The Business & Revenue Model of Shipt: An Overview

Grocery shopping is an essential aspect of daily life; however, it can often be challenging to manage amidst busy schedules and demanding lifestyles. Online delivery service emerged as a solution that provides convenience and a streamlined online shopping experience while delivering products straight to customers’ doors. That’s where online grocery delivery services like Shipt come in to simplify the process. It is noteworthy to understand how Shipt makes money through its innovative approach to online shopping. This article includes everything you need to know about the working model of an app like Shipt.

Between 2022 and 2027, the market for online grocery delivery services is anticipated to expand at a CAGR of 19.43%. The market is expected to grow by USD 652.45 billion in size.

Technavio

What is Shipt?

Shipt is a US-based online grocery delivery service founded in 2014 with the goal of providing an easier and more convenient shopping experience. Shipt allows customers to shop for groceries from local stores like Target, Fred Meyer, Meijer, etc., and have them delivered to their doorstep. The company depends on the network of local stores for a wide range of fresh produce, household essentials, pantry staples, etc., for customers to shop from. Meanwhile, customers can use the Shipt app/website to browse products, add them to their shopping carts and make a purchase. On the other hand, Shipt has a network of personal shoppers who pick up and purchase groceries or products on the customer’s behalf and then deliver them to the customers.

• Customers benefit from Shipt as they save time and avoid the hassle of visiting the store.
• Stores benefit from Shipt as they sell their products more efficiently, owing to the online platform.
• Delivery personnel (the gig workers) benefit from Shipt as they get flexible jobs to make an extra profit while shopping and delivering the products.
• Shipt benefit? Continue reading this blog to find out!

Founder	Bill Smith
Founded on	2014
Headquarter	Alabama, USA
Total funding raised	$65.2 Million over three rounds
Valuation	$15 Billion
Parent company	Acquired by Target since 2017 for $550 Million
Shipt partners	Target, HEB, LIDL, Meijer, Costco, Winn Dixie, Lowes Foods, ABC Fine Wine & Spirits, Piggly Wiggly, Costco, Petco, and many more.
Shipt competitors	goPuff, Instacart, Burpy, Rappi, FreshDirect, OurHarvest, Onfleet, Growcer, Mercato, ShopurGrocery, Walmart, and many more.
Number of Shipt shoppers	More than 300,000 shoppers nationwide

No more navigating busy aisles or waiting in long lines – Shipt makes grocery shopping a convenient and stress-free experience. Plus, with exclusive discounts and offers, online grocery shopping through Shipt is a smart choice for anyone looking to save time and make their life easier.

How to become a Shipt member?

1. If you are a User

• Shipt aims to provide convenience. So if you are looking for hassle-free shopping, you can register as a user on the platform or download the Shipt user app.
• Once registered as a user, you can find your preferred store listed in Shipt and prepare a grocery/shopping list.
• Once you submit your shopping list, you can sit back and relax as the Gig workers (shipt shoppers) will do the shopping for you while keeping the coordination in real-time.
• You can also choose a substitute for the product, and your shopper will buy the same for you.
• Once the shopping is done, you will receive a notification and an update on the shopping status.
• Within the time frame set by you, you will receive your orders at your doorstep.
• You can also buy a membership plan to save a lot of bucks or use a trial membership for a month and upgrade it to an annual one.

2. If you are a Shipt Shopper

• If you are looking for a flexible work environment or extra cash, you can register as a gig worker/shopper at the Shipt Shopper app.
• Begin with selecting the zone you would like to work in.
• You can accept the order at your convenience and shop for the customers as per the list.
• You will be paid for shopping for the customers.
• Most customers pay for their orders online through the app, which is why shoppers are given a Shipt visa card they use at the store to make purchases.
• Once the purchases are made and delivered to the customers, shipt shoppers get paid by the company along with the tip money on every order.
• However, there are some requirements for becoming a Shipt shopper:
  • At least 18 years old
  • Valid U.S. driver’s license and auto insurance
  • Valid mailing address
  • Knowledge of produce selection
  • A reliable, operable vehicle
  • Ability to lift 40 pounds
  • Smartphone – Android (7.0 or newer) or iPhone (iOS 10 or newer)
• You can only become a Shipt shopper if there is a need based on demand in your local area.

Is Shipt free to use?

When discussing Shipt, it is imperative to consider all relevant information pertaining to its functioning and the acquisition of its customer and shopper base.

