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: 7th October, 2022

The transition in consumer behavior is changing the grocery retail landscape. As consumers today prefer to have their groceries delivered to their door instead of going to the brick-and-mortar store and picking them up, online grocery delivery is on an upward trajectory.

According to Statista, eGrocery sales in the United States will account for 20.5% of total grocery sales by 2026. In this blog, we describe in detail what a grocery delivery business is, how to start it, the revenue model, key features, and more.

Table of Contents

Global Market Overview

Advances in technology, continued urbanization and the paradigm shift in consumers’ shopping habits have driven the preference for grocery shopping through online channels. As per a report by Grand View Research, the online grocery market size was valued at USD 285.70 billion in 2021 and is expected to grow at a CAGR of 25.3% from 2022 to 2030.

Future of On-demand Grocery Delivery Business

Please watch the video to know more about the future of the online grocery business, grocery market trends, and how you can launch a grocery multivendor marketplace:

How to Start a Grocery Delivery Business?

Since the markets seem lucrative for online grocery delivery businesses for years to come, even after the COVID-19 effect subsides, it is most appropriate to set foot in this direction. If venturing towards becoming an owner of a grocery service, considering some pro tips will help set sail in a streamlined manner.

Through this write up we have attempted to lay down the basic process flow that would help set up an online grocery delivery business.

1. Form a Legal Entity and Register for Taxes

One of the essential elements of any business is its entity. Ideally, the primary steps to be taken must be centered around getting the company/business registered. An authentic registration for a name, a form of business, and compliances will help give form and shape to the idea.

Online grocery delivery services need to pay taxes for the online sale of groceries. There is a sales tax and a services tax that needs to be duly paid, so registering under appropriate accounts to pay these taxes is a mandate even for online grocery delivery.

2. Finalise your Business Model

In its true essence, this particular online grocery delivery business plan works on the principle of picking up an item from the vendor and delivering it to the customer’s door. It’s as simple as that, and there are several ways in which the on-demand grocery delivery model works:

  • Suppose you are starting a grocery delivery service, and you have tie-ups with offline grocery vendors who do not offer grocery home delivery. You build a grocery marketplace where you have mentioned all the local grocery vendors. The customer chooses the vendor nearest to their locality, buys the items from your website and the order is delivered to their doorstep.
  • The second alternative is that you can put up the items on your grocery shopping delivery website, from where customers can choose the item needed and its quantity. You get those items from the grocery vendor and deliver the order to the customers.
  • The third option is when an offline grocery store owner decides to start an online grocery delivery business and provides an ordering option. The website owner manages all three aspects, from warehousing to logistics to delivery (this mostly comes under a single vendor online grocery business model).

process-2

3. Choose a Readymade Grocery Solution

Setting up an online grocery marketplace from scratch involves inputs from experts and professionals from different backgrounds. Developers to market analysts, and design specialists to business experts, different people need to get involved at different stages to launch an online grocery delivery business.

An acceptable option is to connect with a team of experts who offer grocery software solutions for building your business. Based on the offerings for customization, onboarding assistance, and business model setting, you can choose from the options available. But make sure that the solution offers:

  • Grocery Buyer Apps
  • Grocery Delivery Driver Apps

Grocery Buyer Apps

Buyer apps for grocery shopping provide 24×7 accessibility. They provide pliable options that bridge the gap between real and virtual stores. Shoppers can buy groceries anytime from the comfort of their homes and get them delivered to any location within the area of delivery. The app comes with an array of features and functionalities which provide a seamless shopping experience to the consumers.

Grocery Delivery Driver Apps

Grocery delivery apps are fully equipped with features that aid grocery delivery drivers with last-mile delivery. The features include order management, geo-location, wallet management, push notifications, and more to supplement delivery staff with convenience for easy door-step delivery.

Looking to Build your Grocery Delivery Apps?

Revenue Model for Online Grocery Delivery Business

There are many ways in which this model can help marketplace owners make their online grocery delivery business profitable and scale it. Please note that all these methods have their own set of advantages and conditions. So, let’s talk about revenue generation.

Commissions

Commission by far is the oldest and the most preferred revenue model for all 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 – This commission model charges the buyer and the driver 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 model 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.

Key Features of an On-demand Grocery Delivery Website

There are two stages for the features that must be included in a website based on the on-demand grocery delivery business model: the front end, when the users have not logged in, and the post-login stage. Let’s see what all the prominent features a grocery website has from these perspectives.

The Front End

When the end-user has just landed on the grocery website’s homepage and hasn’t logged in yet, the page they see is the default homepage of the website. From this perspective, the neutral one, here are some important features that the website owner should focus on:

  • Page Banner

The banner is located above the first fold portion of the homepage. A banner that states the core idea of the business is an important asset for the venture owner. This portion may seem trivial, but trust me when I say it, this is the point where it all begins.

  • The Section Below the Banner

This is where you can, and should, put all your favorite and attention-grabbing attributes.

Post Login Features

The game changes by a great deal when a person has logged into your website. Let’s keep the website owner’s perspective first; for the owner, it is the connecting link between the vendor and the customer to deliver the goods.

From the owner’s point of view, easy management, order tracking, and notification are the key features to focus on.

