How to Start a Grocery Delivery Business: Revenue Model & Key Features

How to Start a Grocery Delivery Business: Revenue Model & Key Features

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Last Updated: 18th September, 2023

Consumers today continue to shift to a digital ecosystem with all ages going online to purchase groceries and having them delivered to their door instead of trudging around a brick-and-mortar store. This shift is creating new opportunities, broadening the grocery business landscape.

According to Vantage Market Research, the global online grocery delivery services market is expected to expand at a CAGR of 26.9% from 2023 to 2030 and is projected to reach a value of USD 1670.3 Billion by 2030. In this post, we describe in detail how to start a grocery delivery business, along with its revenue model, features and more.

Table of Contents

Prominent Grocery Delivery Service Businesses

When it comes to grocery delivery services, it is convenience that you are ultimately paying for. Online grocery delivery businesses not only offer doorstep delivery but they also provide items at a discounted price. Hence, you not only get to save time but might also end up saving money. With the information, let us take a look at a few prominent grocery delivery service businesses.

Grocery Delivery Business

Postmates

Postmates is inarguably the most prominent player in this industry. With their service spanning more than 15 states in the USA, Postmates enjoys a massive presence and serves a huge number of customers every hour, every day, every year.

Since its inception in May 2011, they have delivered more than a billion goods and made an estimated $730 Million revenue.  

Instacart

Instacart is a North American leader in online grocery as its delivery services are available to more than 85 percent of U.S. households and 70 percent of Canadian households. It has partnered with more than 350 national, regional, and local retailers,  to deliver from more than 25,000 stores. Instacart reportedly generated $2.5 Billion in 2022 and is predicted to reach $35 Billion by 2023. 

FreshDirect

Founded in 2002, FreshDirect is an American online grocery delivery company that is headquartered in the Bronx, New York. The company sells fresh produce, meat, dairy and so on by finding the shortest route from dairies, fisheries and farms to the table. According to Crunchbase, it has raised $189 Million in funding.

Shipt

Shipt is an American grocery delivery service that was founded in 2014. Headquartered in Birmingham, Alabama, US, Shipt provides access to a variety of stores and product categories including fresh produce, household essentials and more. It has raised $65.2 Million in funding according to Crunchbase.

Future of Online Grocery Delivery Businesses

Technological advancements are reshaping the grocery eCommerce landscape. From user experience to order preparation and last mile delivery, technology is disrupting several parts of the online value chain. For more information, watch the video below to know more about the future of online grocery delivery businesses and launching a grocery multi-vendor marketplace.

Starting an Online Grocery Delivery Business

Since the market seems lucrative for online grocery delivery businesses for years to come, it is appropriate for entrepreneurs/grocery retailers to set their foot in this direction and start their own online grocery delivery business. In this section, we list the steps to start grocery delivery business.

Identify Your Target Market

The first step to starting an online grocery delivery business is conducting market research and figuring out the target market, which means finding out everything about the needs and wants of individuals. Once you have the understanding, you can delve deeper into their behaviors. Hence, if you are just starting out, having a defined target market will not only help you in starting your business, but will also help in creating effective marketing strategies. To define your target market, you can start by answering the following questions:

  • What is the need of your online grocery delivery business?
  • Who will benefit from your online grocery delivery service?
  • Who will be using the grocery delivery platform?
  • What will differentiate your business from the competition?

To find the answers to these questions, you can:

  • Conduct interviews with a group of people
  • Keep a tab on the competitors
  • Dive into the existing industry research
  • Demographically segment the market (age, education, income level and more)
  • Use research tools such as Google Trends, Google’s Keyword Planner, Facebook’s Audience Insights, and so on

Choose a Business Name and Form a Legal Entity 

Choosing a business name and forming a legal entity is one of the primary steps to give your idea a form. An authentic registration for name, a form of business, and compliances is a must. Furthermore, as online grocery delivery businesses need to pay taxes for the online sale of groceries, so registering under appropriate accounts to pay these taxes is a mandate.

Choose Your Business Model

In its true essence, an online grocery delivery business works on the principle of picking up an item from the vendor and delivering it to the buyer’s doorstep. Hence, several business models are available to start grocery delivery business. A few of them are listed below:

  • Multi-Vendor Business Model
  • Inventory Based Business Model
  • Hyperlocal Business Model
  • Click and Collect/Buy Online, Pick Up In-Store (BOPIS) Model
  • Scheduled Delivery Model

Multi-Vendor Business Model

In a multi-vendor business model, multiple sellers get a technical infrastructure to sell their vast range of grocery products to the buyers. Furthermore, it is also known as the ‘zero inventory model’ as the owner of the platform does not hold any inventory of its own.

