The concept of the Instacart business model has been developed around the purpose of simplifying grocery shopping for people who have a busy life because they can choose all their groceries from wherever they may be. Instacart is now the top grocery delivery service in the U.S., valued at over $17 billion.
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Instacart was founded in 2012 by Apoorva Mehta. Working for Amazon at that time, Mehta saw the need for an app that headed only to grocery shopping. So, that year, he joined the Y Combinator summer batch and obtained his initial funding in order to launch his startup. Five years later, Instacart has already expanded to many cities in the U.S. and arrived in Canada.
In 2018, made some important partnerships with names like Costco and Sam’s Club. The great turning point came with the COVID-19 pandemic, which increased online grocery shopping demand. As a result, 300,000 additional employees were hired. Nowadays, nine years after its foundation, Instacart is operating in over 40,000 stores in more than 5,500 cities in North America, with a network of 300 partner retailers.
Instacart is owned by Maplebear Inc., its holding group. Instacart’s Founder, Apoorva Mehta, stepped down as the company’s CEO in July 2021, becoming Executive Chairman of the Board. Fidji Simo, a Board member, was appointed as the new CEO since then.
“To build a world where everyone has access to the food they love and more time to enjoy it together.”
To understand where the money comes from, let us check how Instacart works. First of all, customers access Instacart’s platform via website or app. Whenever an order is placed on the platform, the so-called personal shoppers in proximity will receive a notification of the request. These shoppers are independent contractors, and they receive by delivery made. Once a shopper accepts the request, they drive to the grocery store chosen, pick up the groceries and deliver them to the customer’s address. Now, we can move forward to revenues.
Every time an item is sold through Instacart’s platform, the company receives a percentage of the price, according to the agreement made with the retailer. In some cases, Instacart even sells some products at a higher price to increase markup.
Delivery fees vary from $3.99 to $9.99. Because Instacart, just like other platforms, such as Uber or Lyft, charges according to the demand and external conditions (such as the weather), the so-called surge pricing. And also due to shipment scheduling. These fees are distributed between the store and Instacart. The service fees get around 5% to 10% of the purchase. Sometimes, there are additional fees, for example, when an order surpasses a certain weight threshold or when there is a bag fee.
The company has the Instacart Express. It is a subscription service that ensures unlimited deliveries (or orders above $35), cheaper service fees, and no surge pricing for an annual ($99) or monthly fee ($9.99).
Sellers and brands can advertise on the platform, for additional visibility. The price will depend on the categories and search terms. Usually, advertisers set a budget previously, to avoid overspending.
The Instacart Business Model can be explained in the following business model canvas:
Instacart’s customer segments consist of:
Instacart’s value propositions consist of:
Instacart’s channels consist of:
Instacart’s customer relationships consist of:
Instacart’s revenue streams consist of:
Instacart’s key resources consist of:
Instacart’s key activities consist of:
Instacart’s key partners consist of:
Instacart’s cost structure consists of:
Below, there is a detailed swot analysis of Instacart:
The Instacart business model is based on bringing convenience to people, which is something that may always be present in this field of action. Besides, although the number of competitors keeps growing more and more, as mentioned before, Instacart is still the predominant company in the market of online grocery shopping, and it looks like the rivals are going to eat dust for a while if things keep the way they are.
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