The grocery delivery business has grown up significantly over the last few years while the ongoing COVID-19 pandemic has added fuel to the fire. We have also received many questions related to grocery delivery business models, such as how to make a successful grocery delivery business plan and what factors will play a key role to make a successful start?
Indeed, the delivery business for groceries is one of the fastest-growing niches of eCommerce in 2023. Given the facts and stats on online grocery shopping services, the market is expected to grow by three-fold every year and any investment whether it be launching a grocery store or starting a grocery delivery service; will have a positive outcome.
So, if you are exploring how to start a grocery delivery business, then this article is good to read for you. You will get a comprehensive guide, tips and suggestions here.
Grocery Delivery Business from Market Perspective
Let’s begin with some fascinating facts about the online grocery business trends stated by Statista.
- A report by Statista says that the total retail sales in 2020 accounted for $5,638bn.
- The same report suggested that more than 260 million Americans will purchase things online, including groceries in 2021.
- Instacart, Walmart Grocery, and Shipt have witnessed a significant download surge of 218%, 160%, and 124% respectively.
- Online sales of consumer packaged goods have grown by 56% at the end of April 2020, as compared to the same time last year.
- A survey by Nielsen states that 70% of consumers worldwide will buy groceries online by 2024.
These are some overwhelming facts, and the best thing is that they will continue improving, even if the pandemic is over. The article is a comprehensive guide that is not restricted to the pandemic only. You will understand the range of grocery delivery models as well as how to start it during the COVID-19 situation and continue to flourish even after the pandemic ends.
How To Start a Grocery Delivery Service?
If you are considering starting a grocery delivery service with on-demand delivery apps, then this is the perfect time to hit the ball. If you are flexible and looking for more options, you can visit this page to get a comprehensive guide on how to start a meal prep business.
In this article, we’ve covered the following points:
1. Types of Grocery Delivery Business Model
2. Challenges of Grocery Delivery Business
3. Grocery Delivery Business Plan
#1. Types of Grocery Delivery Business Model
There are mainly three types of grocery delivery business models. They include:
- Inventory Models
- Multi-Vendor Marketplace Model
- Shopping Model
If you take a look at all the top grocery delivery service startups, they are either following one or a hybrid of these various grocery delivery business models. So first, it’s time to understand how these models work and then apply them as per your business goals:
Online Grocery Business: Inventory Model
In the inventory model, you stock up on grocery essentials directly from different suppliers and deliver the products to customers using an in-house or third-party delivery network. It’s basically like an offline store selling groceries that also start a grocery home delivery service. Now, customers can order online, and the grocery vendor will deliver the products to the customers using an in-house delivery network. If you don’t want to start a grocery store, you can choose to start a grocery delivery business, inspired by the inventory model.
Online Grocery Business: Multi-Vendor Marketplace Model
It’s one of the most preferred grocery delivery business models for startups, to begin with. When you choose the Multi-Vendor Marketplace Model, you do not have to manage stocks. All you have to do is become a medium between customers and grocery stores. You provide a digital platform in the form of a website portal or a mobile app using which the customers and grocery stores can interact.
The customers will send orders through the app; the app will further transfer the order to the respective grocery stores. Then a delivery person will collect the products and deliver them to the customers. Many eCommerce companies like Amazon, eBay, and Airbnb already follow this business model.
Online Grocery Business: Shopping Model
The shopping model is the most popular one, in terms of the global market. A lot of startups nowadays are exploring online how to start a grocery shopping business. It works the same as a multi-vendor marketplace model, except for one difference. The platform itself selects the vendor or grocery store instead of the customers, based on the customer’s location.
When a customer places an order, the platform chooses the vendor and uses an in-house delivery person to deliver the order to the customer. The Instacart business model works on the same approach.
#2. Challenges of Grocery Delivery Business
If you are a grocery delivery startup, you have no easy path ahead. The maximum challenges that a grocery delivery service startup would face in a pandemic is from the customer side, such as – around 40% of consumers complained about delayed delivery of groceries during the Coronavirus pandemic in the United States. At the same time, another 20% complained about facing issues with the delivery time range of the groceries.