Inventory Based Business Model

Using the inventory model, the grocery eCommerce business is responsible for storing inventory from various retailers in a warehouse, maintaining and keeping a track of it and providing on-time delivery of grocery orders to the buyers. 

Hyperlocal Business Model

As the name suggests, hyperlocal refers to a small geographical area. So, this business model caters to the needs of grocery buyers within a defined area. The main USP of this business model is that the grocery order deliveries are prompt. 

Click and Collect/Buy Online, Pick Up In-Store (BOPIS) Model

Click and collect or BOPIS model brings the benefits of online shopping while still retaining the charm of picking the grocery order from the brick and mortar store. It offers an omnichannel experience to buyers as they can purchase groceries online and as per their availability pick them from the store.

Scheduled Delivery Model

This model facilitates delivery of grocery orders as per the schedule that fits the needs of all the parties involved, i.e. the retailer, the delivery staff personnel and the buyer.

Launch A Grocery Delivery Platform as per Your Requirement

Decide the Revenue Channels

Once the business model has been chosen, you need to decide the revenue streams. They will not only help you generate revenue but will also help in driving the overall growth and profitability of your online grocery business. Some of the possible revenue channels include:

Commissions

Commission by far is the oldest and the most preferred revenue channel for marketplace owners. There can be two prominent ways to charge commissions with the sale of groceries online:

  • Commission on Each Transaction – This is chargeable to the vendor/seller on every sale they make on the marketplace platform. This way, the marketplace owner can earn according to the sales happening on their portal.
  • Commission on Each Delivery – Under this type of commission, the buyer and the driver are charged with some amount on their purchase and its delivery, credited to the marketplace owner’s account whenever an order is completed.

Vendor Subscription Fees

Also called membership fee, you can use this revenue channel to bring in vendors who are not comfortable with the commission model by paying a fixed subscription fee. These vendors can use your service for a fixed period of time (quarterly, bi-annually, annually, and so on).

Banner Ads and On-site Promotion

A good source of drawing revenue from the marketplace platform is allowing vendors to carry out their personalized ads via banners and schemes on the platform homepage. The admin can charge the sellers for the space and number of campaigns they want to run.
Such advertisements can act as business-boosting elements for the website as well as for the vendors. A good amount of revenue can come in from certain independent product ads as well.

Select the Features

As more and more individuals are transitioning to online channels for grocery shopping, it is pivotal to make their user journey remarkable. This can be done via features of the online grocery marketplace. Discussed below are some of the pivotal features to have in an online grocery delivery platform.

Simple Signup

The signup process for grocery retailers and buyers should be simple. If multiple steps are there for the signup then the users may get discouraged and move to your competitors site. Hence, simple signup is a must.

Custom Search and Navigation

As a marketplace offers a lot of grocery products to the buyers, it is important to have easy navigation and a custom search feature so that the buyers can get the right product quickly.

Easy Checkout

Easy checkout with a reduced number of checkout steps is pivotal to decrease cart abandonment, boost sales and create more revenue.

Multiple Payment Options

It is crucial for an online grocery delivery service provider or any e-commerce store to have multiple payment options for consumers, making it easy for them to purchase.

Order Tracking

Using this feature, buyers can keep a track of the status of their order, i.e. they can review the real-time status of their grocery order.

Ratings and Reviews

Allow buyers to provide their feedback through ratings and reviews. This feature helps in trust building and also provokes new customers to complete their purchase.

Advanced Reports and Statistics

The admin should have full access to all the reports and analytics so that they can evaluate business growth and plan future strategies.

Seller Approval and Management

The admin should be able to approve the request of sellers to join the marketplace through a seller approval management feature.

Product Catalog Management

Every marketplace should have a clean and comprehensive product catalog enlisting essential information about the product. Product catalog management facilitates the same.

Launch a Feature-Rich Grocery Delivery Platform

Create a Multi-vendor Marketplace

The next step is to create a multi-vendor grocery delivery marketplace. This can be done via following two approaches:

Custom Development

Custom grocery delivery marketplace development approach can be followed if you have custom requirements for which tailored functionality is needed. It is more time consuming and expensive because the development is done from scratch. 

Opting for a Readymade Solution

The second approach is to opt for a ready made solution to launch an online grocery delivery marketplace. As the features offered by a ready-made solution are time tested, this is a quicker and cost-effective way to launch the marketplace for the delivery of groceries.

