Setting up Online Grocery Business in 2021? Here is What you Need to Know

Setting up Online Grocery Business in 2021? Here is What you Need to Know

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Last Updated: 23rd July, 2021

Online grocery shopping is catching up with consumers rapidly. According to Orian Research, the global online grocery market would grow at a CAGR of 23.7 % in the period of 2020- 2025. One more research suggests that the grocery ecommerce business is expected to reach $250 Billion in the next five years.

No doubt, this forecast will get a lot of entrepreneurs interested in the grocery eCommerce market. The purpose of this blog is to help such entrepreneurs gain an in-depth understanding of how an online grocery marketplace works, various revenue channels, key features along with useful tips and growth hacks to get a headstart in the market.

Major Players of the Grocery Industry

The top retailers of grocery eCommerce industry are not only popular among customers but many aspiring entrepreneurs or business owners study their order to cash process or frameworks before starting their own grocery ordering and delivery business. Some of the leading grocery brands are as follows:

Top Market Players - start grocery business

Things to Consider Before Starting an Online Grocery Business

To get successful in starting and operating an online grocery business, you need to focus on the following factors:

  • Selecting and enhancing (if required) grocery business model 
  • Creating a roadmap to transform the business model into an agile, efficient, and a precise operating model
  • Determining the target market 
  • Segregating the delivery regions
  • Competitor analysis
  • Grocery website and mobile apps

Out of all these factors, entrepreneurs or business owners often waste so much time and resources in choosing the suitable grocery business model.

To help you out with it, we have explained four major business models in the grocery industry with examples of market players.

Different Business Models Of Online Grocery Industry with Prominent Examples

Instacart: Hyperlocal Grocery Business Model

Instacart is another prominent name in the arena of grocery delivery service providers. Its unique selling point is rapid delivery. Being a hyperlocal grocery delivery platform, Instacart connects customers with personal shoppers who are responsible for door-step grocery order delivery. It works on a 3 tier customer strategy, where buyers purchase grocery orders online via the application of Instacart. 

Business Model of Instacart at Glance (Buying and Dispensing)

  • Grocery Retail Partners
  • Instacart Shoppers

Grocery Retail Partners: Grocery vendors who have a contract with Instacart to list and sell their grocery items through the platform.

Instacart Shoppers: Instacart shoppers shop for groceries as per buyers’ requirements and then deliver it to them.

Read More: Build an App like Instacart

Fresh Direct: Inventory Business Model

The main USP of FreshDirect is to deliver fresh groceries to its consumers. By using the FreshDirect app, customers can order groceries with the click of a button. The order is later delivered to the customer’s doorstep by a refrigerated truck. Apart from customers, grocery suppliers, and FreshDirect buyers, are the key partners of FreshDirect.

Business Model of FreshDirect at Glance (Buying, Warehousing, Dispensing)

  • Grocery Suppliers
  • FreshDirect Buyers

Grocery Suppliers: By partnering with FreshDirect, grocery suppliers supply their produce like meat, seafood, and poultry. Suppliers are also listed on the application of FreshDirect to showcase products to the relevant buyers.

FreshDirect Buyers: Buyers of FreshDirect, check and purchase fresh grocery supplies from suppliers. The stock purchased is taken to the warehouse of FreshDirect. All grocery items are stored in a temperature-controlled environment at the warehouse.

A refrigerated truck later delivers the order to the consumer. As FreshDirect follows just-in-time practice, the order is prepared only after being placed by a customer.

Peapod: Multi-Vendor Grocery Business Model

Peapod is one of the oldest grocery delivery services in the US. Following a hybrid approach, Peapod acts as a service provider like Instacart and an online supermarket. It offers fresh produce, meat, alcohol, refrigerated foods, meal kits, and more.

Though Peapod primarily fulfils orders through its warehouses, recently, it has partnered with grocery stores to provide delivery services. The company has ‘warerooms’ that are attached to the grocery stores where employees prepare and fill customer orders.

Operating as a multi-vendor marketplace, Peapod facilitates shipping and payments.

Walmart: Omnichannel Business Model

With the integration of physical and digital storefronts, Walmart provides consumers with channel engagement as per preference. It operates as an omnichannel business model. Customers are seamlessly served via the website, mobile application, and in-store interactions.

