How Does Instacart Work? Revenue Model, Core Features & Estimated Cost

218% hike in Instacart app users in just one week! Because, the fear of catching Coronavirus has forced people to shy away from the public, making Instacart their first choice for grocery shopping. Consumers who never believed they would shop online have now popularized this delivery platform. But, the question arises how does Instacart work? How does it make money? What can you learn from this established startup to develop your own grocery mobile app? Let’s find out.

What is Instacart?

Instacart is an on-demand grocery delivery service app introduced in 2012 that allows doorstep delivery of groceries and other home necessities. If it is available in your areas, it enables you to buy groceries from the Instacart website or app from nearby grocery stores and get your groceries shipped to your door in as little as 1 hour.

The organization has already partnered with more than 30 distributors across the United States and Canada, including Albertsons, Aldi, Costco, CVS, Kroger, Publix, Sam’s Club, and Sprout.

How Instacart Works?

Just like Uber and Airbnb, Instacart has developed its own model where sharing happens alongside collaborations and a brand image. So here is the 3-tiered Instacart consumer approach (Users, Shoppers, Stores) that will help your companies to understand better.

How Does Instacart Work

For Users

  • End-user/customer sign up on the app or website
  • Customer browse goods from their choice of grocery stores
  • Adds their preferred goods to the virtual shopping cart
  • Add the address and other details and make a payment
  • The mobile application notifies the shopper of a list of goods
  • Once the shopper buys and delivers the goods, the user may give a tip to the shopper

For Drivers & Shoppers

Here, we will discuss two kinds of shoppers. One, full-time shopper, and the second, in-store shopper.

  • Full-time shopper and in-store shopper both register and create a profile on the app or website
  • Both shoppers receive orders on their smartphones via notifications
  • Both shoppers pick up the ordered items manually and put them in the bag
  • Full-time shopper or employee delivers the items to the customer, while in-store shopper does not deliver the stuff but make sure that stuff is ready to pick up, as they are in-store employees only
  • Once their hours are completed, the admin of the platform offers a payment to both shoppers

For Stores

  • Grocery store owners make a partnership contract with Instacart
  • Store owners list their groceries and sell them on the app
  • They also promote and advertise their business on the platform frequently
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How Does Instacart Make Money?

If we talk about the Instacart business model, it follows a sharing economy-based business model as we mentioned, to connect consumers with their personal shoppers. However, if Instacart has to make big decisions or make certain improvements in the structure of the organization, a canvas below will make you visualize what the foundation of the company is.

How Does Instacart Make Money

Instacart Revenue Model

Moving ahead, for the online orders made on the website, the company does not charge the stores any commission. The firm, however, has other ways of earning revenue like,

  • Delivery Charges: Any order delivered above $35 by Instacart is subject to a standard delivery fee of $3.99 for scheduled or 2-hour shipment and $5.99 for 1-hour shipping. Orders under $35 are paid with daily or 2-hour shipping at $7.99 and a 1-hour delivery fee at $9.99. Such delivery fees are distributed between both the store and the company.
  • Membership Fee: Instacart encourages its users to access an annual membership. By just spending $99 for a year, consumers can get unlimited delivery on any orders over $355 for a whole year.
  • Payments From Grocery Partner: Instacart offers retail stores a portal to market their items. They charge these partners a fee in exchange for the same. The fees are calculated on the basis of the store’s earnings. Instacart earns about 3% of the price on each order as a fee for managing fees, sorting orders, and supporting the shop.
  • Mark-Up Price: Any shops selling their goods on Instacart give the same prices as their in-store prices, but there are few shops listed on Instacart that have a mark-up of 15% higher than their in-store prices. The revenue from these mark-up prices heads to Instacart, which makes customers pay for them.
  • Advertisement Placement Charges: These are normally charged for supporting the shops, for the facilities in exchange. For instance, you see some advertisements and promotions when you open the application, and certain shops always appear at the top. This is because of the placement fees charged by Instacart through these retailers.

Also read how to build a food delivery app like Grubhub and postmates

How to Make Money as an Instacart Shopper?

For a shopper, getting started on Instacart is pretty much simple.

  • You just need to be 18 years old
  • Must be able to lift 30-plus pounds
  • Have a smartphone
  • Have a saving account

And you’re all set to earn money when you,

  • Download the Instacart shopper application
  • Attend an in-person orientation (on-boarding process)
  • Complete the paperwork and background check process
  • Register your Instacart payment card

Now, the question arises how much do Instacart shoppers make? (Full-time shopper vs. In-store shopper)

The pay of full-time shoppers depends on the order. On each order, Instacart offers an estimation of future earnings and promises that shoppers will receive at least $5 for each delivery(batch) and $7 to $10 for each batch of full-service (shop and deliver).

The company also says that what you are paid for a given batch of orders depends on the amount of items, type of items, driving distance, and shopping and distribution effort involved.

Also, when making deliveries, full-service shoppers often earn tips.

For in-store shoppers, there’s a fixed, hourly wage that varies by location to location. They are paid weekly or monthly via direct deposit, depending on their contract.

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How Much Does it Cost to Deliver Groceries by Instacart?

While users make a purchase on the application, there would be the following kinds of fees that occur.

  • Delivery Charges: Just like Amazon, Flipkart, and many other websites, the first purchase will be free of shipping charges. If a customer signs-up for “Instacart Express Membership” for $99 for a year or $9.99 for a month, he/she can avail of free deliveries for all purchases on orders above $35. If a customer without Instacart express membership needs same-day delivery service will be charged $3.99 for orders above $35.

  • Grocery Charges: The prices of groceries on the website has nothing to do with Instacart. It is decided by individual retailers. In addition, you will not always get to take advantage of all the deals in the store. Sales on Instacart are open to you, but a special section of coupons could still be available for your store of choice, where you can conveniently browse and purchase.

