Paying per-order fees will kill your online grocery business.
There are many ways to pay for and charge for online groceries. In the spring we covered “enhanced pricing” where the prices online are higher than in the store, basically incrementally charging the customer fees for their order which causes anger and confusion for customers. The other side of the coin is how should the retailer pay for its online grocery platform. One option is paying a per-order fee with the pitch that you reduce your initial fees to get started.
The challenge comes in when you are even moderately successful in your online efforts. Let’s say, for example, that you start doing 100 orders a month which would cost $3,600 in additional fees per year. As you grow your online business you could easily be paying $20,000 in additional fees, penalizing you for success. This will also reduce the ability to offer ‘quick orders’ for subs or other deli items since for a $15 order you are giving up 20% of your margin to the fee. Even on a $100 basket average, you are giving back 3% on each order, not counting the costs to pull and stage the order.
When evaluating an online grocery solution make sure you understand the total cost of ownership and how aligned the provider is with your success.