Its essential resources include brick and mortar stores, eCommerce stores, distribution and storage centres, mobile app, and human resources.

The key activity of Walmart is to buy and deliver goods. The company controls the costs involved. In addition, it invests in inventory control, customer service, and distribution management. The company comprises three major categories:

  • Retail
  • Wholesale
  • And other

Further, these categories consist of many formats: Hypermarkets, Supercenters, Supermarkets, eCommerce, warehouse clubs, and more.

Experience a Live Personalized Demo of Grocery Marketplace

Revenue Channels in Online Grocery Marketplace

Commission on Each Transaction: Admin can charge a commission on every transaction from the seller.

Vendor Subscription: A vendor has to pay a fixed amount of money to the admin in order to list, access, and sell on a grocery eCommerce platform. A vendor can choose the required subscription plan from a number of available options and can also upgrade or downgrade the plan according to his/her requirements.

Commission on Delivery: On every transaction, the admin can charge a fixed delivery fee from both buyer and delivery boy.

Secondary Revenue Streams:

  • On-site promotion for merchants/grocery sellers
  • Hosting banners ads
  • Start a blog and publish sponsored content on it
  • Sell useful merchandise such as jars, reusable carry bags, etc. (it will also help you in branding)
  • Seller user data to market research firms

Key Features for Online Grocery Marketplace

It is essential that your grocery marketplace website is quick to load, easy to use, mobile-friendly, and has the following unique features:

Key Features - Start Grocery Business

Key Features to Attract Vendors & Buyers.

Below-listed are some offerings that you must include on your online grocery marketplace to attract vendors and buyers:

Crucial Offerings for an Online Grocery Marketplace to Engage Vendors

Shop Management

This feature enables vendors to add, update, or edit their shop details such as name, address, delivery slots, operational hours, packaging time, working days, and more.

Order Management

Order management option helps vendors to systematically manage multiple order requests at a single time. They can view the number of pending orders, total orders delivered, order history, cancelled orders, withdrawal requests, among other things.

Product Management

This feature makes it easy for vendors to add or remove products based on the buyer’s demand and the current market scenario. They can update or edit product details and change the product status as available or unavailable.

Inventory Management

Managing inventory operations without having a standardized inventory management system could be challenging. An online grocery marketplace integrated with an inventory management module helps vendors monitor their products’ stock and regularly track inventory status.

Tracking Reports

Tracking and analyzing sales reports on a daily basis is no longer a hectic task with this feature. Vendors can check the total earnings of their store and get daily sales updates to see the business performance.

Logistics Support/Delivery Apps

An online grocery marketplace that comes with logistics support/delivery apps helps vendors manage logistics operations effectively. Vendors can easily deliver grocery items to buyers without any delay.

Crucial Offerings for an Online Grocery Marketplace to Engage Buyers

Multi-lingual

Multilingual functionality allows buyers to browse an online marketplace in their native language. Buyers from multiple regions can choose their preferred language and buy grocery items conveniently. 

Self-pickups/BOPIS

It is an advanced feature that helps buyers place an order online and collect it from the grocery store or any other pick-up location. 

Multi-cart

This feature enables buyers to add grocery items from different stores to a single cart and place a single order for all items at once.

Multi-payment

A multi-payment feature helps buyers to select the payment method of their choice. They should be able to complete payments via credits & debit cards, net banking, digital wallets, cash on delivery, among other options available on the marketplace. 

Delivery Scheduler

This feature enables buyers to schedule the order delivery as per their convenience. They can choose the preferred day and time of product delivery during the checkout process. 

Mobile App

An online grocery marketplace that comes with a buyer app makes online grocery shopping an enjoyable experience for buyers. Rather than searching for the online grocery marketplace on the web, buyers can place an order anytime and anywhere within just a few clicks through a mobile app.

Understand the Working of an Online Grocery Marketplace

Ecommerce Grocery Business in the US, UK, and Canada

We analyzed the current state of the online grocery supermarket business across various countries and found the following dominating trends:

How to Win - start grocery business

Ecommerce Grocery Business in the US is just Getting Started

To gain insight into the current and future state of the online grocery business in the US, we scrutinized both incumbent companies and innovative newcomers.

