Are you curious how the Instacart online grocery business works and how you can be the next Instacart of the World?
Undoubtedly, it is one of the most current technological innovations with a business plan that has shaken the world!
Due to the wide availability of products, easy-to-use mobile applications, and convenient delivery of products at the doorstep within a specified time frame, the online grocery business market is witnessing an exponential rise in the number of consumers in recent years. One such online grocery business that has gained significant popularity and has become a model to follow is Instacart.
Instacart is an on-demand grocery delivery service that delivers groceries and household goods to customers’ doorsteps.
In this article, we will look into the working of Instacart along with some tips and strategies on how you can start your online grocery delivery store like them.
Instacart: An Overview
Launch Date: 1 July 2012
Founded by: Apoorva Mehta (CEO / Founder) and Max Mullen (Co-Founder)
Headquarter: San Francisco, California
The global online grocery market has surpassed $190 billion in 2019 and is anticipated to expand at a CAGR of 28% between 2020 and 2026.
Due to the pandemic and the subsequent lockdowns, sales in online stores started exploding—owing to a surge in demand. Online delivery became the safer way to purchase essentials as opposed to visiting crowded stores during these difficult times.
Modern-day technology has made shopping easier. Instacart is one of the most popular grocery delivery apps in the North American region. You can use it to get your groceries delivered to your doorstep in as little as an hour. Instacart allows you to shop from the comfort of your home using your smartphone or computer.
All you need to do is create an Instacart account, select the products you want and schedule a delivery either within an hour or later in the day or even in the next few days. An Instacart shopper will assemble your order and facilitate home delivery.
It also allows an in-store pickup option that saves you the trouble of walking through the stores searching for your desired products. Just select products you want on Instacart, schedule a pickup time, and pick them up directly from the store.
The Business Model of Instacart
With its unique technology-driven business model, raised by a former Amazon engineer, Instacart is revolutionizing the online grocery business industry. Due to its exponential growth aided by a stable and futuristic business model, Instacart is ranked as one of the USA’s most promising companies. In addition to this, it is currently valued at 7.6 billion dollars after raising an additional 600 million dollars. Statista reports that around 85% of the USA and 70% of Canadian households rely primarily on Instacart for grocery shopping.
Different stakeholders of Instacart:
Instacart directly connects users with shoppers and does not own any store, instead it provides an online platform for grocery retailers to sell their products. The shoppers are part-time employees or independent contractors who shop for the customers and deliver to their doorsteps. Instacart makes revenue from the placement fees from the grocery stores and delivery fees from the customers.
Instacart knows that its success and growth heavily rely not only on the customers but also on two other major stakeholders: grocery manufacturers, retailers, and personal shoppers. The company provides a great platform for the store owners to advertise and sell their products and offers excellent opportunities for gig-workers to earn bucks as part-time personal shoppers.
Benefits offered by Instacart to customers:
- Delivers 1000+ fresh and organic products to your doorstep within 1 hour.
- In addition it provide huge discounts through promo codes on new products.
- Serves more than 25,000+ grocery stores. Users can order from even reputed stores like Costco, ALDI, Kroger, Safeway, Albertsons, and more.
Here is what Instacart offers to the shoppers:
- Shoppers are provided with a flexible working schedule.
- Shoppers can choose between two working models, either as a full-service or an in-store shopper.
- A full-service shopper works as an independent contractor.
- An in-store shopper works part-time
The value offered by Instacart to retailers:
Instacart also has tie-ups with most of the local grocery store owners.
Grocery store retailers use Instacart’s popularity to increase their revenue through online sales. Stores will have the opportunity to increase the number of loyal customers who can purchase from them even outside Instacart.
Also Read: On demand business models
The Revenue Model of Instacart
Instacart has four fundamental channels from which it generates revenue. They earn their revenue from:
- Markup prices of the grocery stores:
- Delivery fees for products ordered
- The membership fee for using Instacart
- Offers and schemes on purchases
How is Instacart Keeping Up With the Demands of people in the Present COVID Situation?
“We saw five years of growth in five weeks, and the growth has continued as we grew over 300% year on year ” – This quote from Apoorva Mehta, the CEO of Instacart, sums up the stellar journey of Instacart in the pandemic.
