Calculating Your Free Delivery Threshold

Setting the right Free Delivery Threshold is essential for balancing customer satisfaction and business profitability. Here's a step-by-step guide to help you determine the ideal threshold for your business on the Trellus Marketplace. 

1. Calculate Your Average Order Value (AOV):
   • Definition: AOV is the average amount spent by customers on each order.
   • Formula: AOV =Total Revenue / (divided by) Total Number of Orders
   • Example: If your total revenue for the month is $5,000 and you had 100 orders, your AOV is $50.
     
     
2. Understand Trellus Delivery Costs:
   • Delivery Cost: $6.99 for deliveries up to 5 miles + $1.50 per additional mile
   • Example: Each delivery will cost you at least $6.99.
     
3. Factor in Platform Fees: There are two fees to consider, Trellus Comission and Credit Card Processing.
   
   
   • Trellus Commission Fee: Trellus charges a 10% transaction fee (up to $10 per order) + $0.75 per transaction. 
   • Example: For an order of $50, the transaction fee would be $5.75.
     
     
     
   • Credit Card Processing Fee: 3% + $0.30 per transaction taken by Stripe processing
     
   • Example: For an order of $50, the credit card processing fee would be $1.80. 
     
     Total platform fees on the $50 order would equal $7.55 ($5.75 + $1.80). 
4. Set the Free Delivery Threshold:
   • Guideline: Set the threshold at approximately 30% (an industry standard) above your AOV to cover delivery costs and encourage larger purchases.
   • Calculation:
     • AOV: $50
     • Threshold Increase: 30% of $50 = $15
     • Free Delivery Threshold: $50 + $15 = $65
       
       
5. Verify Profitability:
   • Revenue Calculation: For an order of $65:
     • Delivery Cost: $6.99
     • Trellus Commission + Credit Card Processing Fees:  $7.55 
     • Total Costs: $6.99 (delivery) + $7.55 (platform fees) = $14.24
     • Net Revenue: $65 - $14.24 = $50.76
       
       
6. Adjust Based on Customer Behavior and Market Trends:
   • Monitor Sales: Track how the new threshold impacts your sales and customer purchase behavior.
   • Analyze Competitors: See what thresholds competitors set and customer responses.
   • Adjust Accordingly: Be flexible and adjust the threshold based on your sales data and market conditions.

By following these guidelines, you can set a Free Delivery Threshold that effectively incentivizes larger purchases, covers your delivery costs, and maintains profitability on the Trellus Marketplace.