• The Shipt is absolutely free to download and install from the app store or play store.
• One can also use its website at no cost through any browser for shopping.
• However, if you want to make an order as a customer, you must get a valid membership.
• Shipt provides two membership plans for customers to choose from:
  • The monthly membership for about $14/per month 
  • The annual membership plan for $99/year ($8.25/month)
• Regarding the delivery charges:
  • There are zero delivery fees if the order is over $35. 
  • There is a $7 delivery fee if the order is below $35.
• To cover the convenience for customers, the prices for the product on Shipt differ slightly from the store prices, and Shipt is vocal and transparent about the prices.
• Moreover, a customer can use Shipt without a membership plan, and in that case, the customer has to pay a $10 delivery fee for every order.
• Every Shipt Shopper has free access to a membership plan while employed.
• Every shopper gets paid per order:
  • Each order delivery gets the shopper a commission of a minimum of $5.
  • The commission amount can also increase based on the order size and the amount it took to complete the delivery.
• Shipt offers $50 to the users each time they refer the app to someone else.

Shipt partner and competitor

1. List of stores working with Shipt as a partner:

HEB	Safeway	Meijer
LIDL	Target	Winn Dixie
Costco	Lowes Food	Piggly Wiggly
ABC Fine Wine	Spirits	CVS
Office Depot	Petco	Publix
7 Eleven	Walgreens	Best Buy
Bed Bath & Beyond	BevMo!	Buy Buy Baby
Fresh Thyme	Kroger	Sur La Table
Smart & Final	Total Wine & More	and more..

2. Shipt competitors:

Shipt	Users get to communicate with their shoppers
Instacart	Offers comprehensive grocery selection
Amazon Fresh, Pantry	Offers groceries and household deliveries to prime members and whole foods customers
FreshDirect	For Eastern U.S. customers who wish to support farms
Postmates	Shopping from local grocery stores
Walmart	Offers pharmaceutical products along with groceries and conducts repairs. It also delivers when the customer isn’t at home by utilizing a camera that employees wear.
Stop & Shop	It makes more than 400 locations in the states of Massachusetts, Connecticut, Rhode Island, New York, and New Jersey accessible to customers for online ordering.
DoorDash	Offers express grocery delivery (in under 30 minutes) along with food delivery from restaurants.

How does Shipt work?

Shipt ensures top-notch service through a thorough process. To ensure timely, convenient grocery delivery, follow the steps to coordinate with the shopper, store, and yourself. Here’s a guide to how Shipt works.

1. Download the application

• Download the app from the play store or app store and set up your account with your credentials for free. 
• You can also use the Shipt website using a browser and without downloading apps. 
• Your account information usually includes your name, email address, and password.

2. Set location and preferred store

• After account creation, add your location manually or use the GPS for the same.
• The location will be used for delivering your groceries. 
• Followed by location, you must pick your preferred store from the list.
• If you have a membership in that particular store, you can specify that information in the system.

3. Add items to the shopping cart

• Once the preferred store is set, you can browse the list of items you would like to purchase.
• Once you choose the product you want to buy, you need to select ‘add to cart’ and review your products by the end.
• You can also substitute your preferences for the product in case the product is unavailable. For that, you can pick one of the following options:
  • Contact me so I can choose
  • Choose for me
  • Do not substitute

4. Select your preferred membership plan

• Membership plans are important if you want to save some extra cash. 
• The monthly membership costs $14 every month, while the annual membership costs $99 for a year. 

5. Select your delivery time slot

• Once you complete the above-mentioned steps, you can place your order and checkout. 
• Followed by checkout, you must confirm your delivery address, add your phone number, and select a payment method.
• The delivery time depends on your location and distance from the store. 

6. Receive your order

• Once all the above-mentioned steps are done, the shopper will shop for you.
• You will receive updates via notification at every step.
• As a customer, you can also coordinate with your shopper while they are shopping for your items.
• You also get to change your delivery slot in case you are not available.

Shipt operates on a business model that leverages the use of technology to facilitate grocery delivery services. The technology stack employed by the company is a critical aspect to consider for individuals who aspire to launch similar ventures. The following is a list of the technology stack utilized by Shipt for reference purposes.

Technology stack for a mobile app like Shipt:

Application and Data	React, NGINX, CloudFlare, Node.js, PostgreSQL, TypeScript, GraphQL, Rails, Kafka, Go, Storybook, Redis, React Native.
Utilities	Segment, Stripe.
DevOps	GitHub, Kubernetes, Docker.
Business Tools	G Suite, Slack.

