Instacart is a delivery service that has been gaining popularity in recent years.
But how does Instacart make money? Is it a sustainable business model?
We’ll dive deep and look at how Instacart makes money and whether or not the company is sustainable.
Table Of Contents
A Not So Short History Of Instacart
In June 2012, Instacart started its operations in San Francisco.
Apoorva Mehta and his partners Max Mullen and Brandon Leonardo founded Instacart.
Apoorva Mehta, the current executive chairman and founder of Instacart, was born in India and lived in Libya before moving to Canada.
He studied Engineering at the University of Waterloo.
The three Instacart founders worked on their startup idea for several months.
After launching its operations, it became one of the highly valued startups that turned out to be a profitable business model.
Despite being a newbie in the grocery delivery industry, it gained popularity.
How Does Instacart Work?
The Instacart app has revolutionized grocery shopping by making it easier than ever to order what you need and have it delivered to your door.
Instacart acts as an intermediary between grocery stores and consumers.
They allow people to buy products that they might not be able to find in their area.
To sign up for an Instacart account, head to their website and click Sign Up at the top of any page.
On that page, enter your email address, choose a password and fill out a few other fields to create your account.
To buy an item, you first must add it to your virtual shopping cart.
You can do this by clicking on a specific product.
Each time you click Add to Cart, the new item adds to your total.
If there’s something on your list that they don’t have in stock, or if you don’t like what they have, you can make a substitution.
Once you have added your desired grocery items to your cart, go to checkout and complete your order.
The logistics are all handled by an Instacart shopper.
They fill your online shopping cart with the items you’ve selected before delivering them to your home within about an hour.
Read More: How does Instacart work?
How Does Instacart Make Money?
There are many ways that Instacart can make money as an e-commerce service provider.
Instacart has five main revenue streams for its business model on the platform.
They allow Instacart to compete with other grocery delivery companies and help them grow their business in the long term.
1. Fees On Delivery
Before you can understand how Instacart makes money, you must first understand what is behind the delivery fee.
A service fee applies to each order through Instacart, as with other e-commerce services.
The delivery fee is a crucial revenue stream for Instacart.
The service fee covers much of Instacart’s base costs and allows customers to receive same-day delivery at a reasonable price.
Fees vary based on factors such as timing and geographical location of pickup.
In general, customers who order same-day delivery have to pay $3.99.
The company utilizes the heavy order fee to cover operating costs and only applies to specific large items, such as beverage cases.
If the total projected weight of these items exceeds 50 pounds, Instacart uses a custom fee.
You should note that before becoming eligible for delivery, all orders must be at least $10.
2. Revenue Share
An Instacart shopper gets a commission on each delivery they make.
According to our research, most shoppers get paid pay $10-$25 per hour.
Instacart operates on a revenue share model.
Customers pay for their order (plus its associated fees), minus their percentage earned through tips.
Along with instant rewards, shoppers like working with Instacart because it offers flexibility.
Shoppers can set their schedules according to demand and availability and get paid via a weekly direct deposit.
3. Instacart Express
With Instacart Express, you can get free delivery on orders over $35 and reduced service fees.
It’s easy to order online or through the app, and there are no minimum purchase requirements or commitments.
Only pay for what you need when you need it.
Delivery is also reliable and available in most major cities across the US and Canada, with members saving about $7 on each order.
4. In-App Advertising
Launching in-app ads allow them to leverage shopper audiences and attract more potential customers.
These high-quality customers are valuable for our grocery retailers because they are often less price-sensitive and willing to try new products.
In-app advertising is necessary for growing companies without an existing customer base.
Instacart offers an exciting way to reach people with relevant offers every time they want groceries.
5. Surge Pricing
Instacart charges delivery fees depending on location, traffic, and time of day.
Surge pricing kicks in automatically when more grocery orders than available shoppers in a specific region.
When a customer places an order, Instarcart will charge them a base rate and then add extra charges to reflect surge pricing in that area.
Surge pricing may not apply during off-peak hours, but deliveries tend to take longer at these times anyway because fewer shoppers are available.
More Instacart shoppers are encouraged to serve the congested location over time, shifting the demand to sustain reliability.
Even though there is now an available vaccine, Covid-19 continues to be a worldwide health concern.
It has changed the way people work, learn, and buy their everyday needs.
When the reported cases of the virus started to rise in the US and Canada, there was concern among consumers afraid to go out and buy groceries.
Many people turned to services like Instacart to deliver groceries to their doorsteps, increasing the demand for Instacart’s delivery service.
What is the Future of Instacart?
Instacart’s long-term vision is to deliver perishable goods in a quick and convenient way.
Instacart has added several new accessibility options, helping them meet customer demand and increase delivery efficiency.
Successful delivery models need to strike a balance between speed and convenience.
Customers are looking for fast and convenient ways to buy their groceries.
Online grocery shopping is becoming more popular every day.
More consumers are turning to digital solutions that let them order online and pick up their groceries from their homes.
If you want to add groceries to your e-commerce business, Instacart has proven that there are ways that you can do it profitably.