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. The company’s valuation stands at $17.7 billion as of November 2020.
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.
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.
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?”
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.
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.
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.
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.
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.
Instacart generates revenue in five ways. Let’s discuss how Instacart makes money.
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.
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.
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.
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.
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.
There are various pros and cons to using the Instacart platform to buy your groceries. They are as follows:
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!”
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.
Instacart is not just limited to supermarkets. The application provides you the option to buy products from stores, including the local and regional ones.
The application allows its users to communicate with the shoppers if there are any issues or special exceptions.
Overall, it is an excellent experience while shopping from Instacart. The platform has an intuitive interface that allows its users to use it seamlessly.
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.
As discussed earlier, prices tend to vary from the in-store prices sometimes. The reason behind this price variation is not apparent yet.
Apart from the product’s cost, you need to pay for the delivery and service charge.
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?
Our applications are thoughtfully designed by keeping all your requirements in mind. By offering a great User Experience and User Interface, we ensure that your end-users love your application.
You can also get a quick feature overview of our on-demand grocery delivery application.
Hope you liked our article “How does Instacart work? Insights into Business and Revenue.”
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