What a box of coriander actually costs you to deliver

The number everyone starts from

Say a wholesaler buys a box of coriander for a hypothetical eight pounds, landed at the yard. Cost-plus pricing takes that eight pounds, adds a margin, say twenty per cent, and sells it on for around nine pounds sixty. On paper that looks like a profit on every single box. It is the number a wholesaler can see, because it is on the grower's invoice, and it is also the smallest part of the true cost of getting that box into a kitchen's fridge.

What the invoice leaves out

Between the grower's invoice and the kitchen's fridge sit several more costs, and cost-plus pricing that only adds a margin to the buying price is missing all of them:

• the buying itself, which is the number on the grower's invoice and the only part most pricing actually counts
• receiving and handling the box into stock, checking it against the order and putting it away
• the pick, finding and carrying that specific box for that specific kitchen's order alongside everything else on the van
• a fair share of the driver's time and the van's running cost for that round, whether the drop is one box or twelve
• a share of that week's failed deliveries, spread across every drop that did succeed
• a share of any credit notes issued that week, for a short-dated box, a complaint, or a late arrival

None of those six lines appears anywhere near the grower's invoice, and none of them changes whether the box costs eight pounds or eighty. All of them still have to be paid for by something.

The van does not care how big the order is

A round of, say, twenty drops shares one driver, one vehicle, one morning of fuel and insurance and wear between them - and a drop of one box of coriander carries exactly the same slice of that shared cost as a drop of twelve boxes of everything else, because the van still has to go there, park, and someone still has to walk to the door. A small order is not a small cost to serve. It is often close to the same cost as a large one, spread over far less revenue to absorb it.

A drop of one box carries almost the same delivery cost as a drop of twelve. It just has a twelfth of the revenue to pay for it.

Why the smallest drops are the ones losing money

Put the costs together and the pattern is consistent rather than random: a customer who orders a full pallet every week absorbs the shared delivery cost easily, because it is spread across a large invoice. A customer who orders three items twice a week absorbs the same shared cost against a tiny invoice, and on paper - priced at cost-plus off the buying price alone - that customer often looks exactly as profitable as the pallet order. It is not. A wholesaler who cannot see the delivery, handling and failure cost allocated down to the line cannot see which of his smallest customers he is effectively paying to serve.

None of this is exotic. It is the ordinary cost of running a fleet of vans and a yard, shared correctly, and it is precisely the part that a price built on the grower's invoice plus a flat margin leaves out. One wholesaler running six vans and buying from 27 different traders across the week carries all of it, every day, on every one of the smallest lines in the book. Fixing it is mostly a visibility problem rather than a pricing philosophy problem: put the real shared costs against the actual lines that generated them, at the volume they actually run, and the smallest drops either get repriced properly or get seen clearly enough that keeping them is a deliberate choice rather than an accident nobody noticed.

What it means for how a book gets priced

None of this means every small order should be turned away or repriced overnight - a good customer who has been loyal for years and orders modestly deserves more thought than a spreadsheet formula. What it means is that the decision to keep serving a small, awkward drop at a thin margin should be a decision, made with the real cost in front of whoever is making it, rather than something that happened by accident because the pricing model never had a place to put the delivery cost in the first place.

The same arithmetic works the other way for a wholesaler thinking about growth: a new customer who wants small, frequent drops of awkward, low-value products is a genuinely different proposition from one who wants a full pallet once a week, even if the two invoices look similar in size once a discount is applied. Knowing the difference before agreeing the arrangement, rather than discovering it a year later in the accounts, is the entire point of doing the sum properly in the first place.