  • Tipping costs: Most people don’t want to leave their homes right now, and since the Instacart shoppers are doing their job to help them, the company roughly pays 20% of the tip to their shoppers. And it is highly encouraged.

Also, find out the top food delivery apps in Canada for 2021

Increased Demand for Instacart During Coronavirus

While in February 2020, people were eating out in restaurants, playing sports, making physical shops crowded, March had hit the Instacart differently or maybe miraculously?

As coronavirus made the urge to feel the emergency of the decade, the people have turned to order meals to their homes to prevent being vulnerable to the coronavirus and standing in long food queues. As a result, Instacart CEO Apoorva Mehta said that it received five times as many orders as it did last year for the same period.

For many US and Canadian shoppers, the pandemic had changed their shopping habits from store moving to online scrolling permanently, which also led to Instacart hiring personal shoppers about 250,000 overnight. This means the Instacart army expanded from 180,000 to 500,000 in just eight weeks.

Instacart During Covid-19 Coronavirus Lockdown

Instacart, the grocery delivery service company, has also started to sell non-grocery products by partnering with major names such as Walmart Inc, beauty goods distributor Sephora, and convenience store 7-Eleven in the United States.

Instacart Valuation

With that, Instacart raised $225 million and the firm was estimated at $13.8 billion in June 2020.

As Instacart focuses more on a spike in online shopping due to new opportunities, it earned another $200 million in its new seed round in the next to next month, valuing the firm now at $17.7 billion. A huge surge in success!

However, post the coronavirus, it would be interesting to see how the company plans and tests its strategy to maintain its market share.

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Unique Features of Instacart App

Unique Features of Instacart App

  1. User Profile

    This feature helps customers to add their address content and billing information, as well as set potential purchasing preferences. Order history, coupons, loyalty discounts, and gift cards should all be offered for robust customer service.

  2. Product Search

    Product search provides a smoother way for shoppers to discover what they want on the home page itself. Highlight the most important goods so that clients can filter outcomes by attributes such as price and color. Filtered product quest lets you optimize visibility and build more purchasing options through all of your inventory.

  3. In-app Payment

    This function is to offer as many customer payment options as possible. Cash, credit or debit cards, wallets, vouchers, coupons, and gift cards. When the order is received, send the invoice to the customer and link the order record to the history of orders.

  4. Checkout

    This feature includes functionalities like,

    • View and edit local grocery products and whole foods
    • Apply coupon codes, if any
    • Set tip for shopper or delivery person
    • Select delivery time schedule including date
    • Add payment and contact details
    • Pay and confirm the order
  5. Track Orders

    Using GPS tracker (tracking technologies) or any other location-based app solutions, allow your customers to track their order delivery and area. This will allow them to be happy without concerns and go on their day, enriching the trust.

  6. Product Recommendation

    You can provide customers with product recommendations based on their past shopping habits. Because more than 50% of smartphone users are likely to buy products from relevant recommendations on products.

  7. Admin Panel

    This function helps the admin to manage their business operations like,

    • Handle shoppers and customers
    • Track area & manage delivery orders
    • Activate & deactivate shopper accounts
    • Manage stores and partners
    • Generate reports on service
  8. Shopper Panel

    To monitor the Instacart account, signify availability, and track earnings, each approved shopper will get access to the shopper panel of the website, or mobile apps. This helps shoppers to track their daily, weekly, and monthly orders in an organized way.

Pros & Cons of Using Instacart

ProsCons
  • Easy to use
  • Convenient grocery delivery services for you and the family to get your groceries delivered at home
  • Available throughout the United States, Canada, San Francisco
  • Wide range of local grocery store chains options
  • Friendly shoppers and drivers
  • Access to many local stores as well delivery window
  • Same-day grocery delivery services available
  • Prices are a bit high for services and products than the actual in-store prices
  • No coupons, discounts, cashback, or offers
  • Additional fees
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Frequently Asked Questions

  1. How to be an Instacart shopper and make money?

    • Download the shopper app to sign up
    • Work as an in-store shopper, part-time, or a full-service shopper
    • Get paid a commission, tips, or by the hour
    • Set your own schedule
    • Cash-out instantly
  2. How to be an Instacart driver and make money?

    • Sign up
    • Register as a driver and fill out details
    • Pick up the goods and deliver
    • Cash-out instantly
  3. How much will it cost to use Instacart?

    For same-day orders above $35, Instacart charges delivery fees of $3.99.

  4. Will you make good money with Instacart?

    Yes. Instacart part-time shoppers, workers, and full-time employees can earn money right away, as on average, shoppers make an extra $200 to $500 per week.

  5. How to create a grocery delivery application like Instacart?

    • Analyze your idea
    • Research competitors and companies
    • Find an application development company
    • Decide on features
    • Design and build
    • Test & Deploy

Conclusion

All this points to the fact that Instacart is a service app that is well thought out. The application and business model features are seamless and optimized to improve customer loyalty. We’ll see a lower number of shoppers in retail stores in the coming years, as nearly everybody will start shopping online for anything. So, this is the ideal time for your service company to build a grocery solution in the marketplace. If you have any rough idea or plan, contact the app development company for startups and entrepreneurs and get delivered all possible solutions.

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Author Bio
Rakesh Patel
Rakesh Patel
Designation: Co-founder and CEO of Space-O Technologies

Mr. Rakesh Patel is a Founder and CEO of Space-O Canada. He has 28 years of IT experience in business strategies, operations & information technology. He has expertise in various aspects of business like project planning, sales, and marketing, and has successfully defined flawless business models for the clients. A techie by mind and a writer at heart, he has authored two books – Enterprise Mobility: Strategy & Solutions and A Guide To Open311.