Instacart has shown exponential growth during the pandemic outbreak and was well-positioned to handle the crisis. In fact, on 23rd April 2020, Instacart added 250,000 more shoppers to its crew to meet the rising demands due to lockdowns.
The supply-side growth (by adding a lot of shoppers) during the pandemic was largely driven by the impact of the pandemic on the demand side (more users ordering groceries online). Most people are acting responsibly by staying at home and staying away from crowded areas like grocery stores. So there was a natural inclination for people looking up to Instacart for their grocery needs.
However, Instacart also faced significant backlash in areas like delivery times and employee satisfaction. During the initial months of the pandemic, which was dominated by panic buying, Instacart dominated the grocery delivery market and was delivering more products than America’s largest grocer, Walmart, says Second Measure, a data firm. The number of chains Instacart served has increased by 60%, and almost 500,000 Instacart shoppers are cruising around 45,000+ stores across the USA and Canada.
The result – revenues had hit $1.5 billion. Forbes reported that Instacart has grown from a loss of $2 per order during 2019 to a profit of $3 per order in 2020. Since the start of the pandemic, Instacart reported positive cash flow for three consecutive quarters for the first time.
To thrive in this competitive world, you need to provide some additional value to your customers over and above the must-have features. Here are some unique features you can offer:
Shared Shopping List:
If there are several members in a family, imagine the chaos that will be generated while preparing a shopping list. You can make this process seamless by allowing sharing of product lists across different members and creating a common place to access all the orders.
his will eliminate the risk of missing or duplicating grocery products. Instacart and other apps have this unique ” shop with friends ” feature through which consumers can view each other’s s list. Try incorporating this in your grocery platform.
Tracking the Order Delivery:
Fear of missing the delivery makes customers anxious, and they end up staying at their homes waiting for the order. Employing GPS tracking and mapping will allow users to track their orders and go about their day without anxiety.
The delivery fee usually depends on the size/quantity of the order, location, and delivery time. You will also end up charging higher during busy shopping hours. While some customers might not mind changes in prices, the users should be instantly notified about the price change before confirming the order.
How to Be the Next Insatacart?
Growing demand for grocery and food delivery apps, attractive government incentives for small and medium businesses, and, most importantly, untapped workforce have created a conducive environment for those looking to start their own online grocery delivery app. Let us now understand what constitutes a platform like Instacart.
Must-have Features in your grocery delivery app:
Furthermore, are some of the most common core features found in most online grocery business delivery platforms (including Instacart) – Product categorization is the arrangement and placement of products into their respective categories. The process usually gets complicated when there are thousands of products belonging to multiple categories.
You should offer a search functionality where users should be able to find the products seamlessly by entering keywords in the search bar.
Offer a separate profile section where users can manage their personal details, addresses, billing details, set preferences for future orders, view order history, and view loyalty points.
Customers usually prefer a platform that offers multiple payment options such as cash, cards, digital wallets, and gift cards, with an option to redeem loyalty points and apply promo codes. After placing an order, the customer should also receive an invoice on his email and the order details should be recorded in the user profile section.
Your checkout process should be simple and should capture minimal details. Capture just the contact details, payment details, preferred delivery time, and delivery instructions.
In conclusion, we can say that online grocery delivery businesses such as Instacart are skyrocketing in terms of revenue generated, and the number of orders served. Moreover pandemic has created an everlasting change in consumer behavior. They now prefer to order their groceries online instead of shopping in the stores for convenience and safety.
Yelo supports all your business needs. It is an end-to-end direct to consumer ordering platform
It provides your business with smart delivery tools that are perfectly tailored to maximize ROI. Build your own marketplace with Yelo.
Above all, if you want to start an online grocery business like Instacart, this is the right time. But remember, the quality of delivery that you offer will be your biggest competitive advantage when you start your online grocery business. Undoubtedly, exceptional delivery quality can only be achieved through efficient and seamless business operations. This is possible by adopting a delivery management system “Tookan“. It helps you manage your business operations better and optimize the delivery process for efficient and faster deliveries.