The unprecedented strain of coronavirus has brought the online grocery industry to the fore. With consumers transitioning towards online grocery shopping, a surge in daily grocery app downloads has been recorded. According to stats, Instacart was on an upward trajectory as its mobile app downloads saw a rise by 218% in March 2020, garnering a massive profit.
With Instacart’s business acceleration, many entrepreneurs have been inspired to launch a similar delivery app or eGrocery business. In this article, let us understand the working of Instacart and how to build an app like instacart.
Understanding the Business Model of Instacart
The unique selling point of Instacart is delivering online grocery orders to its consumers as quickly as possible. It works on the 3 tier customer strategy which focuses on bridging the gap between the consumers and the shoppers who are responsible for door-step grocery order delivery.
The key players are:
- Grocery Retail Partners
- Instacart Shoppers
- Online Grocery Buyers
Retail partners are the grocery vendors who have entered a contract with Instacart in order to list their grocery stores and grocery products for purchases online. They have the independence to operate under the name of their own enterprise.
Instacart shoppers or delivery contractors shop for grocery products as per the buyer’s requirement. They later deliver the online grocery order to the buyer. Instacart shoppers are notified about the orders via a smartphone application. Upon accepting an order request, Instacart shoppers collect grocery items from the nearest grocery retail store and then make the delivery to the buyer’s doorstep.
This segment has two parts:
- In-Store Instacart Shoppers
- Full-Service Instacart Shoppers
In-Store Instacart Shoppers
These are employed on a part-time basis to prepare the customer’s shopping bags or make an order ready for pick-up. They do not make door-step deliveries as the consumer comes to pick the order. To track the buyer’s arrival, the in-store shoppers should have a smartphone.
Full-Service Instacart Shoppers
These are independent contractors who shop and deliver online grocery orders to the buyers at their doorstep.
Online Grocery Buyers
Online grocery buyers are the end customers who purchase groceries online using the Instacart website or mobile application. A buyer has the flexibility to shop from multiple stores. But separate carts for each store are created.
A buyer can switch between stores to find and add items and can also schedule deliveries according to the date & time. Payment for orders can be made online.
How Instacart Grocery Delivery Works?
Businesses are getting evolved to meet consumer shifts towards quality, convenience, more choices, and more speed all at the same time. Getting grocery orders delivered with a click of a button is convenient for online grocery buyers as they don’t have to go trudging around a conventional store.
Below mentioned are points covering the grocery delivery module of Instacart:
- Online grocery buyers can add grocery items to their cart but must register before checkout.
- They should allow location access for online grocery order delivery or manually enter the address on the portal.
- Once the order has been placed by the consumer, the shopper (contractor) will receive the order notification via the app. The shopper will then collect grocery items as per the order received and later hand-deliver them to the buyer.
- Payment is initiated by the Electronic Benefit Transfer (EBT) debit card system.
- Online grocery consumers can also opt for self-pickups from the store by selecting a pick-up time as per their convenience.
Revenue Model of Instacart
The goal of every business is to generate profit. Let us understand how businesses like Instacart harness the power of internet and generate earnings.
Various revenue-generating streams are:
- Delivery Fee
- Service Fee
- Membership Fee
- Partner Payments
The delivery fee on all orders is charged by Instacart. Delivery for the same day starts at $3.99 for orders over $35. But, Instacart Express members get free delivery on orders over $35 per retailer. All orders should be at least $10 for eligible delivery.
Service fee is charged by Instacart to cover a broad range of operating costs such as customer support, shopper operation, insurance, and more. The service fee does not go to the shopper for delivering the order and is not a tip.
Instacart offers a monthly and an annual membership plan where buyers can enjoy unlimited free deliveries on all orders over $35.
Instacart earns profits by charging partnership fees. Many SMEs and market leaders like Kroger have partnered with Instacart to integrate their services within the website or platform for better customer reach.
Instacart also earns profits by charging commissions per order.
The new realities of living with the pandemic have forced consumers to limit social interaction and outings. Delivering groceries to buyers has become quintessential for online grocery businesses like Instacart amidst the ongoing crisis.
If you are an entrepreneur who is looking to establish an online grocery business, with an app like Instacart, then partnering with a good team that offers customization on the product is important.
Our grocery ecommerce platform, Growcer provides a ready-to-launch web portal and mobile apps that can be customized (at an additional cost) to deliver a similar platform like Instacart.