How InstaCart Works: Business Model of the Best Supermarket In Your App Store!

Instacart Facts & Stats - Significant Milestones and Funding

• Founded by: Apoorva Mehta, the CEO and Max Mullen, Co-Founder.

• Total Funding received: $1.9 Billion

• Company Valuation: $7.6 Billion.

• Revenue: Approximately $2 billion

• Headquarters: San Francisco, California, USA

• Number of states Instacart Operates in: 50

• Total customer: 500,000

• No. of acquisitions made: 3

• Instacart grocery partners: 300

• Total number of Investors: 30

How Instacart Works?

Instacart is well known to provide the delivery of groceries on the same day and at your doorstep. The company has a committed workforce who shops for you at the local stores. Instacart has a direct partnership with the local stores and is focused to provide an exceptional doorstep delivery service.

Let us now understand how Instacart works:

• A customer selects a store and orders the groceries required through the Instacart app

• He/She has to pay online to Instacart for making an order.

• The company then sends the notification to a particular shopper in the nearby area mentioned with instructions for delivery. Shoppers are the executives of Instacart who shop on user’s behalf.

• The shoppers will reach the shop mentioned by the customer and will start collecting the items which are specified in the Order.

• The shoppers will pay the bill through a prepaid debit card provided by the Instacart as they are accepted at the stores.

• After collecting all the items mentioned by the customer, the groceries will be delivered.

• After the delivery, the shoppers are going to earn the money in the form per hour’s Income or commissions by the company. They also get various tips from the customers.

   

How Does Instacart Make Money?

Instacart is not charging any commission to any of its stores on the online orders placed in the app. But, there are other means from where the company earns its revenue. These are:

Mark Up Prices

The prices of some goods in certain stores have a markup of 20%. The money earned from these markup prices goes directly to the pockets of Instacart and not to the stores. Although this is not the primary source of revenue generation for Instacart, it still adds up to the total revenue. It also helps the Instacart to pay the Shoppers as remuneration.

Delivery Fees

Instacart charges a standard delivery fee of $3.99 on the orders scheduled for a 2-hour delivery and charges $5.99 for the orders scheduled for 1-hour delivery, which are above the value of $35. The orders which are made under the value of $35, it charges $7.99 for a 2-hour delivery and $9.99 for 1-hour delivery. Instacart Delivery Fee is one of the primary sources for its revenue generation.

Service fees and Tips

Instacart used to charge a heavy 10% as a service charge on every order and also gave an option of tipping any amount to the shopper. But recently, the company changed its service charge to 5% and also made a 5% tip mandatory to every shopper

Surge Pricing

Just like various on-demand organizations, there is an algorithm added to the platform of Instacart where the delivery charge is going to increase as demand for a particular slot increases. The surge pricing is mostly applied to popular delivery times.

Membership Fee

Instacart has an annual subscription plan where the customers are going to get free delivery on orders of $35 or above. Instacart membership is valued at $99 which offers 1 year free home delivery with various home delivery privileges.

Key Takeaways From Instacart Business Model

1. Shopper Retention is Crucial for Every Business

It was very tough to retain the shoppers as they are employed with Instacart on a part-time basis.  Instacart found it very challenging and discovered a unique solution to this problem.

They introduced an option where the users can tip the shoppers during the checkout session of the app. This became a wonderful source for shoppers to earn extra income.

2. A Time-Efficient Business Strategy – the Need of the Hour

There was another challenge of an expected 2-hour delivery system and Instacart did not want to let their customers down. So, to meet the customer’s demand, Instacart started placing its shoppers outside the partner stores. It helped the shoppers to save at least 50% of their time as they are already outside or nearby the stores waiting for the order.

3. Customer Trust is the Foundation of Every Organization

The organization has earned the trust of its customers in a way that there are users who are even ready to pay even the extra surged prices to get the groceries at their doorsteps. Instacart has been able to achieve this by its amazing business model and on-time deliveries.

4. Let Customers Know the Hurdles Ahead of Time

Sometimes there are items that are ordered by the customer but are missing or are out of stock at a store. To deal smartly with this problem, the company added an ‘often out of stock’ option in the Instacart app to give a reference to its customers and efficient purchasing process.

Wrapping Up

The future for the grocery delivery business is great as more and more people are looking for the most convenient ways of buying grocery items. With funding received of $1.9 billion (in 11 rounds), this app is ready to take on more cities in the US and expand outside the country as well.

So, now that you are aware of how the Instacart Business model works, you can also create an app with a similar business model. If you think you lack the required experience and expertise, then get in touch with us and we will help you create the next big thing.