Instacart’s Online Grocery Shopping Inspires Local Business

The world is moved by inspiration and innovation. Everything we have today, from the computer on which I am typing this to the oven I used for dinner last night is the end product of inspiration. Amazon, Apple, and even Facebook are around today because their owners saw something they could make better.

Instacart is only the most recent in a string of business to consumer delivery options. Some, like Door Dash and Grubhub, are independent delivery services for dining; others are business-owned delivery services, like Safeway’s delivery service; still, others are entirely online grocery stores with delivery, such as Farms to Forks.

Instacart combines the independent business model (Door Dash) with online shopping as seen with Farms to Forks. Unlike the proprietary services like Safeway’s delivery program, Instacart isn’t tied to one business. Instead, Instacart has established relationships with several major corporations, including Whole Foods and Target.

Instacart is the so-called “proof in the pudding” – absolute and undeniable evidence that with the right idea and the entrepreneurial spirit, your app can be a success. Instacart has an enviable position in the business world: it is extremely useful to both the supply and the demand side of commerce. It’s time to turn your small biz around. Develop a responsive website or an mobile app for your project today.

The Story

The supply side here refers to the business like Whole Foods, Petco, Target, and so on. They’re businesses that supply a service directly to consumers. However, many retail stores that Instacart helps don’t have a strong delivery service.

With the advent of eCommerce businesses (read more about leveraging tools like Magento to build an eCommerce site in 2 weeks), came the increased expectation of home delivery. People began to realize the convenience of ordering products online and having it shipped directly to them.

Of course, one thing we all hate about online shopping sites is the time it takes for us to get our goodies. Even with an express service, it can take at least a day, not to mention costing a pretty penny.

To bring the story back around, what brick-and-mortar stores have accessed. If you need something right away, a Target or Safeway is where you go. So the overlay of the situation is:

Brick-and-mortar stores have access and availability but cost time and are inefficient.

eCommerce sites are efficient and save tons of actual shopping time, but shipping times mean products take a while to be delivered.

To me, this sounds like an entrepreneurial venture opportunity waiting for the right person to come along. Which is apparently what Apoorva Mehta, the founder of Instacart, thought as well. His app combines the access of local stores with the ease of online shopping businesses.

Instacart occupies that age-old market niche of the middleman: to suppliers, they offer a delivery service that answers the demands and needs of consumers more directly.

What Instacart doesn’t do to well helps the needs of some smaller local mom & pop stores. There is a real dearth of services for more local business – another entrepreneurial venture waiting to happen.

Of course, entrepreneurial ventures are only worth attempting if there is a chance of success. And for most businesses that means making a profit.

Monetization

The world of apps and the internet is the world of free stuff. That is how it works. The smart businessman doesn’t try to fight the world runs; he tries to work with it. For instance, apps like Instacart, Uber, Lyft, and so on are all free, as are most apps today.

While it can be hard to divorce the company from the app the way to think about it is this: the app is not what you are selling. You’re selling a service, and the app is merely the platform for that service.

Apoorva Mehta monetized his app by charging a percentage of the total bill: anywhere from 10-20%. That’s a pretty decent chunk of change for Mehta – and that doesn’t include the Uber-style surge pricing during busy hours. All this has added up to Instacart’s recent valuation of $2 billion.

Even better, Instacart offers an express subscription service. With this subscription, users can waive certain fees (alcohol and busy fees, specifically) and offers free delivery in 2 hours or less.

To sum up, Instacart has three different monetization methods:

1. Delivery Fee

Users take no risk to download the app but the company still makes money when the service is used;

2. Busy Pricing

A busy fee can be a gamble (Uber has received some flack for their surge pricing), but Instacart’s fee is pretty low. Plus if you don’t like it, there’s always the….

3. Subscription

a. This is a great option for your big repeat customers. Having an option for users to dive deeper into your service is brilliant. Not only does it provide a dependable revenue stream, it creates a more in-depth and robust company.

This is a good monetization model. No other way to put it.

While Mehta has leveraged these strategies quite well, they are by no means the only ways to make money of an online delivery site or app.

• Instead of charging the demand side of the shopping market, the supply side could be charged. This can be done in one of two ways:

• A supply-side subscription. Suppliers, like Petco or Whole Foods, would pay you like the app owner. Why would they do this? Because users love instant home delivery. It’s awesome! Online delivery services are one more way to engage customers and leverage sales opportunities.

• A good strategy here can also be to offer varying subscription models. For instance, retailers can use modern tools to offer targeted promotions and coupons to users – for an extra fee, naturally.

• A percentage of each sale is another great supply-side monetization method. In other words, every time a user engages a retailer via Instacart, Instacart charges the retailer a percentage of the final bill.

• The old standby of ad banners is always an option. This generally is best when combined with several other revenue streams, though. It takes a lot of users to make money off ad revenue, thus it takes time to build it into a big moneymaker.

This by no means covers all the paths to monetization out there. There are many options – find out more with a click.

Serve your neighborhood:

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