Shipt is a very popular USA-based delivery service company owned by Target Corporation. This company was founded in 2014 by Bill Smith and later in 2017; it was acquired by Target Corporation for $550 million. Shipt is a website and mobile apps-based delivery platform that allows its users to order groceries online. Shipt works with independent contractors to fulfill these orders. In this article, we will discuss how Shipt makes money and its business model.
Shipt is a delivery platform that makes money via membership subscription fees, Shipt passes, delivery fees, pickup fees, service fees, retailer partnership commission, gift cards, and many more. Fundamentally, Shipt is a subscribed-based delivery service provider that makes money from delivery fees and other types of fees.
Jump To A Section
- 1 What Is Shipt?
- 2 How Does Shipt Work?
- 3 Choose The Product And Shopping
- 4 How Does Shipt Make Money?
- 4.1 Membership Fees
- 4.2 Shipt Passes
- 4.3 Shipt Fees
- 4.4 Retailer Commission
- 4.5 Gift Cards
- 4.6 Shipt Business And Revenue Model
- 4.7 FAQs About Shipt
- 4.8 1. Do Shipt Shoppers Know How Much You Tip?
- 4.9 2. Does Shipt Pay Mileage?
- 4.10 3. How Much Money Do Shipt Shoppers Make?
- 4.11 4. How Is Shipt’s Pay Calculated?
- 4.12 5. Who Are Shipt Competitors?
- 4.13 6. Is Shipt A Profitable Company?
- 4.14 7. Is Target Shipt The Same As Shipt?
- 4.15 8. Is Shipt Or Instacart Better?
What Is Shipt?
Shipt is an online grocery store delivery service that has made grocery shopping more accessible and convenient for millions of people. Shipt allows its users to order groceries and other household items and then they deliver those products directly to the home. It is an on-demand grocery shopping platform where you can order goods from the Shipt website or their mobile phone app. Over the years Shipt has emerged out as a leader in the grocery shopping business and it hit the $10 billion market valuation mark in 2021. Currently, Shipt offers same-day shipping from partnering retailers in over 270 USA cities.
How Does Shipt Work?
Shipt users can order groceries from the website or from the mobile app. Before customers can order through Shipt they have to complete some steps and then the selected groceries will be delivered to their home. Here’s how Shipt works for customers –
Install The App
First, you have to download the Shipt app from the Google Play Store or Apple App Store. Once the app is installed, you have to register an account on Shipt with a name, email address, and strong password. You can also order groceries from the Shipt website and use the same credentials on the web version of Shipt.
If you want to order goods from Shipt then you have to enable location to allow the app to automatically detect your location. You can also enter the location manually where you want your groceries delivered. Based on the location you will be able to see all the nearby grocery stores that will accept your order. So, select the store from where you want to buy the products or groceries.
Membership And Passes
The Shipt mobile app is free to download and you can open the account for free. However, if you want to purchase goods via Shipt then you have two options – Membership and Passes. Shipt has a Membership program on a monthly and annual basis. Most people pick the annual membership program because grocery buying is a thing that can’t be avoided. On the other hand, the Shipt pass is suitable for people who want to buy groceries for one time or choose pay-per-delivery.
Choose The Product And Shopping
Once you have selected the store, the next step is to choose the product that you want to buy and order them. You have to browse all the available products of the store to find your desired products. Products are organized in a categorized way so that you can easily find your desired products. Select the product and quantity of the product that you want to buy and then select add to cart. Once you are done with product selection, proceed with the checkout.
Choose Delivery Time
At the time of checkout, you will be asked about your preferred time of delivery. Here you will be able to select the time slot according to your requirement. You can also add an alternative phone number and address if required. Shipt allows payment from a debit/credit card. Unfortunately, cash on delivery is not available currently on Shipt.
Once the order is placed the Shipt system assigns a shopper to collect the items from the store. When all the items are picked by the shopper you will get a notification. Until the orders are picked up you can change your order, add, or remove items. After the items are picked they will be delivered to your doorstep in your selected time slot.
How Does Shipt Make Money?
Over the years, Shipt has partnered with renowned retailers like Target, Costco, BestBuy, CVS, Kroger, Petco, and many more. They are providing service in more than 270 U.S. cities and this is how Shipt is making money.