According to eMarketer, a subscription-based market research company, the US grocery eCommerce is the fastest-growing product category online.

The online grocery delivery industry in the US currently stands at $20-$25 billion. By 2021, this number will reach $38.16 billion.

Online Grocery Shopping Habits in the US

To attract the young, affluent, and urban US households, you have to work on 3 major things:

  • Seamless Customer Experience on your online grocery marketplace.
  • Eliminating the logistics and supply chain hurdles.
  • Entice Millennials

Online Grocery Business in the United Kingdom (UK)

Online grocery shopping in the United Kingdom is the fastest-growing purchase channel. According to Statista, the UK will become the second-largest grocery market after China in 2020. No doubt, when we talk about edible grocery sales, the online grocery supermarket business in the UK has changed a lot because of Asda, Ocado, and Tesco. But yes, there is a huge scope for new online grocery websites in the country.

Online Grocery Shopping Habits in the UK

Attentive service and friendly interaction play a major role throughout the entire eCommerce grocery experience. Also,

  • Overall low Grocery Bills
  • Easy to Navigate eCommerce grocery website
  • Better Loyalty Scheme

Ecommerce Grocery Business in Canada

In the emerging eCommerce horizon, Canadians want their groceries to be delivered directly to their homes. Currently, they are spending around $6.4 billion per year on online grocery shopping.

Ecommerce Grocery Shopping Habits in Canada

By analyzing the Canadian shopper journey and working aggressively at every step of their purchase journey is the key step in winning them over.

  • Free Shipping
  • Organic Grocery products
  • Seamless Customer Experience

Conclusion

Grocery consumption is the basic human need, and people are increasingly relying on online shopping. So, the online grocery business idea fits perfectly in the current dynamics, despite the above-mentioned challenges.

The important thing for entrepreneurs planning to enter this sector is to be aware of these challenges & know how to tackle them by leveraging the right technology, trends & tactics.

Discuss your Grocery Business Requirements with our Experts

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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Comments (32)
Bisi Alawode

Thank you for the eye opening article. It provided valuable insights and infused the needed drive for the future of our business

Deepak

Thanks, Awais!
Glad you liked the article.
Let me know if I could be of further help, in case you plan to open your own grocery store.
Best,
Deepak

Amna

Deepak, What a great read
We are launching our online grocery store in 2017 and I am pleased that I come across your article. I think yes online grocery business idea fits perfectly in market where online shopping trend is picking up. Look how fast redmart and honestbesss growing in Singapore and obviously if big basket in India can have Shahrukh Khan as brand ambassador you got to believe that online grocery startups can do well in market.

Damon Burton

Doing an online business is not that easy. Following these steps is really important in order to be successful in any online business you’ll put up. Glad to read this article.

FATbit Chef Post author

You’re Welcome!
Keep Visiting us for more such useful information.

Cheers!
Team FATbit.

Ahaan

Online Grocery Business has great future in coming years. This ideas will make new entrepreneurs aware about the challenges that might come along.

Frank Umeadi

Thank you so much for this detailed article. I had to bookmark this page for a very long time because I was always visiting it to gain insights while I was building my online supermarket in Abuja, Nigeria. We launched on 19th May, 2018 and believe me, it has been a thing of success and joy.

Thank you once again for this article.

FATbit Chef Post author

Many congratulations!
We are really glad to hear it.
You are always welcome to connect with us for any startups related projects, services and ideas.

Keep visiting us.
Cheers!
Team FATbit.

william scottty

Can we earn via monthly subscriptions on a grocery delivery marketplace? In your other blogs, you have mentioned it as a viable revenue stream.

FATbit Chef Post author

Hello William, thank you for sharing your concern. Yes, the business owner of a grocery delivery marketplace can generate revenue by selling subscription packages. He can create multi-tier subscriptions for both vendors and buyers.

Karen Christie

Hi There, Karen Christie here from SpotnEats.

Nice post and beneficial for those are planning to launch an online grocery delivery business. Thanks for sharing with us!