10 Lessons Startups Can Learn from Instacart’s Growth

In 2014, when Instacart launched, nobody imagined that the newly started grocery delivery and pickup service would grow to become the toughest rival of Amazon and DoorDash in the U.S. and Canada. With robust marketing strategies and appealing business plans, Instacart is making headlines in the grocery delivery business segment.

As of 2020, so far, the company net worth valuation grew to 13 billion from 2 billion in 2016. Much of its credit goes to the coronavirus pandemic, no doubt. However, the change (in consumer buying behavior) may remain unchanged forever, at least from the founder and CEO of Instacart, Apoorva Mehta’s point of view.

In her press release, she said, “COVID-19 created a massive shift for the grocery industry and forever changed how people view the necessity of on-demand services.”

According to a report published on Forbes, the company earned 10 million U.S. dollars in April 2020. The large number of consumers turned out, buying more than $700 million worth of grocery products each of the first two weeks of April 2020 using its service.

Some other interesting facts and figures about Instacart

• Instacart is operational across all 50 states of the U.S.
• 85% of the U.S. households use Instacart mobile app
• 70% of Canadian households use Instacart
• Instacart possesses 57% of the online grocery market share
• Instacart has partnered with more than 400 retailers across more than 30,000 stores in the U.S and Canada

So, if you are an entrepreneur or a startup and looking to start your own business, then you have many things to learn from the online grocery delivery service provider like Instacart. Right from creating an effective mobile app business plan, proper implementation, feature integration to management, you have many things to learn from Instacart.  

What is Instacart

Instacart is an American company providing grocery delivery and pickup services across the U.S. and Canada. The online grocery delivery service provider is widely popular for its great services to customers.

In this article, we shall go through the changes and implementation it did for its business and how it got into limelight.

What Brought It Into the Limelight?

Even though COVID-19 came as a nightmare for people and businesses, for instacart it came as a boon.  

1. Proper utilization of Opportunities

COVID-19 is not at all good for lives and livelihood, but some businesses, including Instacart, turned this adversity into opportunities.

Grocery products became an essential service overnight, Instacart sensed the opportunity at the earliest and implemented many new things that helped the grocery delivery service grow. It not just served the customers with responsibilities but also kept expanding its business across the states. It is now operational across all 50 states of the U.S.

As a result, Instacart witnessed an unprecedented growth as compared to its competitors.

Here’s a quick recap;

The app daily downloads surge by 218% which was 58% more than Walmart and nearly double from Shipt. Take a look at the Statista findings;

The one thing which all entrepreneurs and startups should learn from Instacart is that it kept giving more priority to its customers and its people at the time of adversity. The sudden growth came as an unexpected thing for the company. Still, it came as a responsibility, more than just a business opportunity.

People trusted Instacart and expected that the grocery delivery service would deliver daily essentials safely and reliably. It stood by its customers through the pandemic peak.

Most importantly, the company had (still has) not just a challenge to provide safe and reliable delivery to customers, but it also had to take care of its staff's health and safety.

2. Flexibility with “leave at my door delivery”

During the pandemic peak, people were panicking, looking for safe and contactless delivery services for everything they ordered online. Instacart adopted the change very quickly and started offering “leave at my door delivery service.”

Customers looking for no contact delivery can check the box “Leave at my door if I am not around.”

The new changes enable customers to receive grocery orders without having to interact with their Instacart personal. No human contact reduces the spread of the virus and protects Instacart staff as well as customers.

3. Fast & flexible and order ahead

Instacart is committed to enhancing and improving customers' experience by making changes in its business plan and strategies. Customers get the flexibility to place orders for groceries either ahead of a couple of weeks or simply order in advance to get the products delivered with first available shoppers. So, no more scheduling specific delivery windows.

The new strategy changes have shown that the delivery windows capacity can be increased by 50% and fasten the delivery process. The new enhancement also helped Instacart go beyond restricted time slots, reducing the limitations that often used to occur by its gig workers’ availability.