Shipt makes most of its money from the membership fee that the users pay monthly or annually. The Ship customers have the option to choose between monthly or annual membership subscriptions. It is a membership-based platform so a non-member won’t be able to order anything from the Shipt. The monthly membership fee of Shipt is $14 and the annual Shipt membership fee is $99. The annual plan will save 41% per year. Moreover, if the order is less than $35 then you have to pay an additional delivery fee.
This is a one-time order basis plan that is available for customers who don’t own a membership. Shipt Passes can be used on a per-order basis. The fees/charges of Shipt passes are higher than the membership fees. You can buy the Shipt passes in packs of 3 or 5. You can also buy Shipt every day for $99 and it will give you free deliveries on all orders over $35 for one year. The cost of Shipt passes are –
1. 3 pack: $27
2. 5 pack: $40
3. Shipt Everyday: $99
Shipt also makes money from fees like delivery fees, pickup fees, and service fees. If you don’t have a Shipt pass or Shipt every day, and if your order is not over $35 with a paid membership then you have to pay a delivery fee with a paid membership. The delivery fee is $7-$10 depending on the location. Moreover, if you choose to pick up the order rather than delivery then Shipt will add a pickup fee to all orders that are under $35. The pickup fee is $7. Shipt also adds a service fee to each order depending on the price of the products. Usually, this fee varies depending on the retailer and item.
Shipt also collects sales commissions from the partner retailers. Usually, Shipt makes a revenue-sharing agreement with the retailers where the retailers have to pay a commission to the company for bringing more customers to their business. Shipt charges a certain percentage of commission from every order. This is also a great money-making source of Shipt.
This is another revenue model for Shipt where they make money from Gift cards. Many Shipt customers buy Gift Card for their friends, family, colleagues, etc. The pricing of Shipt Gift cards are –
1. 6-month gift membership: $49
2. 12-month gift membership: $99
Shipt Business And Revenue Model
Shipt has quite a few business models that they combine within their company to generate revenue. The business models are –
1. Software as a service (SaaS) business model
2. Commission based business model
3. Fee-for-service (FFS) business model
4. Marketplace business model
5. Transaction-based business model
6. Business-to-business (B2B) revenue model
7. B2B2C (partnerships) business model
FAQs About Shipt
1. Do Shipt Shoppers Know How Much You Tip?
The shipt shoppers are able to see how much the customer tip only after 2 hours of the delivery. Then the shipt shoppers receive an email confirming the finalized tip charge.
2. Does Shipt Pay Mileage?
No, Shipt doesn’t pay mileage. But you can track the mileage and then filed it with your taxes at the end of the year.
3. How Much Money Do Shipt Shoppers Make?
An experienced Shipt shopper can make anywhere from $16–$22/hour. Usually, the shoppers get paid per shop, so the more the customer shop the more the shopper gets. Moreover, the shoppers will get to keep 100% of their tips. So, you will be able to make more by providing excellent services.
4. How Is Shipt’s Pay Calculated?
Every order at Shipt started at $5. Moreover, a 7.5% commission of the total order amount was added to the final payment. So if you deliver an order of $100 then you will be paid $12.50.; here, the $5 is the base order fee and $7.50 is the commission from the order.
5. Who Are Shipt Competitors?
Some of the Shipt competitors are Instacart, Amazon, Cornershop, and Peapod.
6. Is Shipt A Profitable Company?
Since its establishment, Shipt has become one of America’s largest grocery delivery platforms. Moreover, it has also grown as a business and its revenue is increasing every year. In 2021, the revenue of Shipt grows more than 350% compared to the revenue of 2019.
7. Is Target Shipt The Same As Shipt?
Yes, Target Shipt is the same as Shipt. Target acquired Shipt in 2017 and now they offer same-day delivery from stores like Safeway, CVS, Petco, and many more.
8. Is Shipt Or Instacart Better?
The answer to this question depends on your requirements. For availability and store selection, Instacart is the best option. But if you are looking for discounts or products at a lower price then Shipt will be the best option for you. So, if Shipt is available in your area then it will be the better option.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.