There are six delivery pricing models in common use, and the right one for your business depends on how spread out your customers are and how much your orders vary in size. Flat rate works when your area is compact. Zone pricing works when it isn’t. A free-delivery threshold works when your problem is small orders rather than long distances. Picking the wrong structure is expensive in a way that’s hard to see, because the fee looks fine on the orders you watch and quietly loses money on the ones you don’t.
Most owners set a delivery fee once, early, by looking at what a competitor charges. Then the business grows outward, the average trip gets longer, and the number never changes. The model matters more than the number, because the model decides which customers subsidise which.
This guide compares the six structures, shows how to set the figure from your own cost per delivery, and gives a straight answer on which model suits which kind of operation.
The Bottom Line
- Start from cost, not from competitors. Your cost per delivery is total monthly delivery cost divided by completed drops, including loading labor.
- Flat rate is simplest and fails first. It works while your delivery area is tight, and it turns your nearest customers into subsidisers of your furthest ones as you expand.
- Zone pricing is the default answer for most local delivery businesses. It tracks cost reasonably well and customers find it easy to understand.
- Thresholds change behavior. 93% of consumers take action to qualify for free shipping, buying additional items being the most common move, and free shipping lifts average order value by 15% to 20% (Capital One Shopping).
- Extra costs at checkout are the top reason people abandon carts, cited by around 39% of abandoners (Baymard Institute). Hiding the fee until checkout costs more than the fee itself.
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The six delivery pricing models compared
| Model | How it works | Best when | Main weakness |
|---|---|---|---|
| Flat rate | One fee for every delivery | Compact area, similar order sizes | Near customers overpay, far ones underpay |
| Zone-based | Area split into zones, each with its own rate | Customers spread unevenly across a city | Boundary arguments; needs a clear map |
| Distance-based | Per-mile rate, often with a base fee | Rural or wide-area delivery | Unpredictable for customers; feels like a taxi meter |
| Tiered | Fee varies by order value, size or speed | Order values vary a lot | More complex to explain and quote |
| Free above threshold | No fee over a set order value | Small orders are the problem | You absorb the cost on every qualifying order |
| Subscription | Recurring fee for unlimited or discounted delivery | Predictable repeat customers | Heavy users can cost more than they pay |
Most businesses end up combining two: a zone rate with a free-delivery threshold, or a flat fee with a surcharge beyond a certain distance. Combining is normal. What causes trouble is having no structure and quoting each account separately, which is how discounts become permanent.
Start by calculating your cost per delivery
Every model below needs one input, and it’s the one most operators don’t have.
Add up a month of delivery costs: driver wages or contractor fees, fuel, vehicle lease or depreciation, maintenance, insurance, tolls and parking, transport packaging, routing software, and the staff time spent picking, packing and loading. Divide by completed deliveries.
Two warnings. Include loading labor, because leaving it out typically understates the real figure by a quarter or more. And work it out per zone or per route if you can, not just as a company average: a driver making four drops an hour in a dense neighbourhood and one an hour in a sparse one produces two completely different costs, and the average hides both.
Once you have the number, every pricing decision becomes arithmetic rather than guesswork. If a drop costs you $9 and the margin on a typical order is $14, a $4 delivery fee leaves you $9 ahead; a free delivery leaves you $5 ahead; a free delivery on a half-size order leaves you behind. That’s the kind of calculation that decides whether a growing month is profitable, and getting it wrong is one of the most common routes to a net loss in a business with healthy sales.
Flat rate delivery pricing
One fee for every delivery, regardless of distance or order size.
Why people use it. It’s the easiest to quote, the easiest to put on a price list, and customers understand it instantly. For a bakery delivering within a three-mile radius, it’s the right answer, because the cost variation between the nearest and furthest stop is small enough not to matter.
Where it breaks. The moment your area widens. A $6 flat fee that covers a two-mile drop comfortably will lose money on a twelve-mile one, and since you can’t control which customers order, your margin becomes a function of geography you didn’t choose. Businesses usually notice this as “we’re busier but not making more”.
Set it at your average cost per delivery plus your target margin on delivery, calculated across your actual mix of distances rather than a typical trip. If your area is wide enough that the average is misleading, you’ve outgrown flat rate.
Zone-based delivery pricing
You divide your service area into zones and give each one a rate.
This is the model that fits most local delivery businesses, because it tracks cost loosely while staying simple enough to print. A typical structure looks like city core $7, suburbs $12, nearby towns $18, with examples of this banding documented in guidance for farm and food businesses calculating their own delivery costs (Local Line).
Getting the zones right matters more than the rates. Draw them from your actual route structure, not from postal boundaries or neat concentric circles. If your drivers run a northern loop and a southern loop, those are your zones, even if they’re the same distance from your kitchen. Zones that match how the van actually moves price your real cost; zones drawn with a compass price a fiction.
Watch for customers just over a boundary. Publish the map, keep boundaries on obvious landmarks like a highway or a river, and decide in advance whether you’ll flex for a good account rather than improvising it on a call.
Distance-based delivery fees
A base fee plus a rate per mile, sometimes with a minimum.
Why people use it. It’s the fairest reflection of cost and the only sensible model for rural or very wide service areas, where zones would need so many bands they’d effectively be a per-mile rate anyway.
Where it breaks. Customers can’t predict the cost before ordering, which suppresses orders. The fix is a published table rather than a formula: 0 to 5 miles $8, 5 to 10 miles $14, 10 to 20 miles $22. That’s technically a zone model expressed in distance, and it’s much easier to buy from than a meter.
One caution. Price on route miles, not straight-line distance. A customer five miles away across a river can be a twenty-minute detour, and a mapping tool that measures as the crow flies will quietly underprice every awkward address in your area.
