How does Instacart Make Money

Instacart is an online grocery company that delivers groceries and daily-needs products online. The company offers its service through its website and mobile applications.

There are thousands of retailers associated with Instacart that offer their products to be sold through Instacart and the company gives the retailers their commission.

Instacart was started by Apoorva Mehta, Max Mullen and Brandon Leonardo with initial funding of $120,000 from Y Combinator Development Hub in 2012. Instacart earns money through various channels like revenue sharing, delivery fees, premium subscription fees and in-app advertising features.

These modes of generating revenue are distributed across North America and the company is planning to expand out of the US and Canada to reach wider networks. 

In this article you will find valuable information about the retail giant Instacart, how it has managed to onboard large people as 'Instacart shoppers', how much they earn and how Instacart earns as a grocery and much-more provider. 

How does Instacart Make Money

Brief History

Instacart was established by Apoorva Mehta who had earlier worked for Amazon. The other founders of Instacart are Max Mullen and Brandon Leonardo who started the company in 2012. 

The company started in San Francisco and by April 2015, the company was 200 employees strong. Instacart had been innovative since its inception;

it came up with a novel idea of asking its regular shoppers to be part-time employees. 



This initiative was done to bring about positive changes in Instacart from the customers' perspectives.

It also encouraged shoppers to be a part of the team. This program was first launched in Chicago and Boston and later was expanded to Atlanta, Miami and Washington DC wherein several shoppers took part in the drive. In October 2016 the company broadened its expansion to California and Minneapolis. 

The Instacart app was launched in 2012 only on the iOS platform. Later the company launched its app on Apple in 2014.

The company has expanded its portfolio and delivers not only groceries but also prescriptions, stationery, electronics, cosmetics, dairy, health and wellness and home decor items. Instacart offers in-store shopping as well and has around 5,500 stores all across US and Canada.

Instacart's Business Model

Instacart has been able to acquire local, regional and national retailers to deliver grocery, health and wellness, beauty, prescriptions and sports utility items. The items are delivered in a stipulated time frame.

The customers can choose to receive the orders within 2 hours or within 1 hour, and the delivery fee varies accordingly.

Instacart allows its users to make purchases from its nearest Instacart store.

The store locator option helps the users to find the nearest Instacart store from where they can go and shop for their utilities. 

Else they can place their order on the app itself and the required items can be delivered to their doorstep on the same day. The company has expanded its retail chain by bringing along as many retailers as it can to build its retailer strength. 

Across US and Canada, around 300 retailers are working with Instacart.

When a user places an order for miscellaneous items, for example, fruits and vegetables, electric equipment and medicines, the personal shopper will be assigned who will handpick the items and deliver them to the user's residence. This personal shopper is not an Instacart employee; rather he is an independent contractor who is self-independent. 

This model is unique to Instacart and it has many benefits for these 'self-employed contractors'. Firstly, these are exempted from paying any taxes as they are not full-time employees of a company.

They get a fixed amount on every successful delivery which gives them a flexible way of working. They can make as many or as few deliveries and earn accordingly.  Thirdly, this helps them in building their business reputation and opens avenues for new businesses as well. 

This has been beneficial for Instacart as well. Instacart does not have to worry about them as regular employees because they are not. They are working voluntarily with Instacart to make some extra bucks while Instacart can focus on the core business model.

This unique model has led to hundreds of applications to work as Instacart Shopper and the company has been able to subsequently widen its network across the US and Canada. Many students are looking for part-time work to support their education and families and this is an excellent option for them.

Almost every locality will have an Instacart shopper who can deliver the items as quickly as one hour.

The eligibility criteria laid out by Instacart for people who wish to become Instacart shoppers are that they must be 18 years of age, should be eligible to work in the US, must have consistent access to a vehicle, consistent access to a smartphone and physical ability to lift weight up to 50 lbs. 

How Instacart Makes Money

Instacart generates revenue mainly through a revenue-sharing model, delivery fees, premium subscription fees and in-app advertising. The combination of these revenue channels has made Instacart a company worth $2 billion as of 2022. 

1. Revenue Sharing

The revenue sharing model works as follows:

Whenever a user places an order online, Instacart earns a commission from the retailer, not the user.

This is because the retailer is getting that customer through Instacart and hence the retailer owes it to Instacart for the lead. 

Instacart has a revenue-sharing agreement with all its retailers in which the retailer and the company share the revenue from every successful order from the customer. 

This revenue sharing ratio between the retailer and the company varies on the size of the retailer and the value of the order placed from the user's end. The higher the value of the order, the higher will be the gain for both parties.

