What is Instacart?
Instacart is a US-based company well-known for its grocery delivery and pickup services. The company operates in the US and Canada. Primarily, Instacart provides its services through its website and mobile app. Using this platform, users can order groceries from various suppliers and retailers. Instacart allows users to shop through a personal shopper. The shopper helps acquire and deliver the products ordered by the user.
Instacart started its operations in 2012, headquartered in San Francisco. The company’s founder Apoorva Mehta has an engineering degree from the University of Waterloo. Currently, he also serves as Instacart’s CEO. He has significant experience, which helped him with his tenure in the company. Before starting Instacart, Mehta was a design engineer at Blackberry and Qualcomm. He also worked in Amazon in 2008.
While at Amazon, Mehta helped develop the company’s fulfillment system under his role as a supply chain engineer. However, he left the company only after two years. At the time, Mehta lived in Seattle. However, he moved to San Francisco to pursue new objectives. In the two years after that, he developed and worked on over 20 different startups. However, none of those ideas made any progress and fell short of success.
During that time, he developed a platform to enhance the shopping experience. The idea behind this platform was to allow users to skip the tedious task of going grocery shopping in person. Along with his co-founders, Mehta started working on an iPhone app. This app became the base for today’s successful business venture Instacart. They also tried launching the app through an incubator but missed the deadline.
However, Mehta used his connections to get into the Y combinator program. This program put the app through a test, which they passed. This way, Instacart received its first investment through a $120,000 funding. Similarly, the combinator offered an extensive network of investors. This way, Mehta started working on the app full-time and focused on getting it to the market.
A few weeks later, Instacart launched its app on the iOS store. However, it faced a challenge due to eBay and Amazon offering same-day deliveries. Nonetheless, Instacart boasted better timings with instant deliveries. Through this feature, the app garnered attention and demand. It also allowed Instacart to raise finance through several rounds of fundings.
Since then, Instacart has gone through several ups and downs. For example, it filed for bankruptcy three years after launching. The advent of new platforms like Uber and Doordash also hindered its business in several areas. However, they signed deals with various big-name retailers and manufacturers. On top of that, it also offered various innovative features, helping it grow its business.
How does Instacart work?
Instacart works by allowing users to place orders using their smartphone or computer. First, however, users must register on the platform. They can achieve that by downloading Instacart’s app on their phone. Alternatively, users can also sign up using the platform’s website. Once they do so, they can shop from over 5,500 cities and choose between 40,000 stores. The platform also offers over 500 million products.
Creating an account on the platform is straightforward. Uses must provide their email address and password to register on Instacart. Once they do so, they can browse through the available stores to shop in their area. After choosing a store, they can add items that they want to purchase. The platform provides a virtual cart feature. It accumulates the products that customers order.
Similarly, Instacart allows users to choose alternatives for their ordered items. If a preferred product is not available, the personal shopper can substitute it for those items. The platform also allows users to add a note for their shopper in the delivery instructions box. Once customers finalize their cart, they can check out on the platform. After that, they can choose the date and time for their delivery and other features.
Lastly, users can add their payment information and finalize the order. From there, Instacart takes over the delivery. The platform recruits a personal buyer that fulfills and delivers the products. As mentioned, the shopper ensures the user’s instructions get satisfied. The shopper may also contact the user if any ordered products are unavailable.
What is Instacart’s business model?
Instacart’s business model is similar to some well-known names in the e-commerce sector. Primarily, the company uses the internet to generate revenues. Therefore, its business model operates under the e-commerce model. This model allows Instacart to deliver digital services and products to its users. On top of that, it helps the company offer its platform to the public.
Within the e-commerce model, Instacart uses a C2C business model. By doing so, it connects two parties. The first is the user that orders products from online shops. These users are the primary income source of the company. On the other hand, it also hires and pays shoppers. These shoppers are people who use the platform to deliver groceries to others.
In that way, Instacart is similar to Uber and Lyft. The company allows users to order goods online. In this transaction, Instacart provides the platform to facilitate those orders. On the other hand, it hires people with a vehicle who can shop for those users. The platform provides an income source for those people. Therefore, it connects both parties while acting as an intermediary in the transaction.
On top of that, Instacart also partners with various stores. As mentioned, it currently offers over 40,000 stores a platform to offer its products. These include local groceries and chain stores. Similarly, these stores include over 500 million products in over 5,500 cities in the US and Canada. These also include household names, including Kroger, Aldi, Target, 7-Eleven, Costco, etc.
How does Instacart make money?
Instacart has been operational for almost a decade. Although the company filed for bankruptcy before, it has a sustainable business model. Similarly, Instacart makes money from various sources, which helps maintain its operations. These sources include commissions, delivery fees and subscription services. On top of that, Instacart also makes money from its app through advertising.
An explanation of how Instacart makes money from each source is as below.
Commissions
Instacart charges commissions for every order that a user places. When a user orders products online, they pay the retailer the amount for those products. For these amounts, the retailer bears the expense. This commission differs from one retailer to another based on their agreement with the platform. In some cases, Instacart also sells products for a higher price, which relate to the company.
Delivery fees
Apart from the commissions, Instacart also charges users a delivery free. Usually, this fee ranges between $3.99 and $9.99. Several factors contribute to how much the company charges. Usually, it also includes a service fee, ranging between 5%-10%. On top of that, the company also charges additional fees when their orders have heavy or fragile items. These fees may also surge during busy hours and higher demand periods.
Subscription fees
Instacart operates a premium plan known as the Instacart Express. It allows users to receive unlimited free deliveries for an annual fee. However, some limitations may apply to orders. Aside from that, it also includes other features, such as reduced service fees, no surge pricing, etc. Most other features remain the same as regular users. The company charges $99 for the package, being the annual fee.
Advertising
As mentioned above, Instacart operates an online and mobile platform. The company offers its service through those platforms. However, it also provides an opportunity to display ads and generate income. These ads relate to the distributors or suppliers available on the app. For these ads, the company charges its advertisers. These charges may differ based on several factors.
Conclusion
Instacart is an online grocery delivery and pickup service. The company started its operations in 2012 and has topped the industry in several aspects. Overall, Instacart’s business model is similar to other household names, such as Uber and Lyft. The company makes money from several sources, including commissions, delivery fees, subscription fees and advertising.