+218% is the increase of Instacart app downloads in just one week. And Instacart is not the exception, other grocery delivery apps also break records with their growth rates.
Apocalyptic movies and books turned to reality quicker than we could expect.
If grocery delivery used to be a luxury, now, in the situation of ‘contactless’ COVID-19 pandemic environment, it has become indispensable. Those stores that postponed going online are now forced to do it in a rush. Consumers who never imagined they would shop online, now have to master this skill.
Growing demand for food delivery, attractive tax and loan conditions for small and medium businesses, as well as a freed-up workforce — all these factors create a perfect environment for those who want to make a meal delivery app.
How are applications like Instacart made? Let’s find out!
How to start a food delivery app in the midst of COVID-19
We weren’t ready for it. For the last several weeks, we all have experienced unimaginably fast changes when each day brings new limitations. Some businesses lost their viability completely, others had to transform their processes and some, in contrast, became vital and increasingly profitable. When the COVID-19 outbreak started, restaurants and cafes closed and visiting stores became unsafe. This led to an increase in demand for food and grocery deliveries. That is why many entrepreneurs are looking for guidance on how to start a business like Instacart.
Reasons to start a grocery delivery business
The market is already covered by large and famous players like Instacard, Peapod, Shipt, and Amazon Prime. Nevertheless, there is still a lot of room for new companies. Here is why you should make your own grocery delivery app:
- According to Apptopia research, these days grocery delivery apps are experiencing the highest demand in history and have been downloaded a record number of times. Instacart had an increase in downloads of 218%, Walmart Grocery — of 160%, and Shipt — of 124%. In December 2020, DoorDash sold 33 million shares in its IPO raising $3.37 billion. DoorDash experienced massive growth in 2020 due to the coronavirus pandemic lockdown. The company’s revenue more than tripled to $1.9 billion in 2020 compared with the previous year.
- With such a big demand, grocery deliveries are overwhelmed with orders and fail to serve the increasing number of customers. The time slots get filled quickly and people have to wait several days for an order, which is not acceptable if you’ve run out of groceries.
- People buy more groceries. Consumers are suspicious about ready-made meals and prefer to cook at home. That is why people now need a constant supply of products. Instacart reported that its sales increased on average by 10 times compared to the sales the week before the pandemic and, in some states, sales grew by 20 times. Instacart says that the cost of the average order grew by 20% and includes popular items like hand antiseptic, vitamins, powdered milk, diapers, face masks, and canned products.
- The elderly are the most vulnerable category of the population; they should not risk going shopping. Not all of them can rely on friends and relatives to deliver goods to them, so grocery deliveries are their only option.
- People became less sensitive to the prices of the essentials and pay less attention to the cost of delivery and price markups.
- The unemployment rate is rising. In China, for example, delivery companies scooped up former employees of hotels, restaurants, and cinemas who were left without jobs due to the pandemic. Now, in the USA, grocery delivery companies also hire aggressively. Instacart announced that they will hire 300,000 personal shoppers and Amazon plans to attract 100,000 workers to reduce delivery delays.
- Restaurants shifted their format to takeaway food eagerly collaborating with deliveries to escape the logistics. And this gives food deliveries an opportunity to enlarge their assortment.
Despite the common business idea, grocery delivery companies have certain differences in the way they operate, buy and store goods, hire personnel, and how they choose their areas of service. So what are the best grocery delivery apps, and what can we learn from them? Let’s review some of the most famous companies:
Instacart is now valued at nearly $8 billion. It is one of the biggest grocery delivery and pick-up services, available in all 50 U.S. states and Canada. The company was founded in 2012 by Apoorva Mehta, a former Amazon employee. Instacart does not possess its own warehouses. Instead, they partner with more than 350 national, regional, and local retailers where they shop. Their shoppers go to the stores, fill the orders, and bring them to customers with their own cars.
Shipt was founded in 2015 in Birmingham, Alabama by Bill Smith. In 2017, the company’s success attracted the attention of Target Corporation which bought the business for $550 million. More than 100,000 shoppers work at Shipt and they deliver goods (food, household items, and electronics) not only from Target but also from 89 other retailers. The shipping can be as speedy as one hour. In 2018, Shipt had reached $1 billion in revenue.