There were only 9% of customers who responded saying that they did not face any difficulties while placing an order online, during COVID-19. But the good thing here is that all the grocery delivery services are facing these problems, so you just need to be better than others. Ultimately, the goal has to be to build a profitable grocery delivery business.
These are also other challenges that occur in the online grocery delivery business that faces other sources. Let’s take a look at some of them:
- Lack of Supply Chain Management
- Changes in Demand
- Changes in Customer’s Buying Behavior
- Dull Workforce
- Delivery Charges
- Stiff Competition
The grocery delivery business opportunity is a really lucrative one if you can overcome these challenges and be able to work efficiently. But, to do so, you need a well-defined grocery delivery business plan. Next, we’ll be taking a look at creating such a business plan.
#3. Grocery Delivery Business Plan
Whether you want to start a new online grocery store or want to take your existing physical grocery business online, you need to explore the grocery store business model and create a foolproof grocery delivery business plan. We have listed out some of the essential points which will help make things easy in planning your grocery delivery business venture.
Study The Market & Your Competitors
The first step you should take is to gather a list of your competitors, research, and take a competitive analysis to understand your market thoroughly. Understanding the market needs, customers’ pain points, and your competitors’ business moves will help you make better decisions while creating grocery delivery service business plans.
Start with some of the prominent names in grocery delivery service and explore their application, how they work, and gauge their strengths and weaknesses. Some of the best grocery delivery services are:
- Amazon Fresh
Invest in MVP Development
Building a full-fledged grocery delivery service app could be a costly affair that has to be done without any mistakes. The best way forward is to first create a Minimal Viable Product (MVP) on your grocery delivery app concept. It helps you analyze things and improvise without making a hefty investment on the first go.
Best App Design, Features, & Technology Stack Will Set Your App Apart
Ever thought about what grabs the attention of the app users? It’s the app’s design, features, functionalities, and the level of technology stack working on running the app that makes the difference. So you must do a competitive analysis and select features and designs that your competitors lack and make them your app’s specialty.
A bit of good advice is to integrate exceptional app design and include user-friendly functionalities, and effective technology while formulating your grocery delivery app.
How Does Grocery Delivery Business Make Money
How your grocery delivery business makes money depends on the type of grocery delivery business model you choose to follow. So you must select the business model carefully after considering its revenue model.
Some of the common sources of revenue for the Grocery Delivery app are:
- Commission on Orders
- Delivery Charges
- Promoting Vendors on the App
- Selling Ad Space in the App
- Monthly Subscription Charges
Take the help of an expert business analyst and investors and do some brainstorming while deciding your grocery delivery business’ revenue model.
An Effective Grocery Delivery App Can Be a Game-Changer
You now know the on-demand grocery business model and have understood the challenges that come with them as well as the revenue models these business models apply. But all of this can only work if you have a competent and exceptional grocery delivery app.
It is essential to know how to make a useful grocery delivery app. Creating an excellent app depends on getting the right app development company and the perfect app solution from them.
If you don’t have the time and money to build an app from scratch, the best option is to get an Instacart clone script solution instead. So, the best call would be to purchase a customizable ready-made grocery delivery clone solution to create your perfect grocery business app.
The next possible solution would be to take a Grocery Delivery Franchise and start your own business quickly. Taking a franchise will help you with a shorter time to market and earn right from the beginning. However, you need to make sure that the franchise you are taking is popular, Instacart, Amazon Fresh, etc, and you don’t have to spend a lot on its marketing.
Read More: Shipt vs Instacart
It’s Time To Start Your Own Grocery Delivery Business
You may find plenty of data, surveys, studies, and research papers on how to start your own grocery delivery business. Still, all of these data dates before the Coronavirus pandemic outbreak hit us. We are not saying that they are wrong or not reliable, but you still need a set of experts that can break down the information based on the current situation.
The world is facing a health crisis, and the economy has been hit hard. Industries, businesses, lives, and livelihoods, everything has been affected by the pandemic. Even though things are getting back on track, it will take time (even years.) Don’t blindly believe in the business tips and guidance given before the pandemic.
Contact experts, share your concern, and you will get the perfect solutions.