From the customer’s perspective, below are the key features that you must include in your on-demand grocery delivery model-based venture:

  • Multi-store

Offering multiple stores to your customers is not only good from their point of view, but you can also enjoy varied commission rates set with each vendor. The more vendors you tie up with, the better it is for your business.

  • Cart and Checkout

Needless to say, these two pages are surely an essential part of any eCommerce-based venture. Make sure moving from the cart to the checkout page is a breeze for consumers. The quicker they move, the quicker they buy.

  • Easy Navigation

Easy navigation is an integral part of a great user experience. Going from point A to B should be a stroll in the park and not a struggle through a maze. I’m sure we all understand that.

  • 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

People like to stay updated with their order status at all times. Keep them posted, and you’ll have more happy customers.

  • Click and Collect

Many grocery delivery marketplaces have already realized the benefit of combining online and in-store shopping in the form of the Click and Collect feature. It is an omnichannel strategy where customers purchase groceries online and pick them up from the store or a common point.

  • Information Security

Whenever your customers are sharing their information with you, they trust you with its integrity and security. You must adhere to sensitive information such as credit card details and personal information guidelines.

Must-have Features to Integrate into your Website while Starting a Grocery Delivery Business:

  • Delivery Staff Management

The platform must allow streamlined delivery management with efficient allocation amongst the drivers on the platform.

  • Advanced Reports and Statistics

The admin must be able to manage everyday online grocery sales and delivery operations with an informative dashboard, crisply displaying the key numbers needed to make informed and wise business decisions.

  • Seller Approval and Management

Approving sellers to join the multi-vendor platform should be managed easily by the admin through the platform itself. As vendors register with their details, their applications must be primarily screened by the platform owners for them to become registered sellers on the marketplace.

  • Product Catalogue System

Managing a clean and comprehensive product catalogue through a defined system will enhance the value of the marketplace. The system itself will allow systematic entries so as to display all information comprehendible by the customer.

  • Tax, Commission, and Revenue Management

The tax, commission, and revenue management on the online grocery delivery marketplace must be ordered and compliant. The admin should be able to manage all accounts efficiently through the platform’s system.

Learn More About the Essential Features of a Grocery Delivery Platform

How Much Does it Cost to Start an Online Grocery Delivery Business?

Cost is a critical factor when it comes to developing an online grocery business or on-demand grocery delivery apps. The biggest cost-driving factor is complexity. This includes features and functionality to be added and the time needed to implement.

A sophisticated online platform with high-end features will cost more, though its development will also depend on the availability of resources and geographical location.

Moderate Time Needs for the Development of a Grocery App

  • Simple App (3-6 months) –  A decent grocery app with simple functionality takes approximately 500-800 development hours.
  • Medium Complex App (5-9 months) –  A custom grocery mobile application with medium complexity requires approximately 800-1200 hours of development.
  • Complex App (8 months above) – A grocery app that requires a lot of customization exceeds 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

So, a platform/app for an online grocery delivery business can approximately take 1900 to 2400 hours to develop. And, its development cost could be anywhere from $47,000 to $36,0000. Instead, you can choose Growcer, a grocery eCommerce solution from FATbit Technologies that would cost you way less.

Growcer – A Complete Solution to Launch your Online Grocery Business

Growcer is a readymade, fully customizable eCommerce grocery 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 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. Offering a myriad of pre-integrated APIs (more than 15), Growcer is a comprehensive yet cost-effective solution that is built with state-of-the-art technologies. It is a white-label solution that offers a plethora of revenue-generating options to business owners.

Providing a rich user experience, Growcer has enabled many startups to do more. A few of the success stories 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

Prominent Names in Grocery Delivery Service Business

Now that we know what the on-demand grocery delivery service business model looks like, and how it works on the core, it’s time to take a look at the major players in the market.

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 generated revenue exceeding 250 million dollars. In 2020, the total valuation of the company reached $2.65 billion.

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 has raised probably 19 rounds of funding and the company is now valued at $14.7 billion.

UberRUSH

Currently providing their service in the New York City Area (Manhattan, Brooklyn, and Queens), San Francisco, and Chicago, UberRUSH is an on-demand grocery delivery service initiative by Uber, a brand that doesn’t need any introduction, unless you are living in a cave or under a rock.

While Postmates and Instacart work on a B2C model, UberRUSH works on a B2B model. Moreover, UberRUSH does not offer delivery services for restaurant orders since they have UberEATS for this purpose.

Grocery Delivery Service Infographic

Conclusion

Concisely discussed pointers above should lay down some basic expectations for setting up a multi-vendor online grocery delivery platform. Considering the available options, picking out a solution that lands your business in the market at the earliest possible should be easy.

Reach out to partner with a team that provides an end-to-end solution, with all the necessary inclusions to begin an online grocery delivery business.

Kickstart a Tailored Online Grocery Delivery Business

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.

Disclaimer: The Blog has been created with consideration and care. We strive to ensure that all information is as complete, correct, comprehensible, accurate and up-to-date as possible. Despite our continuing efforts, we cannot guarantee that the information made available is complete, correct, accurate or up-to-date. We advise - the readers should not take decisions completely based on the information and views shared by FATbit on its blog, readers should do their own research to further assure themselves before taking any commercial decision. The 3rd party trademarks, logos and screenshots of the websites and mobile applications are property of their respective owners, we are not directly associated with most of them.


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