4. Infrastructure scaling and AI improvements

Instacart consistently worked through expansion at the time of peak performance. The app worked on its infrastructure development, such as upgraded its customer-facing app, shopper app, admin app, enterprise software, and advertising engine. It helped the grocery delivery service provider add more new store locations and partners.

For example, in March, Instacart indeed 2,500 new store locations and more than 35 new retail partners.

5. Started Prescription Delivery Service

Prescription delivery service, at the time of the pandemic, added value to the business. When people were not allowed to step out of their homes to contain the virus's spread, Instacart stood by their needs. The grocery delivery service provider partnered with Costco and launched a new prescription delivery service. At the same time, it also increased the workforce, such as:

• It doubled its customer care team (from 1200 to 3000)
• Hired 300,000 additional shoppers (as independent contractors)
• The hiring process is continued (aim to hire another 250,000 employees)

6. Excellent business management

Instacart has deployed three shoppers for every ten new users. This came as an opportunity for people looking for a chance to earn money during the crisis as demand grew by 1,000% pandemic.

• Instacart recorded an unprecedented record with 141K downloads on April 8th.
• The overall download exceeded 3.2 million across App Store and Google Play in the US

7. New feature integration

As the demand for grocery delivery was rising, the challenge was to manage the traffic and provide comfort to users. Instacart did it successfully by integrating some of the value-added features, such as “My Door Delivery” and “Mobile Checkout.” Rolling out new features helped Instacart streamline business processes and provide simplified delivery service to customers across the USA and Canada.

8. Responding to Shoppers

There were times (during its early days) when Instacart was criticized for not responding to its workers. As the scenarios changed and now Instacart announced many welfare schemes for its workers, they include;

• Paid leaves part-time workers (those diagnosed with COVID-19)
• Bonus program for shoppers

Bring changes in employment policy led to a sudden spike in shoppers app download surge.

Things which entrepreneurs should learn is that taking care of the staff will help boost productivity and gain more business opportunities. That means keep your workers happy, provide competitive compensation packages to attract workers.

Instacart revenue plan

Instacart makes money through for revenue channels, they include;

• Delivery fees
• Grocery store partner fees
• Markups
• Placement fees
• Ad

Delivery fees: Instacart charges $3.99 for two-hour delivery and $5.99 for 1-hour delivery from its users. The grocery delivery service provider also offers express delivery options to its regular users at cost-effective delivery options. For example, the Instacart Express Delivery plan needs to pay $149/year for unlimited delivery throughout the year.

Grocery store partner fees: Instacart has partnered with grocery stores across the U.S. and charge a percentage of sales revenue. 90% of orders are placed with partnered stores. And if it collects 2% or 3% from its partners per order, it makes around $2.25 per order.  

Markups: According to an article online, Instacart charges around 15% on Costco products in certain regions. However, the benefits depend on the order frequency and demand in particular areas.

Placement fees: When a manufacturer wants to promote its products to customers through Instacart, the delivery service provider will charge a fee. Manufacturers would send samples to Instacart to deliver to customers for free. A certain amount of expenditure would be given to Instacart.

Ad: Instacart also allows grocery stores and grocery products manufacturers to place ads on its grocery delivery mobile app. It charges certain fees for it.

Learn from Instacart's business model

Instacart focuses more on its customers and shoppers. It does everything to provide value to its customers. The grocery delivery service provider ensures that the products delivered to customers are fresh and organic. Here’s how it does;

• Offers 1000+ fresh products with discounts vouchers
• Instacart partnered with reputed retailers and grocery stores, including ALDI, Safeway, Costco, CVS, etc.
• Customers can browse through popular stores and place orders
• Offer Instacart Express to its regular customers
• Delivers alcoholic beverages on the go

Apart from these, Instacart also focuses on mobile applications, particularly the app for users. It ensured that users get all necessary features with excellent UI/UX.

Final Thoughts

If you are willing to begin your own business like Instacart, then ensure that you develop the right business plan by keeping mobile apps at the centerstage. You can also explore and learn from similar companies, apart from Instacart, and learn what their business plan works. At the same time, dig out how the utilization of technology will make differences.