing to do in most cases, but your customer will happily contribute towards the cost, and depending on how far away, and how much they order, you can alter it accordingly to minimise any sharp in-take of breath from the customer when they see the delivery fee.

The easiest way to work out your delivery cost is by using your average order value as your yard stick. Anything under that, and above your absolute minimum order value (you don’t want to be doing a delivery for a £2 order), should be weighted more towards the customer covering the cost.

Anything higher than the average order value and you take more of the cost on board, as your margin on the order is better overall.

As a simple example, based on an average order value of £25, and minimum spend of £12 you could have a pricing structure in place as follows:

• Orders over £12 and under £25 pay £5.00 Delivery.
• Orders over £25 and under £40 pay £4.00 Delivery.
• Orders Over £40 pay £3.00 Delivery.

You might want to take this a stage further where using a 3^rd Party delivery provider, who charges you based on distance, not order size.

In this scenario two main factors may influence the fee you charge; the value of the order, and how far it is going.  For example:

• Orders up to 1 mile and under £25 pay £5.00 Delivery.
• Orders up to 2 mile and under £25 pay £6.00 Delivery.
• Orders up to 1 mile and over £25 pay £4.00 Delivery.
• Orders up to 2 mile and over £25 pay £5.00 Delivery.
• Orders up to 1 mile and over £40 pay £3.00 Delivery.
• Orders up to 2 mile and over £40 pay £4.00 Delivery.

The final factor that could affect delivery price is be postcode.  For example, if a postcode you deliver to is on a university campus and you know that if you can get lots of orders, you can reduce your overall delivery cost and charge a flat fee so that any deliveries to that postcode are only ever charged at a nominal rate based on minimum order size.

In summary you need to know your costs, be confident in your order values and don’t be afraid to charge a realistic fee for delivery. Your customer doesn’t mind, they know it costs money, and they are paying that fee, so they don’t have to come to you.

It is also very important your ordering system allows you to have a ‘matrix’ of delivery fees, based on basket size, distance and location, so that you ensure your covering your costs and charging your customers fairly.