Tiered delivery pricing by order value or speed
The fee changes with the size of the order, the speed of delivery, or both.
Common structures:
- By order value. Orders under $100 pay $15, $100 to $250 pay $8, above $250 are free. This is a threshold model with a ramp rather than a cliff, and it’s gentler on the customers just below a cut-off.
- By speed. Next-day included, same-day charged, two-hour charged more. This prices urgency, which is usually what the customer is actually buying.
- By handling. Standard drops at one rate, deliveries needing refrigeration, setup or a second person at another.
Tiering by speed is the most underused option in food and floral. Same-day and timed-window deliveries cost you considerably more than a scheduled route drop, because they can’t be batched, and charging the same for both means your most expensive orders are your least profitable ones.
Free delivery above a threshold
No delivery fee once the order passes a set value. This is the strongest tool available for a business whose problem is small orders rather than long distances.
It works because it changes what people buy. Capital One Shopping’s research reports that 93% of consumers take action to qualify for free shipping, most often by adding items, and that free shipping raises average order value by 15% to 20% (Capital One Shopping). The average free shipping threshold was $64 in 2023, up 23.1% from 2019, so there’s an established expectation that free delivery is earned rather than given.
Setting the threshold. The usual guidance is to put it 15% to 25% above your current average order value (Ryder). High enough that it changes behavior, low enough to look achievable. Then check the arithmetic: the extra margin from the uplift has to exceed the delivery cost you’re now absorbing. If your AOV is $80, your margin is 40% and a drop costs you $10, a threshold at $100 earns you $8 of extra margin on an order where you’ve given up a $10 fee, and you’re marginally worse off per order while gaining volume. That can still be the right call, but make it deliberately.
The common mistake is a threshold below your true break-even, which turns your best-converting offer into your biggest leak.
Subscription and membership delivery pricing
Customers pay a recurring fee for unlimited or discounted deliveries.
Why it works. It converts a variable cost decision into a fixed relationship, and it suits businesses with reliably regular customers: weekly produce boxes, standing wholesale accounts, meal plans. The revenue is predictable, which makes routing and staffing easier to plan.
The risk is adverse selection. The customers who sign up are the ones who order most, so your subscription base will skew toward your heaviest users by design. Price it against the usage of a frequent customer, not an average one, and either cap deliveries per month or set the fee where a heavy user is still profitable.
Where it fits best is as an add-on to a zone model, giving regulars a reason to commit while occasional buyers keep paying per drop.
Which model fits your business
A short decision guide.
- Compact area, similar order sizes → flat rate, revisited whenever your area widens.
- City-wide with uneven spread → zone pricing, zones drawn from your actual routes.
- Rural or wide area → distance bands published as a table.
- Order values vary a lot → tiered by order value, or a threshold.
- Lots of small unprofitable orders → minimum order value first, then a free-delivery threshold above it.
- Regular repeat customers → zone or flat base, plus a subscription for the regulars.
- Wholesale and B2B accounts → minimum order value plus zone rate, with the terms printed on the price list rather than negotiated per account.
That last point is worth emphasising. For wholesale, the delivery terms are part of the offer and belong in the sales conversation from the start, with the minimum, the delivery days and the cut-off time all written down. Inventing them mid-negotiation is how accounts end up on terms nobody can serve profitably, which is why they belong in the sales process itself rather than in an operations decision made later.
Four mistakes that cost more than the fee
Hiding the fee until checkout. Extra costs including shipping, taxes and fees are the leading reason shoppers abandon carts, cited by roughly 39% of abandoners (Baymard Institute). Showing the delivery cost early loses you a few orders; revealing it at the last step loses you more, and annoys the customer as well.
No minimum order value. A delivery fee and a minimum do different jobs. The fee covers the trip; the minimum makes the trip worth making. Businesses with a fee and no minimum still lose money on tiny orders.
Never revisiting the number. Fuel, wages and vehicle costs move. A fee set two years ago is almost certainly below cost now. Put a date in the calendar to check it against your current cost per delivery twice a year.
Pricing from competitors. Their cost structure isn’t yours. A competitor with denser routes can profitably charge less than you can, and matching them just transfers the problem to your income statement.
Frequently asked questions
How much should I charge for delivery?
Start from your cost per delivery, then add the margin you want on the delivery itself. Across local food, floral and wholesale operations, published fees commonly land between $5 and $20 depending on distance and handling, but the range is wide enough that it’s a sanity check rather than an answer. If your calculated cost sits far above typical local fees, the problem is route density, not pricing.
Should I offer free delivery?
Only above a threshold that covers your cost, or built into the product price. Unconditional free delivery on any order size is the fastest way to lose money on a growing business, because every incremental small order costs you a full trip.
Is it better to charge for delivery or raise product prices?
Charge separately when customers vary in distance or order size, since a visible fee lets you price the difference. Build it into the product price when your customers are uniform, your margins can absorb it, and the simplicity wins you orders. Wholesale and B2B usually prefer a separate line, because they want to see what they’re paying for.
How do I price same-day delivery?
Higher than scheduled delivery, because it can’t be batched into a route. Treat it as a separate speed tier with its own fee rather than an exception to your normal rate, and set it so that a single-drop trip is profitable on its own.
How often should I review my delivery pricing?
Twice a year as a habit, and immediately after any change in your service area, fuel costs, driver pay or vehicle arrangements. Recalculate cost per delivery first, then check each zone or tier against it.
What to do this week
Work out your cost per delivery, then look at the orders you served in the last month and sort them by what you actually earned after delivery cost. In most operations the bottom slice is small orders going to the edge of the service area, and both of those are pricing decisions rather than operational ones.
Then pick one structure, write it down with the zones, the minimum and the threshold, and use it for every quote. The model you choose matters less than having one that everybody in the business, and every customer, can see.
