Last Updated: 06th June, 2023
The strain from the emergence of unprecedented Covid-19 has put grocery eCommerce businesses on an upward trajectory. Capitalizing on the eCommerce wave due to consumer transition, Grocery retailers are launching grocery delivery apps as they help in seizing a significant competitive advantage. Though there are a lot of applications available in the market such as Shipt, Gopuff, freshdirect, OneCart, Zulzi, Pick n Pay, KIBSONS, GrabMart, Blinkit, beelivery, FarmBox, FarmDrop, Amazon Fresh, Peapod, Walmart Grocery Delivery, Safeway, Kroger, Buymie,Good Eggs, Cornershop, Instacart.
Instacart is one of the growing player in online grocery industry. As the company is reaching new heights even after the pandemic, many entrepreneurs take inspiration and want to launch a business or delivery app like Instacart. To draw a better understanding, let’s take a deeper look at Instacart’s customer retention strategies by dissecting its business model, revenue model, features, and the cost of building an app like Instacart.
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Instacart’s 3-Tiered Customer Strategy
The Unique Selling Point (USP) of Instacart is to deliver grocery products to the customers’ doorsteps as early as possible. The business model that Instacart follows supports a 3 tier customer strategy. Not being the entity that directly maintains the inventory, the company acts as a host whereas the contractors are responsible for managing inventory and making goods available for delivery.
This unique “no-inventory” business model was an outcome of lessons that the company learned from the failure of its competitors. The 3 tier customer strategy focused on bridging the gap between consumers and contractors who are responsible for making timely delivery of goods.
Below is a detailed study of Instacart’s 3 segment consumer strategy. The key players are:
Retail Partners
Instacart has partnered with multiple registered stores that have the independence to operate under the name of their enterprise. The stores have to first enter into a special contract with Instacart to get listed on the website. Then, they can showcase the articles for purchase on Instacart’s website.
Instacart Shoppers
Instacart shoppers or delivery contractors shop for the products and later deliver them to the buyer. This segment of the 3 tier system works on a contractual basis. The Instacart shoppers are notified about the orders via a smartphone application. Upon receiving the orders, the shopping personnel collects the items from the nearest store and makes the delivery.
This segment is further divided into two categories:
- In-store Instacart Shoppers: They are employed on a part-time basis with Instacart. The in-store Instacart shoppers are designated to prepare the customers’ shopping bags or they have to make an order ready for pick up. These shoppers do not require a vehicle as they do not make deliveries but they should always have access to smartphones to track the buyer’s arrival.
- Full-service Instacart Shoppers: These shoppers are independent contractors who use the Instacart platform to shop and deliver orders for their customers.
Buyers
Buyers are the end customers who place orders for groceries using Instacart’s website or mobile application. Since multiple stores are listed on Instacart, buyers have the freedom to choose from their preferred stores. The buyers can also combine items from multiple stores and place orders.
Buyers can also schedule the date and time of deliveries respectively. Payment for the orders placed can be made online.
Decoding Instacart’s Business Model
Instacart has penned and adopted a business model that is an amalgamation of the gig-economy, eCommerce, subscription & aggregated business model.
How does Instacart Grocery Delivery Work?
- The users must allow location access or manually enter their home address. The app will automatically enlist nearby local stores.
- The users can simply choose from a wide range of items, make the payment, and select date and time for delivery.
- Once the consumer has placed the order, the shopper (contractor) will receive a notification via the app. The shopper will then start collecting the articles as per the order received and prep the order for delivery.
- Payment will be initiated by the shopper by swiping the prepaid debit card issued by Instacart.
Consumers can also opt for self-pickups directly from the store. All you have to do is place an order for the grocery essentials that you require and select a pick-up time as per convenience.
Order Economics: Revenue Model Adopted by Instacart
Now that we have discussed the business model that Instacart runs on, let us learn more about the order economics of the grocery giant by enlisting the revenue streams.
Delivery Fee
Except for the first order, Instacart charges a delivery sum from customers for every order placed. The initial delivery amount is $5.99 if the order is to be delivered within 2 hours after placing it. The delivery fee for requesting a 1 hour delivery is $7.99. This may vary according to the minimum purchase requirements.
Partner Payments
Many SMEs and market leaders like Kroger have partnered with Instacart to integrate its services within the website or grocery delivery platform for better customer reach. Instacart earns profits by charging commissions per order and a partnership fee.
Markup Fee
Instacart earns a markup fee priced at 20% of the net cost of the item. The prices listed by some retailers (wholefoods) on Instacart are the same as their in-store prices which leaves a marginal room for profits. However, some stores like Costco list products at a 20% higher cost. The revenue generated from this set of items goes directly to Instacart.
Service Fee
Instacart charges a compulsory service fee of 5% on every order. Also, the customers have to make a mandatory 5% shopper tip for every delivery.
Membership Fee
Instacart also provides an annual membership priced at $149 known as the Instacart Express. With the membership, the customers can enjoy free deliveries for orders valued above $35, all year round.
Features that you Should Integrate while Creating a Platform Like Instacart
The success of a grocery delivery app like Instacart heavily relies on the features incorporated. Listed below are the category-wise features that enhance the overall usability of the application.
Customer
- Sign up
- Search and filter
- Choose products from different stores
- Single cart
- Wallet
- Schedule delivery
- Track order
- Return and replacement
Instacart Shoppers (Delivery Drivers)
- Dashboard
- Geo-Map services
- Route optimization
- Accept or reject the order
- Chat/Call functionality to both sellers and buyers
Sellers/Vendors
- Store and product listing
- Inventory Management
- Seller Wallet
- Shop operation timing
Admin
- Commission Management
- Reports and analytics
- Seller & Delivery staff approval/rejection management
- CMS Management
- Currency & Language Management
Build a Grocery Delivery App Like Instacart
Designing and developing a grocery app like Instacart from scratch requires a lot of investment both in terms of money and time. Further, an entrepreneur has to consider factors such as addressing customers’ pain points, analyzing the strength and weaknesses of competitors, choosing a technology stack, intuitive UI/UX design & layout, necessary grocery app features to integrate, exploring monetization options etc.
How Much Does it Cost to Build an App Like Instacart?
Features needed in the Instacart app today can become irrelevant over time. So depending on your requirements, we suggest starting with an MVP and later scaling the system to a full product. In the case of Instacart’s shopper app, you can have a full-fledged delivery app.
Growcer, an MVP grocery delivery solution, comes equipped with web interfaces for admin, buyer, and seller and mobile apps for buyers and delivery staff. It is an ideal and practical solution and can also adapt to other business requirements. Our team of experts can also be hired to build a custom shoppers app.
Launch a Grocery Marketplace with Growcer
FAQs
Q1. What are some apps that are similar to Instacart?
Ans. In the grocery delivery market, a lot of apps are similar to Instacart. These include FreshDirect, PeaPod, Shipt, and more.
Q2. Does Growcer’s base copy build a platform that is exactly similar to Instacart?
Ans. Growcer is a readymade solution that can be enhanced to function like Instacart. A few functionalities of Instacart are not incorporated in Growcer’s base copy though it can be customized at an additional cost. Also, instead of shoppers apps, as in Instacart, Growcer comes with a delivery driver app.
