How Does Instacart Work? Insights into Business and Revenue.

Everyone who wishes to create the next big thing in the on-demand grocery space has only one question – “how does Instacart work?”

At the beginning of the year, Instacart’s value was $7.9 billion. As online grocery shopping surged during the pandemic, this figure has increased by more than two-folds. Meanwhile, the company also raised $200 million in funding this year. Instacart is reportedly looking at a $9.3 billion valuation for its IPO, set for sometime later in 2023.

Due to Instacart’s success, potential, and prospects, many budding entrepreneurs are keen to know how does Instacart work, especially the company’s business and revenue models.

Well, if you wish to seek insights into the same, this article is all you need. 

So without further ado, let’s discuss everything you need to know about Instacart.

What is Instacart? 

Instacart is an on-demand grocery delivery company that has revolutionized the way customers shop for groceries. They offer an intuitive platform that facilitates home deliveries of groceries and home essentials. 

So how does Instacart work? 

Well, the concept is simple. All you have to do is go to their website or application, search for the products you want, and get it delivered right at your doorstep within a timespan of 1-2 hours. Sounds easy, right? 

It is the perfect solution for a busy lifestyle. Due to this convenience, ease, and simplicity, Instacart has witnessed exponential growth in the past few years. As of today, Instacart provides services across all the metropolitan areas in the 50 states in the U.S and 9 provinces in Canada (currently unavailable in Quebec) 

As per the Statista reports, Instacart is available to 85% of U.S households and 70% of Canadian households. This is enough to show how successful this on-demand grocery delivery service is. 

Now, let’s discuss the three client segments of Instacart to know more about how does Instacart work and the reason behind its success.

Instacart’s 3 Segments Explained

There are three end-user segments of Instacart – users, shoppers, and stores. 

Each of these segment interacts with the platform in a different way and get different advantages. It is of utmost importance to maintain harmony between these three segments to ensure efficiency, punctuality, and customer satisfaction. Let’s understand how Instacart keeps each of them involved in the ecosystem and get you the answers to the question “How Does Instacart Work?”

• User Segment 

Users are the people who buy or show interest in buying groceries from the on-demand grocery delivery application. 

The users get all types of groceries and home essentials from over 30,000 stores and 400 local, regional, and national retailers across the U.S and Canada. They are the most crucial part of the ecosystem and are indispensable as they create a demand for the products. Lack of this demand would lead to the redundancy of the other segments’ roles.

Let’s look at the role of the users and understand how does Instacart work for this segment: 

1. The users access the application of their smartphone, tablet, or laptop.
2. They sign-up or log-in on the application with the necessary details.
3. The application then asks the user to share their location or add their address to find stores near them.
4. The users can choose their preferred store and grocery items and check-out.
5. They can also schedule the orders for later.
6. During the check-out process, users can choose to make online payments via multiple payment options, such as debit cards, credit cards, e-wallets, etc.
7. Once the user places an order, the shoppers immediately get a notification on their app. 
8. The users can also re-order previous groceries.

Do you want to how does Instacart work and make the next big thing in the grocery delivery space? Reach out to us and get started with your on-demand grocery delivery app today!

• Shopper Segment

In simple terms, shoppers are the workers or employees who provide the products to the customers. There are two types of shoppers: Full-service shoppers and In-store shoppers. 

Full-service shoppers are independent contractors who shop and deliver the product at the customer’s doorstep. In contrast to this, in-store shoppers do not handle the delivery work. They are part-time employees who only need to shop for groceries and make them ready for pick-up.

Let’s discuss the shoppers’ contribution to the application and understand how does Instacart work for this segment: 

1. The shoppers receive a notification on their Instacart application that a user has placed an order.
2. They can see if it’s a delivery order or a curbside pickup, along with the items and units mentioned for the groceries. 
3. Once they accept the order, they send a notification or greeting to the user who has placed the order.
4. The shoppers then collect the mentioned items, scan the barcode, and bag them. If an item is out of stock, they provide a suitable alternative and send a message to the users.
5. If there are any fragile items in the bag (jams, glass, eggs, milk, etc.), the shoppers stamp it as fragile so that the users and delivery agents are more cautious while handling them.
6. After everything is done, they mark the order as complete and keep their groceries on a shelf for pick-up by delivery agent or deliver it themselves. This depends on the type of shopper they are. 
7. Through this process, they make $7-$10 per hour.  Moreover, they can also earn through the tips given by users. 

• Stores

Remember how we told you that users are the ones who generate demand for the products? Well, stores are the ones which fulfill this demand.

In the absence of this segment, there will be no products to place orders for in the first place, and subsequently nothing to deliver to the users. Thus, stores are of paramount importance in the on-demand grocery delivery ecosystem.

