How Does Instacart Make Money?

Founded in the year 2012 and based in San Francisco, Instacart is one of the most successful online grocery companies in the United States.

Let’s take a look at the successful journey of Instacart through this infographic: 

What Factors Help Instacart Make Good Money?

Apoorva Mehta (Co-founder, Instacart) once said, “Instacart makes good money because it owns nothing. No inventory, no delivery vans, and no store whatsoever.”

The model that Instacart follows is known as the asset-light business model. This model is also known as the capital-light business model, as it doesn’t require a lot of money to put a venture into action. 

For example, a person wants to start a business and needs land to build an office for it. Instead of paying a hefty amount of money to purchase the land, the business owner makes an agreement with the landowner, sharing a certain percentage of profit. This is it.

Instacart always keeps on enhancing their business model to ensure that their customer experience is not compromised. Here is the business model canvas of Instacart:

Let’s take a look at the major factors that helps Instacart earn good profits in this challenging sector:

1. Premium Subscription: Instacart offers a premium membership subscription in which the subscriber gets unlimited delivery (free of cost) on all orders above $35. It is a nominal additional fee that is paid once in a year.
   
   
   

2. Contract Workers: Instacart hires workers on a contractual basis. They also offer a variety of benefits, including health insurance and child care. Instacart hired 300,000 new full-service shoppers due to coronavirus in the second quarter of the year 2020.

It is a smart way of saving money instead of spending on fixed employees. They are paid for the number of orders they complete in a week.

3. Items per Minute: One of the company’s smartest internal metrics is “items per minute.” It is the number of items that a shopper can put into the customer’s shopping cart in 60 seconds.

This saves a lot of the shopper’s time as they don’t have to search for the right aisle to find the required items. Eventually, it helps them in executing more orders in a day.

4. Advertisements: Advertisements might not seem as inventive as the other factors mentioned above but, how they utilize this option is worth knowing. Instead of hosting ads from 3rd party ad networks, it hosts its own ads and targets big brands from the food industry.

Suggested Read: How Instacart Manages Healthy Profit Margins in the Low-Yield eGrocery Sector

Conclusion

Now we have a clear understanding of how Instacart works and makes good profits. The business model is exceptionally well executed and accepted by the consumers as well. 

Further, the Coronavirus pandemic has exponentially increased the market need of the online grocery delivery businesses like Instacart. 

So, do you think 2020 is the best time to start an online grocery delivery business?
I guess you know the answer! 

Since you have already learned a lot of things from the success story of Instacart. Here is  suggested reading for Setting up an online grocery store like Instacart.