January is a Great Month to Assess Your Delivery Charges

 I admit that even though I retired, I enjoy following posts on Facebook Group Pages. I often log into the groups I follow for Gifts Shops, Florists and General Retailers. Often times the three groups have similar issues going on such as finding staff, sales levels and discussing where to find new products but delivery charges are only discussed among florists. 

Recently a florist posed a question about delivery charges. She mentioned where she was located, what she was currently charging, what her competition charges and asked what others charge.  She received a multitude of responses. Some gave simple answers while others gave much more in depth responses. Here's my take on it...

It actually doesn't matter where she or the other shops are located. It doesn't matter what her competition charges. The only thing that matters is what it costs her to make a delivery. So if you are  wondering if your delivery fees are inline, here's what you do. 

Look back at 2023. Take all your expenses associated with making deliveries. This would be total cost of labor (including any benefits you provide and matching taxes), gas, insurance, vehicle payments and repairs. Using your POS, take the total number of deliveries you made for the whole year. Take the cost and divide by the number of deliveries you made. That will give you the break even for making deliveries. 

For example: Total Cost associated with delivery is $50,000 and you made 5,000 deliveries would mean that your average cost is $10 per delivery. That is your break even. That means every time you load a delivery into the van, it costs you at least $10. 

Now here is where you go if you want to determine if you need to raise your delivery fees. In this example, it cost you $50,000 to make those 5,000 deliveries. Now go to your POS and look for the total dollar amount you charged for delivery. It's simple, if you received $45,000 in delivery fees, you lost $5,000 to the bottom line. If you received $50,000 in delivery charges, you broke even and if you charged $55,000 you had a $5,000 profit from making deliveries. 

Now it's time to determine if you want your delivery charges to create a loss, profit or break even. Being a florist that delivers is pretty stressful and way more complex then being a retailer where folks walk in and walk out with your product. I would hate to think that some florists are operating with their delivery fee structure creating a break even or heaven forbid a loss. Delivering is tough and your customers appreciate it. Charge what you need to charge to keep your business profitable. With the example above, I would make my lowest delivery fee $10 and then go up from there. Doing a little more math, based on your radius will tell you where you need to be but if you go further than 15 miles from your shop, you need to be up in the $20's for deliveries that far away. 

Lastly, here are some tips of what we did over the last 15 years of being in the flower business to really profit from our ability to deliver...

• Like the example above, our average cost of delivery was about $10. At that point, our delivery charge started at $12 and went up based on how far away the town was located. 
• We offered "early express" delivery, which were added to the regular delivery charge.  We charged between $5-$10.00 more for deliveries made before 12 noon depending on the time of year (more for holidays such as Valentine's day). These needed to be placed either the night before or by 8 am that morning. You'd be surprised how many people went for that and if you had the order in the night before, chances were you were going to be there by 12 noon anyway. 
• In addition to the by 12 noon, we also did earlier deliveries. These were at our discretion and we only did them if we could accommodate them.  At our shop, we did a ton of corporate events. Many of those needed deliveries prior to a 8 am and pick ups after 5 pm. We had our fees structured where the normal delivery fee applied and then depending on how early the delivery needed to be made, we charged higher fees the earlier the delivery was needed and again if we needed to do a late pick up of rental items.  If pick up could be done the next day, we waived this fee, which really worked in our favor.  Years before, we just accommodated the early time without any additional fee!!  Early delivery charges often added $20 or more to the delivery charge, what a huge difference that made financially! 
• We offered late delivery. This was for folks who needed something delivered after 4 pm. We were able to charge an additional $10 for this, our afternoon driver usually worked until at least that time. It also helped to pay for payroll if we needed to keep a driver on the clock on those slower days to accommodate late orders being our cut off was 3 pm. 
• We offered the express and late delivery charges on our website as an add on. If, for some reason, we were unable to accommodate their request, we gave them a call as soon as the order came in to discuss. Most of the time the order was preserved and the customer appreciated our honesty. 
• We majorly increased our delivery charges for weddings and events. I could go on more about this but needless to say, I noticed that no one questioned delivery charges but they would question the cost of a bridal bouquet. I made sure to account for how many staff were in the van, how long they would be on the road, how many miles they were driving and charged the same for breakdowns and rental pick ups. I wish I had started doing this earlier in my career, it would have made a tremendous difference to the financial stability of my business. 
• Don't fall into the trap of thinking your customers will complain about raising your delivery fees. You may have a few bumps in the road but it will be less then you think. When you do get a negative comment, instead of explaining how expensive it is to make deliveries, just tell the customer you understand their frustration. Don't go any further than that. At our shop, we sort of had a little trick of just going "Aww, I understand" and then staying silent. You'd be surprised how often they just moved on and finished their order. 
• Lastly, don't be afraid of what your staff might think. When you up your fees, explain to them the math, updated your POS with the new fees and move on. Years ago I was helping a floral friend with his delivery fees and he said he didn't want to hear his employees complain. I reminded him that what he was doing was for the good of everyone at the company and that just to let any negativity flow off him. What happened? Nothing. He raised his delivery charge $2 and the staff said nothing about it, just charged what they needed. That change netted him $34,000 to his bottom line and turned delivery from creating a loss to a profit. Profits mean bonuses and raises, make sure your staff understands that their cost to the company, contributes to the cost of the product. Sometimes they don't put those 2 things together! 

Thanks for reading this post. I hope you found a tidbit of information that was helpful. Feel free to hit me if you have a questions! Make 2024 your most successful year ever!