How Much Should We Charge and What is Enhanced Pricing?

How Much Should We Charge and What is Enhanced Pricing?

There are definite costs to picking and fulfilling orders but how much should you charge? Some also try to build margins by using “enhanced pricing” but customers don’t see online as a special new experience and expect to pay the same regardless of the channel. Enhanced pricing, where the commerce vendor or the store increases the prices of all or select items online, can be confusing for customers and is especially troublesome on TPRs and Circulars.

Pickup fees are generally around $5 with delivery around $10. There are certainly many other prices but these seem to be the anchors. Going much cheaper could seem compelling but paying $2 for pickup makes it seem like it is so easy that the customer thinks it should be free. We also highly recommend that you never do Free as a default. You can give out coupons for “Free Pickup” on the first two orders but once you make it free customers will expect it forever.

There are real costs to picking and staging orders and delivery adds more cost so reasonable charges seem to be acceptable. We rarely see complaints about fees as the customer is paying for convenience. Your online grocery platform should allow you to offer same as in-store pricing and also allow all TPRs and other offers which can be compelling marketing.

Freshop sees average baskets above $120 which is terrific and the makeup of the baskets yield much better than 30% gross margins. It is tempting to do free on orders over $100 but these orders take a long time to pull and stage. Even if the margin goes up 5% you only have another $5 to play with but the order can easily take 40 minutes to pull. For the customer placing an order for $150 saving $5 on the fee does not seem that compelling.

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Some stores require a minimum purchase of $35 for pickup. While this makes sense for delivery small pickup orders are very quick to pull and normally don’t have both mid-temp and frozen so that $5 fee adds margin and the customer gets the convenience they want.

We recommend prices that are the same as in-store, honoring TPRs and offers and offering coupons to get customers used to online while charging a reasonable amount for the great convenience offered.

If you are exploring pickup and delivery please reach out to brian@freshop.com to have a detailed conversation of your needs and how online grocery with Freshop can help your business.

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