Instacart is a very popular online grocery delivery service company that generates profit from delivery fees, premium subscription fees, in-app advertising, a commission from participating merchants and retailers, etc.
Key Takeaways
- Instacart has more than 10 million active users in 2022
- Instacart makes more than 50% of its revenue from delivery fees
- The Instacart Express membership plan allows Instacart users to save an average of $7 per grocery order
- In 2020, Instacart sold $35 billion worth of groceries
- More than 600 retail stores are partnered with Instacart
- Instacart’s sales increased by 229.7% from 2019 to 2020
- The regular delivery fee of Instacart is $3.99
- The Instacart Express membership fees are $99 per year and $9.99 per month
What is Instacart?
Established in June 2012 by Apoorva Mehta, Max Mullen, and Brandon Leonardo, Instacart is an American grocery delivery and pick-up service company that offers its service in the USA and Canada. This company takes orders from customers online via its website & mobile app and then offers same-day delivery of fresh produce, pantry essentials, and all types of products. When a customer places an order, a personal shopper goes to the store and picks up all the items of the order, and then makes the delivery to the required location. Instacart offers various types of delivery services like same-day delivery, two hours delivery, one-hour delivery, etc. In order to get the Instacart delivery service, you have to pay a delivery fee and a small service charge.
Company Overview: Instacart
| Company Name | Instacart |
| Country | USA |
| Headquarters | San Francisco, California |
| Industry | Grocery Delivery |
| Company Type | Private |
| Ticker | N/A |
| Revenues | US$1.8 billion |
| Market Value ($B) | US$14.7 billion |
| Employees | 3,000 |
How Instacart Works
Instacart allows its users to shop from local grocery stores online. If you have an Instacart account then you can shop from your favorite shops without visiting them physically. What you have to do is log in to your Instacart account from your computer or mobile app and visit the desired shop. Then select the products that you want to buy from that store and place the order. While placing the order you have to pick the delivery type according to your requirement. The more quickly you want your goods to be delivered the more the delivery charge will be. Instacart doesn’t have its own products unlike other grocery delivery service companies, Instacart doesn’t stockpile fresh produce in a massive warehouse. Instacart works with participating merchants, grocery stores, super shops, etc. When you place an order, a “Personal Shopper” will shop for the products from your desired store and then deliver them to your address. While shopping with Instacart, you have the option to give special instructions as well as last-minute changes in order if the product is sold out or out of stock, which is very convenient.
List of Participating Stores of Instacart
| 1. Sprouts Farmers Market 2. Safeway 3. Costco 4. Rainbow Grocery 5. Walmart 6. Walgreens 7. Woodlands 8. Mollie Stone’s Markets 9. CVS Pharmacy® 10. Target 11. HMart 12. Gus’s Community Market 13. BevMo! 14. Smart & Final 15. Lucky Supermarkets 16. FoodsCo 17. Bi-Rite Market 18. Total Wine & More 19. FoodsCo Delivery Now 20. Andronico’s Community Markets 21. 99 Ranch Market 22. Indian Market and Liquor 23. Petco 24. Costco Business Center 25. Lowe’s 26. Sephora 27. Berkeley Bowl 28. Grocery Outlet 29. Bed Bath & Beyond 30. Staples 31. Restaurant Depot 32. Jai Ho Indian Grocery 33. Best Buy 34. Lunardi’s Markets 35. CHEF’STORE 36. LeBeau Nob Hill 37. Michaels | 1. Cole Hardware 2. The Vitamin Shoppe® 3. Dollar Tree 4. Pak N Save 5. Falletti Foods 6. Healthy Spot – Organic Pet Food & Supply 7. Pressed 8. Organics Market 9. 7-Eleven 10. The Wine Shop 11. Foodhall 12. The Epicurean Trader 13. Spirit Halloween 14. Eataly 15. Sunbasket 16. New Leaf Community Markets 17. FoodMaxx 18. Mi Tierra Market 19. Mission Grocery & Liquor 20. Gene’s Fine Foods 21. Glen Ellen Village Market 22. Mill Valley Market 23. Marina Floral Design 24. Bath & Body Works 25. Cardenas Markets 26. The Village Market 27. Andy’s Local Market 28. The Body Shop 29. ButcherBox 30. La Fromagerie Cheese Shop 31. Quicklly Indian Meal Kits 32. Mishka Dog Boutique 33. Thatcher’s Gourmet Popcorn 34. Mike’s Bikes of San Francisco 35. Tibetan Golden Lotus 36. The Gifted Basket Driver’s Market |
The Cost of Instacart
Unlike other grocery delivery service companies, Instacart doesn’t have any membership fees. You will have to pay delivery fees, service charges, and in some cases tips. Usually, the delivery fees of Instacart start from $3.99 and this fee is for orders above $35 and for same-day delivery. The delivery charge will increase for two hours and one-hour delivery options. For club store deliveries and deliveries under $35, the delivery charge will increase. Instacart also has a membership plan and the fee is $99 per year. It also has a monthly membership plan and which will cost $9.99 per month. If you avail Instacart membership plan then you don’t have to pay a delivery fee. Moreover, your service fee will also be reduced for orders above $35.
Instacart Business Model: How Instacart Makes Profit
Instacart has a very simple business model and the business model usually consist of revenue sharing, service fees, delivery charge, membership fees, mark-ups on prices, in-app advertising, etc. Let’s check out how Instacart makes money.
1. Revenue Share
Instacart charges commissions from the participating stores. When a product is sold via the Instacart platform, Instacart gets a commission. Instacart has a revenue-sharing agreement with all the participating stores and it allows Instacart to collect the commission from each sale. The commission rate is not fixed and it varies depending on the type of product, the volume of sales, etc.
2. Delivery Fees
Instacart has different types of delivery charges for different types of delivery services. The basic delivery charge of Instacart is $3.99. For one-hour delivery, the delivery charge is $5.99. If the order is below $35, then the delivery charge will be $7.99 for two-hour delivery and $9.99 for 1-hour delivery. The delivery charge varies depending on the location, delivery type, etc.
3. Service Charge
Instacart also has a service charge, and it can be 5% or 10% of the total order amount. Apart from the service charge, there could be a heavy fee, bag fee, bottle deposit fee, alcohol service fee, etc. If the product is surplus the weight limit then the customer has to pay the “heavy fee.”
4. Membership Fees
Instacart has a membership plan known as “Instacart Express” and it offers delivery service at a lower cost for regular users. If you subscribe to “Instacart Express” then you will get unlimited free delivery for fixed yearly or monthly fees. The annual membership price of “Instacart Express” is $99 and the monthly subscription fee is $9.99. So, membership fees are another excellent profit-generating source for Instacart.
5. In-app Ads
Instacart has a mobile app for both Android and iOS platforms. Millions of Instacart users use the Instacart app. So, this is a huge advertising platform for various brands and companies. In fact, Instacart also uses its apps to earn revenue from in-app ads. Instacart receives in-app ad revenue depending on ad categories and search terms.
6. Mark-Up Price
This is another way Instacart makes money. Almost all products at Instacart have the same price as the in-store price. However, there are some products that are listed on Instacart with a markup price of 15% higher than the in-store price. So, Instacart makes a profit from the price difference.
Revenue of Instacart (2013 – 2022)
| Year | Revenue |
| 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 | $10 million $75 million $120 million $185 million $300 million $525 million $735 million $1.5 billion $1.8 billion $2.1 billion |
References:
https://finty.com/us/business-models/instacart/