The article was updated on April 21, 2021.
Local delivery apps are a big hit now since people prefer to make purchases without having to leave their homes. During the lockdown, this tendency has become more vivid than ever: shopping online is a way to protect yourself and your family.
Apps like Instacart connect grocery stores and restaurants with their customers, and the key to this service is fast delivery. Lots of entrepreneurs want to have a piece of this tasty pie – the revenue of the online food delivery market is growing and is expected to reach $136,3 million by next year.
There is no better time to take a closer look at grocery delivery apps. Everything you need is in here: the types of online food delivery apps, their specific features, possible challenges, and how to build one.
Food delivery apps: Market overview
There are three main categories of local delivery food apps on the market:
Restaurant food and grocery deliveries
Postmates basically organizes food deliveries from everywhere. There are over 650 000 shoppers working across the US to deliver food from a local restaurant or store on any day, and at any time.
There are also interesting collaborations now on the market. For example, Mercato (a grocery delivery app) and DoorRash (a restaurant food delivery app) have teamed up to improve delivery services and help small grocery shops stand out.
Restaurant food deliveries
DoorDash, which we have mentioned above, is one of the most popular restaurant food delivery apps. You can get any food from your favorite restaurants along with alcoholic beverages from any cafe or shop.
Grubhub is another great option for restaurant food delivery. Along with standard features of choosing a place and then the dish, you can also use available discounts.
Read also: All You Need to Know About Building a Food Delivery App: Grubhub Case Study
Uber Eats is an option for everyone with an Uber account. You simply choose any place that sells food in your city, make an order, and the food thereafter be promptly delivered to your location.
Grocery deliveries
Walmart Grocery is focusing on covering all angles by providing options slightly different from grocery delivery apps. Buyers can pick up their orders – this is a half-offline and half-online option. There is also a delivery option for those who do not want to leave their home.
For Shipt, the delivery process is pretty much the same, but this app offers deliveries from several grocery chains. The order gets to the buyer in a flash – it takes an hour or so. It is possible thanks to the groups of local shoppers who are always near the stores that they shop at to provide guaranteed fast delivery.
Amazon Prime Now delivers not only groceries but also other items like cleaning supplies or books – a huge variety of Amazon products. For more grocery items, you can opt for delivery from local markets.
Instacart, like Shipt, uses the help of local shoppers. The company works in major US and Canada cities and offers deliveries from several grocery chains. The best part is special deals and coupons that are available solely in the Instacart app.
Grocery delivery at a glance: How Instacart works
Instacart was founded in 2012, and is now considered to be a market leader for on-demand food delivery in the US. It is not surprising that lots of local delivery apps look up to this company.
In the nine years of its existence, Instacart delivery has grown to cover more than 5,500 cities across the U.S. and Canada, partnering with more than 40,000 stores to bring fresh food and other products right to its users’ homes.
As an on-demand grocery delivery app, Instacart has several delivery options, such as same-day doorstep delivery, curbside pickup, and the new contactless delivery possibility. Let’s examine the structure of Instacart’s business model to see what makes it so successful.
Read also: Busting Myths of Employing Technologies in the Food Industry
Customer segments
There are three parties concerned within this grocery delivery service: individual buyers, shoppers, and grocery stores. To build apps similar to Instacart, it is important to know the end goal of each party.
Individual buyers are those who make their orders via the mobile or web app. Basically, they are the key company’s clients. The application has to be intuitive, and they should feel comfortable using it.
The main goal of this segment is to shop for groceries online. You win if you provide enough convenience and something more. Why would clients stay with your app and not use another one? They should know the benefits. In this case, it can be store coupons.
Shoppers are those who provide deliveries. This segment uses another app where a person can review available orders and follow up with how much they charge.
Shoppers can choose how to work with the platform:
- Full-time shoppers work independently, and deliveries are their main activity throughout the day. They make both purchases and deliveries for the customer.
- In-store shoppers only buy products according to the customers’ lists and do not make any deliveries. These are part-time workers who have a flexible schedule. It can be a side job for students or people with full-time jobs.
Grocery stores include retailer chains as well as small local stores. Instacart has a broad network of partnerships across North America. For stores, this is a chance to spread the word about their business and increase their income.
The workflow
1. After opening a mobile app or a website, the user should choose a store they are going to make an order from. The user then chooses products for the order and adds the delivery information.
To help shoppers, the consumer can add some clarifying details: a parking location, entrance gates, or special marks on the building. When it is done, the client pays for the products and delivery services within the Instacart app. First-time users, however, don’t have to pay a cent: Instacart appeals to new clients by offering free delivery on their first order.
2. After that, the grocery list and delivery instructions appear in the system. This information is subsequently received by the local shopper who will carry out the delivery.
3. Now it is the time for the offline part. The shopper buys items according to the user’s grocery list and pays with the app’s card. If some products are not available, a corresponding sum of money goes back to the user’s card.
Instacart also provides a chat for shoppers to communicate with buyers directly and find replacements if some products are not available. In case a shopper can’t find a suitable replacement, a corresponding sum returns straight back to the buyer’s card.