3. Amazon Fresh
This is an Amazon Prime Now membership for groceries. The cost of membership is $119 per year and allows customers to order any goods on Amazon and receive them for free within 2 hours or just an hour for an extra $7.99. Amazon did not strictly specialize in groceries, but now during the COVID-19 outbreak, they have entered the grocery delivery competition. Amazon, with its reputation, ambition, technology, and ready chain of warehouses around the country, not to mention its ownership of Whole Foods, has become a serious competitor. Today, they actively relocate their workers from other departments to Whole Foods’ grocery team promising higher wages. It is estimated that Amazon’s online grocery service could bring in $70 billion by 2023 which is 3 times more than in 2019.
Founded in 1989 by Andrew and Thomas Parkinson, this is one of the oldest online grocery services. The website was launched in 1996, as one of the earliest internet startups. Now the company is owned by Ahold Delhaize. In 2015, Peapod was the largest online grocery delivery store in the United States covering 24 U.S. urban markets. The company is one of the few grocery delivery services that have their own warehouses. They also operate Stop & Shop, Food Lion, Giant-Landover, and other supermarkets. In February 2020, the company management decided to shrink its service areas in the Midwest and focus exclusively on the East Coast.
5. Walmart Grocery Delivery
In addition to its offline supermarkets, Walmart created a grocery pickup and delivery service in more than 1,600 cities. They first launched their test app in 2015 and it turned out to be a great success. The membership in Walmart Grocery doesn’t offer any bonuses except for savings to Walmart’s regular customers. But isn’t the lower price what all customers want from such services? Unlike its competitors, Walmart doesn’t have its own delivery people or shoppers. Instead, Walmart contracts with delivery providers across the U.S., like Point Pickup, Skipcart, AxleHire, Roadie, Postmates, and DoorDash. They also tried to work with Deliv, Uber, and Lyft but soon rejected this idea after several cases of drivers not delivering the orders.
Business and revenue models
As you plan to build a website like Instacart, you should study the ways such apps make money.
Grocery delivery apps usually work like this:
The consumer downloads the app to their smartphone or goes to the website. They put items into their virtual shopping cart and provide their billing information and shipping address. The platform processes the order and sends it to a shopper (an employee or contractor) who completes the order either by taking the goods from the warehouse or by going and buying items at a local store. The completed order is shipped to the customer’s address by a delivery driver or the shopper themselves in their own car. The payments are collected, either in cash by the delivery person or online at the moment of the order. The receipt can be emailed or provided in paper with the order to the customer upon the completion of the order.
Before we drill down into the questions on how to build an app like Instacart, let’s choose the way your platform will make money.
Here are several common revenue models for food delivery services:
Subscription. This is the most popular business model. A subscription allows frequent customers to save money on delivery. Membership in most services costs around $100 a year, or $10 to $14 per month. Usually, it means that the members get free delivery on orders of $35 or more, and some other perks, like no extra fee for delivery during peak hours. Some other membership options may include bonuses and access to features like the possibility to see photos of purchased items before authorizing the delivery.
Commission and delivery fee. For those consumers who use the delivery services sporadically and do not want to pay for the membership, platforms charge commissions.
Usually, this is a percentage of the purchase, or a flat fee for delivery that may vary depending on the time, location, and order size. For example, Instacart takes 5% (or $2 minimum) for orders and $3.99-$7.99 for delivery. Tips to delivery people are not included in the price.
Higher prices than in stores. To compensate for the delivery expenses, platforms may set prices that are higher than in stores. Even the slightest margin can significantly add to the total revenue.
Instacart highlights that the prices on their website are set by the retailers they partner with and do not differ from the prices in stores. In exchange, Instacart obtains a portion of the partners’ profits from the purchases.
Though Instacart claims that they only add a 15% markup to items from non-partner shops, one researcher discovered that on average they added more than 23% over store prices.
Instacart is customer-oriented and they try to compensate for the higher prices with the convenience of their services. And despite negative reactions on the Internet about the Instacart markup disclosures, many people still use Instacart.
“I have just finished my 14-day Instacart free trial. I compared their prices in my latest order to the store prices and noticed an average markup of 24%. Despite such a substantial margin, my wife and I decided to stick with it, as the time it saves has ‘more value’ than the price difference.” — said one of the Instacart users on Quora.
Advertisements. If you do not want to charge extra for delivery and provide competitive prices, but still need to make your business profitable, you may try to get revenue from sponsors and ads. If a user does not want to see ads, give them an option to buy a membership, and get rid of them.
To sum up, the total revenue of the grocery delivery companies usually consists of:
- Delivery fee or membership
- Commission fee depending on the order size
- Discounts or percentage of purchase from the partners
- Extra fees for delivery in busy hours or night time, urgent orders, far away locations, and special requirements
- Price markup
Additionally, the consumer pays the tax for each item and gives tips to the delivery person.