What is the business model for Shipt, and how does it make money?

Here are the entities of the Shipt business and revenue model:

USP of Shipt

Users	Users have a smartphone app that allows them to choose a shop to obtain groceries at a specific time; in exchange for this service, an online payment must be made.
Shoppers	The shoppers are in charge of accepting orders via the app. Depending on the end-user and the vicinity of the store, the app allocates shoppers to get a certain order.
Stores	Due to their partnership with Shipt, the retailers can generate more sales and money. Once given an order, the shoppers travel to the store and pick up the requested items.

Shipt received $65.2 million in total in three rounds of venture capital investment. Investors in it include Greycroft e-Ventures and Harbert Growth Partners. Target Corp purchased the company in December 2017 for $550 million; since then, neither the company’s valuation nor revenue has been updated.

Crunchbase

Key entities	Users, Shoppers, Stores
Key activities	Delivery services, Local market management, Customer management
Key resources	Efficient shoppers, Collaboration with local stores, Technical backend support
Accessible channels	Mobile Application for Android and iOS, Website
Cost structure	Cost to keep the tech up and running, Management staff, Commissions to the shoppers

How do Shipt tips work?

• With Shipt, tipping is optional but encouraged. When the shopper delivers, customers may tip them in cash or by using the app. 
• Shoppers will get to know about the tip (if any) from the customer within the week, and it will be anonymous.
• Whether a customer tip shoppers with cash or through the app, the Shipt shopper will get it directly.

How Shipt generates revenue?

Membership plans	Annual ($99/year), Monthly ($14/month)
Delivery fee	$7 delivery fee on orders below $35
Surge charge	$5 > than that store

Required features for on-demand grocery app 

Here are the features to be must be included in an on-demand grocery app like Shipt:

Features Of User Panel	Features Of Admin Panel	Features Of Shopper Panel
1. Signup/Sign-in	1. Dashboard	1. Option to accept/reject the delivery request.
2. User profile creation	2. Order allocation	2. New Delivery Notifications
3. Customer reviews	3. Payment Management	3. Chat Feature
4. Search Option	4. Customer Management	4. In-app calling
5. Tracking Delivery Status	5. Shopper Management	5. Geo-location
6. Managing Orders	6. Inventory Management	6. Delivery confirmation
7. Payment Options	–	–
8. Delivery Scheduling	–	–

Online grocery sales in the US

1. As per IBIS World

• Online Grocery Sales in the US Market Size in 2023 are expected to be $36.3 billion.
• Online Grocery Sales in the US Annualized Market Size Growth 2018–2023 is estimated to be 15.1%:

As per Statista

• In 2023, it is expected that the Grocery Delivery industry will generate US$565.30 billion in revenue.
• By 2027, the market is predicted to generate US$1,003.00 billion in revenue, representing a 15.41% CAGR from 2023 to 2027.
• Grocery delivery is the market’s largest sector, with an estimated market volume of US$433.50 billion in 2023.
• In the Grocery Delivery category, the average revenue per user (ARPU) is anticipated to reach US$397.70 in 2023.
• By 2027, there will be 2,034.8 million consumers in the category of grocery delivery.
• In 2023, the category for grocery delivery will have an 18.5% user penetration rate.

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FAQ

1. What will be the US market size for online grocery sales in 2023?

The online grocery sales business will generate $36.3 billion in revenue in 2023, as per IBIS World.

2. What elements influence the US sector for online grocery sales?

Numerous mobile internet connections and intense rivalry are the main drawbacks for this sector.

3. What sector of the US online grocery sales market has the greatest potential for growth?

Consumers who have an active internet connection on gadgets like tablets and smartphones are represented by the number of mobile internet connections. Americans have more access to online purchasing since there are more mobile internet connections. Online grocery sales will have a chance in 2023 as mobile internet connections increase.

4. Has the US market for online grocery sales increased or decreased over the last five years?

Between 2018 and 2023, the US market size for online grocery sales increased by 15.1% yearly.

5. What will the US market for online grocery sales look like in 2023?

In 2023, the market size for the Online Grocery Sales sector is projected to grow by 3.6%.

6. How can I launch an app like Shipt?

To create an app, you only need a concept and a group of skilled programmers. But before you start, do some market research to see whether there is a need for your Shipt-like service, whether your target demographic is there, and whether you have a strong, unique value to offer.