4. The shopper brings the products to the consumer – it is as simple as that. Tips are acceptable and are totally up to the user upon receiving the order.
The Instacart app also offers a curbside pickup option: a customer can order groceries at a specific store and indicate when they will be able to pick up the order. When the buyer arrives, they simply need to notify the staff through the app, and a shopper will bring the products to their car or a specific location they’ve agreed on.
Instacart monetization model
On-demand grocery delivery services have to be not only convenient but also reasonably priced to attract users’ attention. Let’s take a look at several monetization channels that enable Instacart to incur revenue while staying affordable for buyers.
Delivery fees
Virtually any grocery delivery app charges users for bringing their orders to their doorstep. A percentage of the fee goes to an Instacart shopper, and the rest flows to the company. Standard fees for non-members start at $3.99 for orders over $35 if you want them to be delivered the same day. There are also additional fees for orders when the estimated total weight exceeds 50 lbs.
Pickup fees
The Instacart shopping model relieves users of paying the service fee when they choose the curbside pickup option. These orders also present no additional charges for premium members. For casual users, Instacart pickup costs as much as the corresponding delivery fee.
Service fees
Instacart service fee starts at 5% with a minimum of $2 for users without a premium membership. Premium Instacart customers have their service fees reduced: the charges constitute around 1.9%. Collecting a service fee is essential to cover the operating expenses for the app, such as customer support, shopper management, and so on.
Note that orders containing alcoholic beverages are subject to additional fees necessary to account for the process of ensuring proper conduct of regulated products.
Premium membership
Instacart Express membership is another monetization channel that offers considerable perks for customers. The advantages include free delivery on orders over $35, requesting items from multiple stores in one order with no fees, reduced service charges, and no pickup fees.
An Instacart membership works on a monthly or yearly basis. An annual subscription costs $99, and the monthly plan will be provided for $9.99 per month.
Advertising
Apps like Instacart also make revenue by promoting their partner stores or certain products. Stores benefit from the huge user base that Instacart offers, and the company receives profit each time a customer engages with promoted items.
Gift cards
Gift cards are a great way to monetize a grocery delivery app while getting a chance to attract new customers. In addition to the classical options, Instacart gift card types extend to Express membership: you can give someone a premium account for 3 months ($29), 6 months ($59), or a full year ($99).
Getting to business: How to build an app like Instacart
Instacart is a popular app among consumers, but it does not mean that its business model is the only perfect solution. If you are interested in becoming a player in this market, we recommend choosing a business model for your on-demand delivery app before taking a deep dive into various app features.
1. Business model
There are four options for your consideration.
Marketplaces provide their own menu. People make orders according to this menu, and delivery employees process the order and deliver it to the buyers. In this case, you may not have a physical store or shop.
Aggregators gather menus from several shops under one roof (services like Instacart). This model also does not require having a physical store. Unlike marketplaces, the list of available items will not depend on you but on the stores you work with.
Single store apps are mainly built for regular clients and help increase their loyalty. This is a great solution for small local stores because it distinguishes them from other local companies.
Grocery chain apps are now standard practice for big market players, and it has gradually become a natural part of their business growth. Grocery chains have much more regular customers, and the app provides products for people all over the city or even the country.
Read also: Impact of Coronavirus (COVID-19) on Small Businesses and What You Can Do About It
2. Features to include
No matter what business model you choose, there are some vital features to discuss with the software development team.
In general, your system will be divided into three critical components: the customer app for buyers, the delivery app for shoppers, and the admin panel for managers.
Let’s take a look at the essential functionality each of these pieces of software requires:
Customer app
- The shopping list is the foundation of the final order, and creating lists within the app is an essential feature.
- The search box is necessary for those buyers who are looking for specific products. With an on-demand grocery delivery app, there is no need to roam around the shelves looking for something specific. You should create a clear category system and provide a quick and convenient search option.
- The cart is where all the products should appear after they have been picked by the customer.
- Suggestions may include the most frequently purchased items, allowing people to save time by quickly adding such items to their cart without having to search for them every time they create a shopping list.
- Special offers of any kind (sales, coupons, rewards) are the most effective instrument for broadening your return customer base, especially if buyers receive discounts on their favorite products.
- Payment options: Paypal, Quickpay, PayU, etc.
- Scheduled delivery allows users to define a specific time when products should be delivered.
- Order tracking is simple but crucial: clients should be able to check the status of their order and where it is at any given moment.
- Reviews help assure users in that they provide useful information about the shoppers, stores, and products.
Delivery app
- A profile lets shoppers sign in with an email or phone number and take orders.
- A list of orders displays available orders, as well as past and ongoing deliveries. It’s particularly important to keep a record of all completed orders if your grocery delivery app offers performance bonuses to shoppers.
- The ability to accept/reject orders is vital to assign deliveries. Shoppers should also be able to change the status of the orders they accept.
