What Grocery Delivery Startup Must Learn From Instacart Business Model
“In a matter of a couple of weeks, we were already ahead of our end-of-year goal. A week later, we were ahead of our 2021 goals, and a few days after that, we were ahead of our 2022 goals.” — said Instacart founder Apoorva Mehta on netting $10 million in monthly profit in April 2020.
Today, Instacart is more than an inspiration, and delivery businesses are in awe of its business, asking: What is the business model of Instacart that helps it overtake its competitors? How Instacart works and manages its over 10M users and 500K shoppers has been a great debate. Not to mention, every grocery delivery business wants to know the Instacart revenue model.
So here we are with everything you need to know about Instacart and its success to pave the path of your business business. To begin with,
Instacart is a technology-driven, same-day grocery delivery service, which was founded in September 2012 by Apoorva Mehta. The company offers customers a new way to discover and buy groceries and a new way for retailers to sell groceries.
In addition, Instacart partners with stores including Whole Foods Market and Costco, offering delivery in under one hour from local stores.
Customers can choose from over 500 million products, order on instacart.com, or through the Instacart mobile app for iOS, Android, or Amazon devices.
Furthermore, its on-demand grocery delivery services are available for 5,500+ cities served across the U.S. & Canada. Besides, the company has built a network of personal shoppers who pick groceries for customers based on their orders. So, customers can browse through items in their preferred grocery store and place orders online or through the Instacart app. Shoppers then deliver the groceries in as little as an hour.
How does Instacart work?
Instacart is a grocery delivery service, but it’s also an online shopping platform for a variety of retailers. Here’s how it works:
So, customers place an order on Instacart.com or the company’s mobile app and choose a delivery window. Instacart sends shoppers to various stores, where they buy groceries that are then delivered to the customer.
For example, Instacart offers one-hour deliveries in San Francisco and two-hour deliveries in Chicago and Boston. Instacart employees fulfill orders. Customers can also sign up to receive regular deliveries from Whole Foods Market and Petco retailers. Individual retailers fulfill the orders.
It’s time we dive a little deeper to know Instacart’s business model.
Instacart Revenue Model And Business model
The Instacart business model revolves around the principle of “subscription commerce.” Basically, in subscription commerce, consumers pay a fixed fee for regular delivery of their groceries, giving them convenience and eliminating the need to go to a grocery store.
Down the line, Instacart’s technology platform connects customers with personal shoppers in its network.
When it comes to, How Instacart makes money:
Instacart has revenue streams as follow:
- Delivery: It charges fees starting at $3.99 for same-day delivery over $35. However, the price varies for club store deliveries, one-hour deliveries, and deliveries under $35.
- Service fees: Service fees also vary and are subject to change depending on factors such as location, the number, and types of things in customers’ shopping carts. Noteworthy, Orders that contain alcohol are charged a separate service fee.
- Instacart Express membership: The membership costs $9.99 per month and $99 per year, which waives off all delivery fees for grocery orders over $35.
- In-app Advertising: Instagram average cost-per-click prices are reported as to be $0.75 – $1.25 per click.
- Retail Partner Commission: It has partnered with over 300 retailers and earns an average of 10% from the subtotal on each transaction that occurs on its platform.
So, putting it with formal words, Instacart earns revenue via several models such as:
- Software as a service (SaaS) business model
- Advertising based business model
- Fee-for-service (FFS) business model
- Commission based business model
- Marketplace business model
- Transaction-based business model
- B2B2C (partnerships) business model
With the same business model, Instacart has raised a total of $2.9B in funding over 20 rounds, boasting 38 leading investors.
How does Instacart Stand Out? Instacart Value proposition
While the startup works to build a logistics system that can keep up with demand, it’s also trying to make it more convenient for customers to shop on its app.
The company calls its model “on-demand grocery shopping and delivery.” Besides, with hundreds of retailers and wholesalers at its disposal with thousands of personnel, Instacart has transformed the grocery shopping experience. It offers opportunities for every seller to expand their reach and offer new options for their customers to shop from their stores.
Furthermore, stores and markets working with Instacart can extend our current hours, providing customers access to quality products at affordable prices on demand.
When we talk about how Instacart nurtures its customer base for all of its partners, we can’t go without mentioning:
 Instacart is a delivery service that uses personal shoppers who fulfill orders placed on the company’s website or mobile app.
 Customers shop for groceries through the company’s website or mobile app and have items delivered directly to their homes within a specified time frame.
 Instacart has three different membership options: “Personal,” “Shopper,” and “Business.”
Instacart business model in a nutshell:
Customer segments: Shoppers (who have a vehicle, smartphone, and desire additional income), Stores (supermarkets, wholesalers, and retail grocery shops that want to increase their sales), and End-users who are busy and elderly people that want their groceries delivered at their doorstep with little effort.
Key Activities: Web and on-demand app development for Android and iOS. And to provide elite customer service and nurture partners.
Value proposition: Effortless and time-saving grocery shopping experience with same-day delivery for end-users. For shoppers, an opportunity to earn extra in free time with flexibility. And store owners will see an increase in their sales.
Key resources: A network of shoppers, local and supply chains of grocery stores, and customers as well as cutting-edge technology to maintain the strong network.
Customer relationship: In-app customer service and social media.
Channel: Web App and Mobile Apps.
Key partner: on-demand grocery delivery app development company.
Cost Structure: App development, Shoppers commissions, and employee salaries.
Revenue Streams: Markup pricing, Delivery charges, and Memberships.
There may be regions where services that Instacart offers are not available, but the audience yearns for it. So, in case you have such a particular location in your mind, don’t give it a second thought. Plan out your business model, create a prototype, and get started collecting feedback and improving your final platform, similar to Instacart.
Yet if anything remains, you can run towards us. Because we have the perfect app developers for hire who can turn your vision into reality with a quick turnaround time.