How to build a grocery delivery business website
Whether you want to create a grocery delivery app or a website, the functionality will be more or less similar. Here we collected the features found in the most popular grocery delivery platforms.
To start your own grocery delivery business app or website, choose the most important features for the website. As we already discussed, the platform should enable customers to find the necessary goods, add them to the online cart, pay, and schedule delivery. The system should process the order and assign an available shopper. This person will make the purchase, and deliver the goods in exchange for a fee.
So the core features are:
1. Product search and categorization
Users should be able to search for products either by categories or by entering a keyword in the search bar.
2. User profile
This is where the user can add her address and billing information, and also set preferences for future purchases. The user should also be able to view order history, coupons, loyalty discounts, and gift cards.
Provide customers with as many payment options as possible. Cash, cards, wallets, bonuses, gift cards, and coupons. As the order is submitted, email the invoice to the customer and add the order record to the History of Orders.
The checkout process may include several steps:
1) Viewing and editing the items and their quantity
2) Applying member cards, coupons, and discounts
3) Setting tips for the delivery person
4) Filling customer contact details (to facilitate the process, insert the address from the user profile but make it editable).
5) Choosing a delivery date & time.
6) Adding delivery instructions.
7) Adding payment details.
8) Confirming the order.
5. Product Recommendations
63% of smartphone users buy from apps or sites that suggest relevant products or services that users may be interested in buying.
The best examples of product recommendations are ‘Featured items,’ ‘Daily deals,’ ‘This goes well together,’ ‘Previously purchased,’ ‘Often bought with,’ as well as recipes with ready sets of ingredients, and freshness ratings. These, and also the history of previously bought products, can increase your average order. Using AI, you can analyze similar users’ purchases and make more accurate suggestions.
Instead of spending hours searching for a product, users can follow your suggestions and make the order in minutes.
6. Admin section
This is a large back-office part of the website where an Admin team should be able to:
- Manage customers
- Manage shoppers
- Track and manage orders
- Set the fees and manage subscription
- List categories and products
- Activate and deactivate discounts
- Create notifications and alerts
- Manage website content (blog, advertisements)
- Manage relationships with partners (track commissions)
- Generate reports
7. Shopper section
Platforms like Instacart and Shipt are hiring shoppers massively now.
Anyone can become a shopper simply by applying on the website and meeting all the requirements.
Each approved applicant will get access to the Shopper section of the platform, or mobile app, to manage their account, indicate availability, and track earnings.
To stand out in the competitive world, you need to give your customers the added value that can be created with unique features. Here are some examples:
1. Shared shopping lists
Remember how tiresome the creation of shopping lists can be when several family members live under one roof? Make it easy to share product lists and order everything in one place without the risk of missing or duplicating something. That is why Instacart and some other apps have a ‘Shop with Friends’ feature. Thus, consumers can easily view each other’s lists of products and how much they cost. Look at the picture below to see how it works:
2. Tracking the order delivery
Waiting for the order, people feel obligated to say home and NOT do other things for fear of missing the delivery. Having a GPS-tracker like Amazon Fresh allows them to relax and go about their day without worries.
3. Buying ingredients for recipes and meal plans
When people buy groceries, they usually already have an idea of the dishes they are going to cook. Why not save time and effort?
Create an API that will integrate your app with popular recipe sites. As a result, you will also attract new customers from the recipe websites.
Instacart is already integrated with Yummly and plans to partner with AllRecipes, the Internet’s largest cooking portal. Users fill the cart with all necessary ingredients in the correct proportion with a single click of a button.
Integration with famous recipe portals is a great idea for your service to let their customers make instant orders, but be ready to compete with similar apps.
4. Dynamic pricing
The delivery fee typically depends on the size of the order, delivery time, urgency, and location. However, you can also consider adjusting your fees at peak demand times. In this case, during the busiest shopping hours, the fee may change and the users should be notified of the price change. This is just like Uber’s dynamic pricing that some hate, while others adore.
5. Cashback and coupons
People love discounts and cashback, so you can integrate your platform with services that process coupons, cashback, and other perks.
Are you still hesitating about how to make a grocery delivery app?
What measures Should you take to make delivery safe during the pandemic?
- Make delivery “contactless.” This means that the courier should leave the order at the door without interacting with the consumer. Taking cash, signatures, or even card payments should be avoided.
- Implement online payment methods that are the most popular in your region of service to be sure your consumers can pay for the orders online.
- Equip drivers and couriers with hand sanitizers, gloves, face masks, and disinfectant wipes.
