How you structure delivery fees and service charges significantly impacts both checkout conversion rates and your profit margins. This guide explores different strategies to find the right balance for your business.
Understanding Your Fees
StoreKit provides two fee types you can configure:
| Fee Type | Scope | Where to Set |
|---|
| Service Charge | Fixed amount on all orders | Store Settings |
| Delivery Fee | Per delivery zone, variable by distance | Fulfillment > Delivery Zones |
The Psychology of Delivery Fees
High delivery fees are a leading cause of cart abandonment. Research shows:
- Customers often expect “free” or subsidised delivery from online ordering
- A single large fee feels more painful than multiple smaller charges
- Customers accept small service charges more readily than high delivery fees
Strategy 1: Service Charge Subsidy (Recommended)
Best for: Stores using third-party delivery (Uber Direct, Stuart, etc.) or own drivers
Add a small fixed service charge to all orders, then reduce the delivery fee customers see.
How It Works
- Calculate your average delivery cost (e.g., £4.50 per order)
- Add a service charge of £0.99 to all orders
- Set your delivery fee to £2.99 instead of £4.50
Customer sees:
- Service charge: £0.99
- Delivery: £2.99
- Total fees: £3.98
You receive: £3.98 toward your £4.50 cost (you subsidise £0.52 per order)
A service charge of 99p feels insignificant to customers but adds up. On 1,000 orders/month, that’s £990 toward delivery costs.
Configuration
- Go to Settings > Store Settings
- Set Service Charge to your desired amount (e.g., 99)
- Optionally set a Service Charge Label (e.g., “Order fee” or “Packaging”)
- Go to Fulfillment > Delivery Zones
- Reduce each zone’s delivery fee by the service charge amount
Strategy 2: Tiered Delivery Fees
Best for: Stores with wide delivery radius where costs vary significantly
Set different delivery fees per zone based on actual cost, while using a service charge to keep the closest zone very affordable.
Example Configuration
| Zone | Distance | Actual Cost | Service Charge | Delivery Fee | Customer Total |
|---|
| Zone 1 | 0-2 miles | £3.50 | £0.99 | £1.99 | £2.98 |
| Zone 2 | 2-4 miles | £5.00 | £0.99 | £3.49 | £4.48 |
| Zone 3 | 4-6 miles | £7.00 | £0.99 | £4.99 | £5.98 |
- Keeps local delivery very competitive
- Passes higher costs to customers ordering from further away
- Maintains consistent service charge revenue
Strategy 3: Free Delivery Threshold
Best for: Stores wanting to increase average order value
Combine a minimum order value with reduced or free delivery.
Example Setup
- Service charge: £1.49 (all orders)
- Delivery fee: £2.99 (orders under £25)
- Free delivery: Orders over £25
Configure this using:
- Set your service charge in Store Settings
- Create a discount code with:
- Type: Free delivery
- Minimum order: £25
- Auto-apply: Enabled
Even with “free delivery”, you keep the service charge revenue to offset costs.
Strategy 4: Full Cost Recovery
Best for: Premium restaurants where customers expect to pay for quality service
Pass the full delivery cost to customers, but frame it transparently.
Configuration
- Service charge: £0 (or small amount for packaging)
- Delivery fee: Full cost per zone
This works when:
- Your food commands premium pricing
- Customers value quality over price
- You want to maintain healthy margins
This approach typically has lower conversion rates but higher profit per order. Test carefully.
Strategy 5: Pickup Incentive
Best for: Stores with high foot traffic or wanting to reduce delivery volume
Make pickup significantly cheaper than delivery to encourage collection.
Example
| Method | Fees |
|---|
| Pickup | £0 |
| Delivery | £3.99 + £0.99 service charge |
- Pre-orders for pickup
- Loyalty rewards for pickup orders
- Prominent “Ready in X minutes” messaging
Calculating Your Break-Even
To find the right fee structure, calculate your actual costs:
Third-Party Delivery Costs
| Provider | Typical Cost | Notes |
|---|
| Uber Direct | £4-7 per delivery | Varies by distance |
| Stuart | £4-6 per delivery | Zone-based |
| Own drivers | £2-5 per delivery | Fuel + wage |
Break-even = Delivery Cost - Service Charge - Delivery Fee
- Delivery cost: £5.00
- Service charge: £0.99
- Delivery fee: £2.99
- Break-even: £1.02 (your subsidy per order)
A small subsidy per order is often worthwhile if it increases conversion rates and total order volume.
A/B Testing Your Fees
Before committing to a strategy, test different approaches:
- Week 1-2: Current fees (baseline conversion rate)
- Week 3-4: Lower delivery fee + service charge
- Week 5-6: Different service charge amount
Track:
- Checkout conversion rate
- Average order value
- Total revenue
- Profit per order
Common Mistakes to Avoid
| Mistake | Why It Hurts | Better Approach |
|---|
| Very high delivery fee | Cart abandonment | Split into service charge + lower delivery fee |
| £0 service charge | Leaves money on the table | Even £0.49 adds up |
| Same fee for all zones | Losing money on far deliveries | Tiered delivery zones |
| Rounding to whole pounds | Feels more expensive | Use £X.99 pricing |
Recommended Starting Point
For most stores, we recommend starting with:
| Setting | Value |
|---|
| Service charge | £0.99 |
| Service charge label | ”Order fee” |
| Zone 1 delivery (0-2 mi) | £1.99-2.49 |
| Zone 2 delivery (2-4 mi) | £2.99-3.49 |
| Minimum order | £10-15 |
Compare Strategies
Use this calculator to compare different fee structures and see how they impact your costs and what customers pay.
Next Steps
