Online Grocery Pricing Strategy: 6 Ways To Make Delivery More Profitable

You’ve found the perfect grocery e-commerce platform, set up your online store, and fulfilled your first orders. 

The only problem? 

You aren’t making money — you’re losing it. Fulfilling online orders for pickup and delivery costs time and money, often more than you make on each purchase. 

Fortunately, a few simple pricing switches can turn things around. In this blog, we’ll explore online grocery pricing strategy, sharing six actionable tips to help you make a profit on every single order. 

Online Grocery Pricing Challenges

Before we dive into specific strategies, let’s explore what makes online grocery pricing so complicated. You have to contend with: 

• Sticker shock: First-time online grocery shoppers are often surprised by their total when it’s time to check out. They’ve filled their virtual basket with everything on their list — but they don’t go through with the purchase after seeing steep delivery and service fees applied. 

• Small basket sizes: Some customers use grocery delivery or pickup as a convenient way to pick up a few forgotten items, but over time, these small orders cost you more to fulfill than you make in revenue. 

• Big-chain competition: With mega-retailers like Amazon and Walmart offering fast, free delivery, it can feel impossible to compete in the online grocery space.

• Increased returns: Customers are more likely to return products ordered online than bought in-store — especially if they see bruised produce or near-expiry dairy in their pickup bag. These increased returns can slow you down and cost you money.  

Striking the right balance between making money, meeting customers’ expectations, and competing is tough, but doable. Let’s look at six ways to tackle these challenges and create the perfect pricing structure for your online grocery operation. 

1. Ditch the Expensive Delivery Fees

Offering grocery pickup and delivery is expensive. Between hiring extra employees to pick and package orders, paying costly commission fees to third-party delivery providers, and maintaining your website, it’s tempting to charge high service fees. 

But when customers see these $5 to $10 fees applied on the checkout screen, they often cancel their order and close the app — it just isn’t worth it. 

That’s why we recommend ditching the high fees and baking the costs into your item costs instead. 

For example, rather than charging a $10 delivery fee on a 20-item order, you might add modest price increases to each item, letting you bring in an extra $10 without the sticker shock. 

2. Mark Up Your Online Options

Charging higher prices online than in-store is essential for profitable grocery e-commerce, but it isn’t as simple as adding an extra dollar to each item’s price. 

Most budget-savvy customers will notice an increase in the price of staples like meat or dairy, but they’re willing to pay more to have bulky cases of bottled water or convenience items like cleaning supplies delivered. 

Dig into your sales data to learn more about your customers’ online shopping habits and identify potential candidates for small price increases. Creating your online pricing strategy isn’t a one-and-done project, so keep an eye on how your sales trends change when you adjust prices. 

Related Read: 10 Supermarket Pricing Strategies To Try Today

3. Set an Order Minimum

Want to boost online order sizes and make customers feel like they’re getting a great deal? Advertise free delivery on orders over a certain price. 

To set your order minimum, calculate the true cost of each online order. Include the picking time, packing materials, delivery driver costs, and customer service overhead. From there, you can identify your breakeven point and add a markup to ensure profitability. 

An order minimum of $25 to $50 is the online grocery industry standard, but experiment with different thresholds to see what appeals most to your unique customers.

Pro tip: Consider lowering your order minimums during your slowest weekdays and reserving higher $50 minimums for premium weekend delivery slots. 

 4. Encourage Large Basket Sizes

Setting a minimum order threshold isn’t the only way to encourage customers to add more products to cart — you can also use strategic promotions. 

Here are some deals that are a win-win for you and your online shoppers: 

• Bulk discounts: Reward customers for stocking up on popular (and profitable) products by offering a discount when they buy two or more of the same item. 

• Meal deals: Create dinner bundles like boxed pasta, jarred sauce, and frozen garlic bread, or taco shells, ground beef, and classic toppings. This gives customers an easy meal idea and lets them purchase all the ingredients in one click. 

• Threshold promotions: Encourage customers to spend and save more. Consider offering $10 off a $75 order, $15 off $100, or $20 off $150. They’ll be motivated to add more items to unlock bigger discounts.

Shoppers are almost always willing to spend more when they have the opportunity to save, so strategic promotions are an easy way to increase your average online basket size. 

5. Highlight Your Most Unique Products

Grocery delivery giants might offer the fastest delivery and lowest prices, but you have something they don’t: a handpicked product selection designed to cater to your customers’ tastes. 

If you want shoppers to choose your online grocery store over the competition, you have to offer them something they can’t find anywhere else. They’ll trust you to deliver family-friendly organic staples, farm-fresh steaks in a recurring subscription box, or a convenient made-to-order meal for pickup during their lunch break.  

Remember: You don’t have to offer your entire product selection in your online grocery store — you can pick and choose which items are most unique and profitable. 

Bonus Resource:  The Ultimate Guide to the Top Products Sold in Grocery Stores

6. Push for Grocery Pickup

While door-to-door delivery might seem like the future of grocery shopping, pickup is a solid middle ground. 

Grocery pickup eliminates delivery costs on your end, making it more profitable — and it eliminates in-store shopping time for your customers, making it more convenient than a traditional grocery store trip. 

Here are a few strategies to increase the popularity of your grocery pickup services: 

• Designate one or two pickup parking spaces near the front of your store to make the pickup process more convenient for your employees and customers. Plus, your regular in-store customers will see these spots and consider pickup next time. 

• Create pickup-specific promotions to encourage in-store shoppers to place their first online order. A $5 off coupon seems like a great deal to customers, and with a significant order minimum, it could be more profitable for you than a percentage-based discount. 

• Highlight the benefits of pickup, like faster fulfillment, the ability to swap substitutions before they leave the store, and lower fees. 

These deals and benefits make pickup feel like a special offering rather than a downgrade, helping you compete in the online grocery space without budgeting for delivery costs. 

Become an Online Grocery Pricing Pro With IT Retail

Ready to put it all together and transform your online grocery pricing strategy? First, make sure you have the right tools. 

A grocery store point of sale (POS) system with seamless e-commerce integration will help you: 

• Customize your online and in-store pricing
• Monitor profit margins on online and in-store sales
• Track sales and inventory changes across your online and in-store operations
• Fulfill pickup and delivery orders quickly and accurately
• Launch in-store and online-only promotions
• Learn about your customers’ online shopping habits and sales trends

IT Retail includes all these features and more — schedule your live, personalized demo to see it in action.