Let’s discuss the role of stores and understand how does Instacart work for this segment:

1. The stores can partner with the Instacart platform and provide their products to the application users.
2. They cater to the high demand by providing adequate supply, thus keeping the grocery economy stable. 
3. By keeping their stock updated, they help the users can get what they want.
4. The stores benefit from Instacart’s popularity and can also opt for paid ads to reach a wider audience by getting featured on the application.

These were the three client segments of Instacart. Now, let’s move onto its Business and Revenue models to get into the details of how does Instacart work. 

Business and Revenue Models of Instacart

Your startup’s business model can either make or break your business. It turns out, Instacart’s business model is the leading factor in making it the most successful grocery delivery business in the U.S and Canada. 

As per the last year’s reports published by Edison Trend, Instacart owns a 68.8% market share, leaving the remaining portion to its competitors such as Amazon Fresh (9.0% share) and Shipt (22.4% share)

To know how does Instacart work and how it achieved such exponential growth, we’ll now share the Instacart Business Model Canvas with you. 

As you can see, the Instacart Business Model Canvas has covered various aspects. However, the most significant element to know how does Instacart work is its Revenue Model.  

Revenue Model of Instacart

Instacart generates revenue in five ways. Let’s discuss how Instacart makes money. 

• Grocery Partners 

Instacart lets the grocery stores display their products on the app and charge a commission in return. The revenue-sharing agreement mentions the commissions, which entitles Instacart to a percentage of the product’s price every time a product is sold through its platform.

• Delivery Fee 

Just like any other on-demand delivery services, Instacart charges a delivery fee from its users. The standard delivery charge is $3.99 and can get higher depending on factors such as high demand, external conditions (rain, traffic, etc.), the proximity of delivery location, etc. 

Apart from this, there is also a service charge which ranges from 5 to 10 percent of your order.

• Instacart Express Membership

The users can subscribe to Instacart Express and get unlimited free deliveries for their orders. 

You may ask – how does Instacart work with the cost of Instacart express?

Well, it depends on the type of subscription the customers opt for. The monthly subscription costs $9.99, whereas the annual subscription comes in $99. Also, the customers who subscribe to Instacart Express do not face high prices during surge-pricing.

• In-app Advertising

When you open the Instacart application, you see certain ads. Also, some stores always appear at the top of the list. This is because these stores opt for paid-ads to increase their visibility and reach more customers. This is another great way to gain additional revenue. 

• Mark-up Price

Although the prices mentioned on the application are the same as the prices charged in stores, Instacart sometimes charges a higher price. 

This mark-up price is generally 10 to 15 percent higher than the in-store prices. This could vary from store-to-store and product-to-product. It may also be the case during high demand and limited stock scenarios. 

After going through these insights, I’m sure you’re closer to knowing how does Instacart work. 

To conclude, let’s look at the pros and cons of Instacart. 

Do you want to how does Instacart work and make the next big thing in the grocery delivery space? Reach out to us and get started with your on-demand grocery delivery app today!

Pros and Cons of Instacart

There are various pros and cons to using the Instacart platform to buy your groceries. They are as follows:

Pros of Ordering through Instacart

• Convenience

Instacart is the most convenient way to get all your daily groceries and home essentials. 

Within a few clicks and taps on your device, you can get everything you need without stepping outside your house. Well, if we leave the technical part aside, my answer to the question “how does Instacart work?” would be “with ease, speed, and convenience!”

• Updated Stock

Remember searching for a particular product in every aisle of stores and supermarkets only to find it has been sold out? Well, that’s not the case with Instacart. In case a store does not have your desired product, you can always search for it across the application and find the store that has it. 

• More Options 

Instacart is not just limited to supermarkets. The application provides you the option to buy products from stores, including the local and regional ones. 

• Communication

The application allows its users to communicate with the shoppers if there are any issues or special exceptions. 

• Great Experience 

Overall, it is an excellent experience while shopping from Instacart. The platform has an intuitive interface that allows its users to use it seamlessly. 

Cons of Ordering through Instacart

• Inability to Choose the Produce

When it comes to fresh and organic produce, you cannot choose the items yourself. As a result, you may receive fruits and vegetables that are smaller in size or slightly over-ripe. 

• Prices Vary

As discussed earlier, prices tend to vary from the in-store prices sometimes. The reason behind this price variation is not apparent yet.

• Additional Costs

Apart from the product’s cost, you need to pay for the delivery and service charge. 

Conclusion

After having gone through all the topics to know how does Instacart work, you must have understood the reason behind the company’s success. However, it all comes down to one thing, and that is its application. Do you think Instacart would have been this successful had its app not been up to par? 

Your application’s functionality and performance is the key to success. Therefore, instead of asking “how does Instacart work?”, now you may ask “how to build an application like Instacart?”

Well, you can tell your developer to include all the basic and MVP features and create a similar app. However, are you willing to settle for something basic?

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