With its unique and efficient business model, Instacart, A grocery delivery start-up has been ruling as a leading online grocery delivery company for the last few years. The Company is the brainchild of Apoorva Mehta, who was an Amazon employee at the time when this idea came into his mind.
Due to immense growth and a stable operating model, Instacart has been a favorite for leading investors. In the last round, this grocery delivery giant raised $600 million at a $7.6 billion valuation. Furthermore, Statista’s most recent reports suggest that around 85% of US households and 60% of Canadian households use Instacart for grocery shopping.
If you are considering an idea similar to Instacart for business, this article is for you. In this article, we are going to shed some light on the Instacart Business Model and how it generates revenue. We will also compare it with its competitors like Amazon Fresh and others. But before that let’s start with some nitty-gritty of Instacart.
How Does Instacart Works? Overview
So, how does Instacart work?
Instacart implements sharing economy-based business model and provides hyper-local on-demand grocery delivery by connecting customers with personal shoppers. Instacart does not own any grocery store, It provides a platform for grocery retailers to sell their products on the platform.
Customers can choose their favorite grocery store from the mobile app, browse through grocery products, add quantity, and confirm the order. The shoppers are independent contractors or part-time Instacart employees who receive the order and shop for customers who ordered grocery items deliver to their doorstep. Customers pay through the app and get their items without stepping out of their home.
Instacart earns from the delivery fees and placement fees from the companies.
We will learn all this in detail ahead in the article. Keep reading!
Instacart Business Model Canvas
Check out Instacart’s business model analysis and know its business structure, its value propositions, revenue streams, finance, and more.
Instacart Value Proposition
Instacart knows that their business’s success heavily relies on the participants who are going to use the services. The company does not only provide an easy way for customers to shop groceries online, but it also has two other major stakeholders who are as important as consumers.
Instacart also provides a platform for local grocery manufacturers or retailers to advertise and sell their products. Besides this, the company allows a great opportunity for the gig workers to work as full-time independent contractors or part-time employees as a personal shopper. Let’s look into the details.
What Values do Instacart provide to Customers?
Instacart allows its customers to order any quantity of groceries from the home through the seamless mobile app. They have made sure the grocery items their consumers receive are fresh and organic. Also, they have focused more on the on-time delivery of their customers’ orders. Here is what Instacart does for its customers.
- Delivers 1000+ fresh products to doorstep within 1 hour.
- Provides promo codes and discounts on new products to save some bucks on shopping.
- Customers can browse grocery items from reputed stores like ALDI, Safeway, Costco, CVS, Publix, Kroger, Albertsons, Sam’s Club, Sprouts and Wegmans, and more. The company serves more than 25,000 different grocery stores.
- Allows its loyal customers to upgrade to Instacart Express program for faster and unlimited delivery for free.
- It also delivers Alcohol on the go.
- Renders a personalized shopping experience with trained shoppers.
Read also: GrubMarket Business Model
How Instacart Helps Shoppers?
The whole Instacart business model is built for providing the best experience to customers through personalized shopping. And for that, They have experienced shoppers who can shop in the store, select fresh items, pack it and deliver it.
In an interview, Mehta said, “As Instacart grows, and we continue to learn what makes the best experience for our customers, we are constantly looking for ways to improve our service”.
Here is how Instacart provides value to its shoppers.
- Shoppers can earn money by shopping & delivering on behalf of customers.
- They receive an order on the shopper app.
- Shoppers can work whenever they want. That means flexibility in working hours.
- Two different working models: (1) Full-Service Shopper (2) In-store shopper
- Full-Service Shopper: Shop for customers and also deliver to them. They work as an independent contractor. Instacart pays $7 to $10 per order to the full-service shopper and a minimum $5 for delivery only works. Shoppers can also have tips from customers.
- In-Store Shopper: Work as a part-time employee of Instacart and shops only. They have to make an order ready for pick up.
How Does Instacart Provide Value to Retailers?
Similarly, Instacart partners with local grocery store owners.
- Grocery store retailers get the benefits of Instacart’s popularity.
- The company aids store owners by providing its marketing and sales platform.
Instacart Revenue Model: How Does Instacart Make Money?
How Instacart make money? Perhaps it is the most important question for those who are looking to start a grocery delivery business.
Speaking about the Instacart revenue model, the company has multiple channels from which it generates revenue. By way of example, Instacart earns its money from delivery fees, surge prices, Payment from grocery partners, and placement fees. Let’s understand it deeper.
Delivery Fees:
On each order, the grocery delivery company charges delivery fees from consumers. These charges are not fixed and depend on order quantity, but Instacart charges $3.99 for 2-hour delivery and $5.99 for 1-hour delivery.
By the same token, there is another option for regular customers of Instacart who can purchase a subscription of Instacart Express of $99/year. Customers get unlimited delivery if the order is above $35.
Mark Up:
As per the company it charges the same price as in-store for some retailers. I.e Wholefoods. But for some retailers, it charges 15%+ markup. i.e Costco.
Grocery Partner Payments:
Instacart makes money from charging fees to their registered grocers. The company charges some percentage of the sales revenue of grocery retailers. To be precise, the company charges around 3% on each order from grocery stores. Consider it as a fee for tackling their order process and advertisement.
Placement Fees:
Apart from the above-mentioned revenue generation methods, Instacart revenue model also earns by levying placement fees charged to the manufacturer. Confused?
To illustrate, think of a soap manufacturing company that launches a new shampoo or a soap and wants to get enough exposure at starting. The manufacturer can approach Instacart and advertise it by offering promo codes and free samples to Instacart customers instead of distributing flyers. Instacart promotes its new products with banner brandings. And for that, they pay placement fees to the company.
See Also: Grubhub Business Model
Instacart’s Business Model: Better than Competitors?
The Instacart grocery delivery business plan turns out to be the most significant factor in building a leading grocery delivery business in the USA & Canada.
As per the Edison trend, Instacart has beaten all its competitors in the grocery market share in the USA. Instacart owns 68.8% market share leaving behind its competitors like Amazon fresh, Shipt, and FreshDirect. This progressive growth has led Instacart’s valuation to sky-high.
Conclusion
With its unique approach and business plan, the Instacart business model now has proven to be sustainable. It remains to be seen how Instacart takes from here. If you want to start your own grocery delivery app like this, then this business structure will definitely be worth implementing. Also, get an insight into how to develop an app.
A Seamless mobile app and website will be an important aspect of starting a grocery business. You could go for custom app development or buy a ready-made Instacart clone which can be started instantly at an affordable cost.
Do you have any questions regarding the business model of Instacart or building mobile apps for it? Let’s talk.