Market Your Online Grocery Business

Once the marketplace is ready, it is pivotal to market it to broaden the horizon of the target audience by bringing awareness. Marketing can be done via following methods:

  • Search Engine Optimization
  • Content Marketing
  • Social Media Marketing
  • Pay Per Click Advertising
  • Email Marketing

Cost to Start an Online Grocery Delivery Business

Now that we have discussed the steps to start an online grocery delivery business, let’s take a look at the cost of starting one. If you choose to develop a multi-vendor marketplace platform then the biggest cost-driving factor is going to be its complexity, i.e. the features and functionality to be included. Cost of development depends on the time needed for the development of the platform and the availability of resources.

Moderate Time Needs

  • Online Grocery Delivery Platform with Simple Functionality (3-6 months) –  A decent grocery delivery platform with simple functionality will take approximately 500-800 development hours.
  • Online Grocery Delivery Platform with Medium Functionality (5-9 months) –  A custom grocery delivery platform with medium complexity will require approximately 800-1200 hours of development.
  • Online Grocery Delivery Platform with Complex Functionality (8 months above) – A grocery delivery platform that requires a lot of customization will exceed 1200 hours of development.

Hourly Rates (Region Wise)

  • North America – $150/Hr
  • Australia – $82/Hr
  • UK – $71/Hr
  • South America – $43/Hr
  • Eastern Europe – $40/Hr
  • India – $25/Hr

Hence, an online grocery delivery platform can approximately take 1900 to 2400 development hours. And, the development cost could be anywhere between $47,000 to $360,000. Instead, you can choose Growcer, a grocery eCommerce solution from FATbit Technologies that would cost you way less.

Growcer – An Online Grocery Delivery Solution from FATbit Technologies

Growcer is a readymade, fully customizable grocery eCommerce solution that is equipped with all the necessary modules- admin, seller, buyer, and delivery staff. Enriched with user-centric features, platforms like Walmart, Peapod, FreshDirect, Instacart, and more, can be built using it. Growcer also offers pre-integrated APIs and robust ready-to-use mobile apps for buyers and delivery staff.

Being a self hosted-platform, clients do not need to have any technical expertise. Further, it is a white-label solution and offers a plethora of revenue-generating options to business owners. That said, Growcer has enabled many startups to do more. A few of them are mentioned below:

  • ShopExpress – An online grocery delivery platform that delivers quality products to customers’ doors in Zimbabwe.
  • Superkiwi – Is another online grocery platform in the USA whose mission is to provide quick delivery of groceries that are purchased online, using the platform.
  • Tap Retail – Built using Growcer, Tap Retail is an online grocery marketplace that provides agile delivery of groceries that are purchased online using the platform.
  • Dhalmart – Is a one-stop platform that is dedicated to selling organic vegetables, groceries, and home-cooked food to individuals with busy schedules.
  • RX Delivered – Is a drug delivery platform that enables patients, hospitals, and pharmacies to order authentic and high-quality drugs for delivery in Africa.

Start Your Grocery Delivery Business with Growcer

Conclusion

The grocery retail landscape is constantly changing with people shifting to online shopping channels. Hence, starting an online grocery delivery business is a good idea. So, if as an entrepreneur you are excited about starting your own online grocery delivery business in less time, then consider our ready-made solution Growcer. For more information, get in touch with us.

FAQs

Q1. Is the online grocery delivery business profitable?

Ans: Online grocery delivery business is profitable as more people are ordering groceries online. The transition in consumer behavior is evident and the business is expected to remain profitable for the years to come.

Q2. How much can my business earn per grocery order?

Ans: Businesses mostly charge a fee of 10% to 15% depending on the order size. A fee of $15-$20 can be charged for a grocery order of $150. If on average 100 orders a day are received, then a business owner can make $1500 to $2000 per day. More orders will ultimately result in good profit.

Q3. How should I acquire grocery sellers on my platform?

Ans: Grocery sellers that are active on other marketplaces can be approached. You can research their expectations and provide them with exclusive offers and also have an approachable seller service support system. Implement useful guides and provide them with buyers on board. Further, you can ask grocery store owners to join your online marketplace and increase their sales/ revenue through your platform.

Q4. How should I acquire customers on my platform?

Ans:  Today’s fast-paced life with long working hours, hectic study schedules, and more does not allow employees or students living independently to go out and spend time shopping for groceries. In this context, customers who are looking for on-demand delivery services are ideal as a grocery eCommerce store solves their problem by providing them with flexibility. Buyers can shop any time, from anywhere, and get the order delivered to their doors. You can market your platform on various social media platforms to grab people’s attention.

Q5. How can FATbit Technologies help in growing your business?

Ans: The team of digital marketing experts at FATbit will help you to grow your business online and enhance its online presence through various digital marketing services offered. This includes social media marketing, PPC, and so on.

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