Oct 05, 2022

The Strengths of Instacart - How Did it Become a Billion Dollar Company?

Business Model Idea
Business Model Pattern
by Stefan Lemmerer

What is Actually Instacart's Business Model?

Revenues are generated by adding delivering fees and surcharge on the store price. Additionally, Instacart offer a grocery delivery membership including free delivery on two hour and scheduled grocery deliveries over $35.

Instacart recruits its shoppers thoroughly and makes sure to have their background checked. To qualify as a shopper, people who like shopping groceries need to be in good physical condition and have a recent smartphone. The payment is based on how fast the shopper can deliver the products. The users pay a delivery fee and an additional charge on the store prices.

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In contrast to other companies, e.g. Google and Amazon, that wanted to change the way customers receive groceries and therefore created warehouses and other delivery infrastructure, Instacart builds on its marketplace model. One key advantage of this model is the ability to launch quickly in a new city such that the company needs about six weeks to make the service work. Instead of investing in delivery trucks and warehouse structures, Instacart positions its service around a shopper network making use of their equipment of cars and smartphones.

So far, the service is available in major big U.S. cities, such as SF Bay Area, NYC, Washington DC, Philadelphia, Boston, Chicago, Austin, Seattle or Los Angeles. However, the company is about to expand the coverage to ensure this delivery experience everywhere in the world.

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Quality Meals & Product Innovation

Instacart Delivering Convenience is a fast-growing business and has actually constantly valued their customers by providing them quality meals.

Reliable Suppliers

The providers of Instacart Delivering Convenience are reliable and trustworthy. Furthermore, they supply the raw materials and active ingredients to them on time which attaches the supply chain management process.

Quick & Fast Delivery System

They have recorded the minds of its customers through their psychological and strong message ads. Like Mom's day advertisement of Instacart Delivering Convenience providing a message to like you moms and dads no matter what is psychological method of Instacart Delivering Convenience.

Customer Service

Social media managers of Instacart Delivering Convenience provide 24/7 help on their sites and social networks platforms through which they engage with customers. It likewise develop a great relationship amongst the consumers and the franchisees.


2 of 9 Business Model Patterns behind Instacard

1. Commission

Instacart charges a commission on every order they process from clients. However, the commission comes from the retailer, not the app user.

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2. Convenience

Instacart of course uses the convinience pattern. Customers can easily and conveniently order groceries at home. They receive them on the same day and can track them via live tracker. Customers can also choose from a list of over 60 shops.

Instacart Patterns ©Business Model Ideas

How Does Instacart Make Money?

Instacart makes money through revenue sharing, delivery fees, mark-ups on prices, premium subscription fees, and in-app advertising.

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Revenue Sharing

As already mentioned at the Pattern Commission: Every client order processed by Instacart is subject to a commission fee. However, the retailer pays the commission, not the app user.

With its retail partners, Instacart has negotiated variable revenue-sharing rates based on the retailer's transaction volume.

Delivery fees

Every time a customer places an order, Instacart will charge delivery fees. The delivery fee varies based on the city, the location, and the timeframe. According to the company's website, the standard delivery fees for orders over $35 are $3.99 for a scheduled or 2-hour delivery and $5.99 for a 1-hour delivery. Orders under $35 incur fees of $7.99 for scheduled or 2-hour delivery and $9.99 for 1-hour delivery.

The service fee on orders can range between 5% and 10% of the total order amount. There may also be additional fees, such as a 'heavy' fee that applies when the weight of the items ordered exceeds a certain threshold, a bag fee, a bottle deposit fee, and an alcohol service fee.

Instacart Express

The Instacart Express subscription model offers consumers a service for frequent users. You receive unlimited free shipping on all of your orders in exchange for a monthly or annual fee paid in advance. Monthly membership is $9.99, while annual membership is $99.

The consumer benefits consist of the following:

  • No delivery fee for orders over $35.

  • Lowered service fees

  • No demand escalation pricing

In-app ads

With nearly ten million Instacart cart users, the company has access to North American consumers, allowing it to generate revenue through in-app advertising. Sellers and brands can purchase advertising space on the platform, thereby gaining direct access to their consumer base.

This highly targeted in-app advertising allows Instacart to generate revenue using a similar advertising model as market leaders such as Amazon and Etsy. Mars and Coca-Cola are two of the leading brands advertising on the platform.

The worth of Instacart

The company is currently valued at approximately $39 billion, making it one of the most successful digital platforms in the United States.

In 2020, Instacart began receiving millions of dollars in a new round of funding. Instacart was recently valued at $39 billion after raising $265 million from a number of venture capital firms.

Additionally, the company is expanding into the advertising sector. The platform provides advertisers with unique and valuable granular shopping data, such as how much someone spends on groceries and what products they purchase. Instacart aims to generate $1 billion in advertising revenue by 2022, up from $300 million in 2018. To achieve this objective, they have hired top industry talent, including ex-Facebook executive Carolyn Everson, as their new president to implement this digital transformation and increase the number of women in leadership positions.

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