- Push notifications help shoppers monitor fresh delivery requests and quickly access the details and time constraints for each order.
- A GPS navigation system should be integrated within the app. In addition to helping shoppers find their way quickly, it can also provide real-time delivery data and the estimated time of arrival to customers.
- A chat with buyers is a feature that apps like Instacart need to let customers clarify their requests or modify their orders if some items are not in stock.
- A wallet makes it easy for shoppers to keep track of their income and withdraw funds whenever they want.
Admin panel
- A list of orders with the details about customers’ locations and items requested.
- A list of stores and the dynamic data about their inventory or menus. Managers in on-demand grocery delivery should be able to reject or change orders when some products are missing from the specified stores.
- A chat with shoppers to resolve any potential issues quickly.
- Customer support functionality.
- A Finances dashboard to monitor payments and view the history of transactions.
- The ability to see customer reviews and ratings for the services or a particular shopper.
3. Extra features
Some features are not necessary for a grocery delivery app to be functional. However, when correctly implemented, they can boost your customer experience and help you beat the competition, win users’ loyalty, and grow revenue.
The most promising additional features for an on-demand grocery delivery app in 2021 include:
- Signing in with social networks like Facebook or a person’s Google account is a quick way to get the new customer onto the app and encourage them to order something. A longer sign-up process gets tedious quickly, and you are likely to lose some potential users who fail to complete the registration.
- The alternative products option allows customers to select second-choice items in case their desired ones are not available.
- Chatbots provide automated 24/7 customer support and help resolve a wide variety of issues without involving a human employee. In addition to being useful and convenient to customers, chatbots can also help reduce operating costs and boost the efficiency of the app.
- Voice recognition is a rapidly growing trend in mobile development. You can incorporate this technology into the app and enable your customers to place orders without typing.
- Displaying nutritional value information for each product can be a nice touch that makes your app stand out on the market.
- A plan-your-meal option can be appealing to users who love to cook and do it frequently. By importing recipes into the app, you can let users choose the meal they wish to cook, and the app will automatically fill their cart with the necessary ingredients.
4. Software development process
When developers decide on how to make a grocery delivery app, they need to review your requirements once again and then build technical specifications accordingly. There are several aspects they need to consider.
Read also: Benefits of Outsourcing Mobile Application Development over In-House Development
The programming language. It depends heavily on the platform for your app – whether it will be launched for mobile or desktop, or both.
Adding the payment feature. The safest choice here is to use well-known technologies, such as Stripe or PayPal. Developers will probably suggest adding more than one payment method.
GPS navigation. In the development of an on-demand service app, navigational support is a crucial feature. There are separate tech solutions for mobile and desktop. Developers use different technologies to figure out the store’s location, track shoppers, and give them directions.
Top 5 challenges of online food delivery
All on-demand grocery delivery apps have similar problems, so it is better to mention them before you actually have to deal with these issues.
Where to get the app data
Companies like Instacart work with many stores around that country, and getting the current data on available products can be quite a challenge.
The solution. The best way to get the actual list of products and prices for them is to contact the stores directly so they can provide updated information about the inventory. It is made easier if they have access to, for example, a special partner account, allowing them to make adjustments to their products and prices themselves.
Wrong product delivery
The human factor has a big impact on grocery delivery. Shoppers may deliver the wrong products from time to time.
The solution. Your support team is a lifeline in such situations. If a customer does receive the wrong item, then they should be able to contact the team via phone or email. Solutions to such problems can be refunds, store credit, etc.
Out of stock items
This is another common issue. Keeping an eye on thousands of products is a difficult task even in one store, so out-of-stock issues are just a part of the routine.
The solution. You can provide users with the option of adding notes to the product – what alternatives a shopper can buy. Or a simple but effective addition to the app: allow partners to mark those products that are often out of stock. Such a feature helps manage the clients’ expectations.
Shorter delivery time
Not every delivery app can provide users with same-day delivery. Shorter delivery times can become your competitive advantage.
The solution. When hiring shoppers, ask them to define which stores exactly they are ready to buy products in. This way, each shopper will be “attached” to a store or several stores, resulting in faster deliveries.
Freelance shoppers
Individual shoppers work as freelancers which means it is hard to control when exactly a shopper will be ready to process an order. But time is everything for high-quality service.
The solution. To cope with this issue, you should consider adding higher charges for peak shopping times. Shoppers may be interested in earning a few extra dollars and will plan their schedules accordingly.
When deliveries matter
Delivery services like Instacart give people around the globe a completely new shopping experience, especially when the COVID-19 lockdown requires staying at home. You pick items from your favorite store and then wait for them to appear on your doorstep. Is it worth investing in this trend? We have no doubts about it.
You can build a food delivery platform if you already have a physical store (or a chain) or by partnering with other stores and providing delivery services solely. In any case, a smooth app workflow and well-established partnerships with shoppers make a winning combination for your business success.
Looking for a development team to help you build a local delivery app and overcome the challenges we have listed above? Eastern Peak’s experts are just one click away – let’s discuss your software startup.
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