- Do daily health checks of employees and do not allow sick people to work, giving them paid sick leave. For example, Uber Eats, Instacart, Shipt, and some other companies provide 14-days financial support for drivers and delivery people who are diagnosed with COVID-19. However, these measures were taken only after shoppers of different companies organized strikes demanding that the businesses provide them with protective equipment and paid sick leave.
What Will be your competitive advantage?
Now that we have discussed how to make a website like Instacart, let’s talk about what else you can do to defeat your competitors. Attractive prices, user-friendliness, timely delivery, pleasant interactions with employees — what is most important for good grocery delivery? CheckBook conducted a survey to compare the most popular services in the industry according to what their consumers say.
You can see that all the providers were rated more or less equally and the rates are not high. Thus, you should have some ideas on how to build a food and grocery delivery app that will outperform those on the market now.
New COVID-Effected Features
Staying home is critical for ‘flattening the curve’. The deliveries now work at their fullest capacity and aggressively hire new shoppers. The companies ask customers to order in advance, select alternate products if the ones they select are not in stock, combine orders with their relatives and neighbors, and be patient. Technological advances have come to help them in the shape of new features. Here are some of them:
Recently, Instacart created the ‘Leave at My Door Delivery’ feature which can be used if the customer wants to get the order without personal contact.
Senior customer priority orders
Save priority order slots for senior consumers as they need grocery delivery more than others. Some offline shops already have dedicated senior hours to make sure that elderly people will be able to buy all the goods they need.
Now, planning the purchase of essentials in advance is vital as never before. The ‘Order Ahead’ functionality allows customers to fill their online cart well in advance so shoppers can fill it on time.
Delivery on availability
As the demand for grocery delivery has increased, the services are struggling to meet the demand. Instacart has announced a new feature called ‘Fast & Flexible’ to reduce waiting.
Instead of scheduling a specific time slot for delivery, customers can choose the delivery by the first available shopper. The system automatically estimates the approximate delivery time (e.g., Tuesday through Thursday) and notifies the customers the moment their order is picked up by a shopper, and when it should arrive at their home.
What to expect after the quarantine?
For now, nobody can definitely say how the world will change after COVID-19. But the pandemic has already influenced people’s mentality and lifestyle. As many businesses could not afford to wait till the end of the quarantine, they have already transformed their habits, and will never go back to the way it was.
After-quarantine society will have to accept new rules of work, shopping, traveling, and gathering to prevent another pandemic in the future.
Some of the changes are evident even now:
Offline business digital transformation
Previously, digitalization was perceived as a way to increase effectiveness through automation and data synchronization, but now businesses are forced to go online to survive.
Chinese companies became pioneers in this massive transformation, showing the way by reorganizing their processes in almost every industry.
Lin Qingxuan, the Chinese cosmetics company, had to close 40% of its stores around the country, including all shops in Wuhan. However, the company did not fire its employees. Instead, they transformed them into online beauty advisors who continued consultations with customers via WeChat. This resulted in a 200% growth in sales in Wuhan compared to the previous year’s sales.
Many restaurants and food stores have already transformed into takeaway and delivery services. Depending on how long the quarantine lasts, people will become ever more used to ordering groceries and other goods online.
For groceries, such a transition may be a huge benefit as it would let them reduce or even eliminate brick-and-mortar stores and sell directly from centralized warehouses. This, in turn, will reduce expenses for real estate, furniture, and equipment.
Drones and robots for delivery
The fast spread of the virus called for contactless delivery by drones/robots, as never before. Today, such companies as Wings provide deliveries in Finland, Australia, and Virginia, shipping snacks and health care products. Although it is just the beginning of the drone delivery era, it is clear that this business will blossom in the future.
So, how about a drone-delivered coffee and croissant?
How to Apply This to Your Business
As you see, grocery delivery apps are skyrocketing now. No one can predict how long the pandemic will take, but there is definitely no time for hesitation if you want to start a grocery business.
You should hurry up to find a grocery delivery app development company and create a food delivery website as quickly as possible.
At the start, you do not need complicated features. People just want to have the staples delivered quickly. So pay attention to the Core Features first. In the current situation, you do not even need to prove your startup idea. It is clear that any grocery delivery app that serves its purpose will succeed. When the situation stabilizes, you will be able to modify and improve your website with more sophisticated features.
We know how hard it is to start a new business in times of a crisis. So, from our side, we are ready to provide all our development experience and help you understand how to build a company like Instacart fast without compromising on quality.
Are you ready to start a new grocery delivery service?