2. Delivery Fees

The Instacart user has to pay delivery fees for the successful delivery of the order at their doorstep. This is a highly variable entity and differs with region, city, location, time and items placed. 

As per the Instacart website, the standard delivery fee for orders below $35 is $3.99 per order if the order is to be delivered within 2 hours. 

If the user is in a hurry and wants the order to be delivered within one hour straight, the delivery fees get high at $5.99 per order

All the orders above $35 worth are subjected to a delivery fee of $7.99 for delivery under 2 hours 

$ 9.99 delivery fee for delivery under 1 hour for orders above $35Apart from this, there are other service charges, bag fees, bottle deposit fees, alcohol fees and others.

When an order surpasses a certain weight limit then also a 'heavy' fee is levied.

The user can tip the shopper as per their wish, and this amount is directly earned by the shopper. Instacart operates on a surge demand model like that of Lyft and Uber.

The surge demand model works on the principle of surge or rise during peak times like weekends or offs. This simply means that the users have to pay slightly more for items that are in huge demand or will have to wait longer on Sundays to receive their order, etc.

3. Instacart Express

This is a subscription model for Instacart's regular customers. With Instacart Express, the users can get their orders without any delivery fees.

The Instacart Express subscription fee is earmarked at $9.99 per month and $99 per year.

The subscribers of Instacart Express can place unlimited orders above $35 which will be delivered to them devoid of any delivery fee which is a great relief.

The subscribers also get reduced service charges and no demand surge pricing during peak times. 

4. In-app Ads

Instacart has acquired more than 10 million users all across the US and Canada.

The sellers and brands can reach out to them through advertising with Instacart. 

The sellers and brands can purchase the space on the Instacart website or mobile application by paying a certain amount where the brand can be advertised for a certain amount of time and duration. 

This is a highly sought after revenue channel of Instacart as the in-app advertising fee is high and reputed brands get on board. As of now, brands like Mars and Coca Cola are advertising on Instacart which gives a boost in revenue and branding as well.

The rates it charges for allowing advertising on its platform are undisclosed by the company. This is variable and depends on the size of the company, the space, the duration and length of the advert and differs for app and website. 

Instacart also uses a 'cost-per-click' model where if an advert running on the Instacart app or website is visited by the user on a click, that advert company is liable to pay Instacart a fee on a pay-per-click basis. 

Future Growth Possibilities

Instacart's future planning has targeted both ways- acquiring new users and partnering with more retailers.

Instacart has grown from just being a grocery provider and has expanded into prescriptions, beauty and wellness, sports utilities and other miscellaneous items which have increased the customer share considerably. 

The users have started to rely on Instacart for getting their needs fulfilled in a timely and cost-efficient manner. 

The other future possibility that Instacart has planned on tapping is exclusive delivery under 30 minutes for the top 15 metropolitan cities of the US.

This is aimed at those Millennials, young adults and working women who want instant access to their items. This is a sector for high revenue and promises great results to Instacart.

CONCLUSION

Instacart has been working in the online retail business since 2012 and has made quite a name for itself in the last decade. Instacart has acquired more than 10 million customers now and plans to double this figure in the coming five years.

Not only is it planning to increase its consumer base by offering more products and services on the table, but it is also planning to scale on the geographical aspect as well.

The company has competition from Shipt, FreshDirect, Amazon Fresh, Postmates, Walmart Grocery and Peapod which are old and new in this domain. 

These competitors from North America and beyond are the main contenders in which the consumers are divided. If Instacart has to make an impact and stand out among the rest, it must devise strategic policies and methodologies to attract a larger consumer share.

It can work on branding tools, marketing campaigns and strategies and also in the sustainable environment vertical to appeal to the consumers. Only then the company Instacart can go big and become a leader in grocery and related categories. 

FAQs

1. How do Instacart shoppers make money?

Instacart shoppers can partner with Instacart and deliver the products to the customer's homes directly. The request for a new order can be accepted from their end and they make all the purchases that the user has asked for. The complete items are delivered to the doorstep within the stipulated time frame. The user has to pay for the items, the service and the delivery charges.  This service has skyrocketed since Covid-19 as people prefer to stay in homes and avoid public places. 

2. What percentage does Instacart take from stores?

Instacart users prefer buying from the stores rather than from the app as the app charges a heavy service charge, delivery fee, order fee and shopper tip, which is easily around 50% more. Instacart levies charges around 5-15% from the stores as per the order value.

3. How much do Instacart Shoppers usually make?

Instacart promises that its shoppers can earn a minimum of $5 on a delivery-only order and $7-8 on a shop-and-deliver order. 

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