EarnsmartHub

Instacart is one of the leading grocery delivery services in the U.S. and Canada, providing a convenient way for customers to shop for groceries from their favorite stores without leaving their homes. But have you ever wondered how Instacart makes money? The business model of Instacart revolves around several revenue streams, including customer fees, retailer partnerships, and advertising. In this article, we’ll break down the different ways Instacart generates income.

1. Delivery Fees and Service Fees

One of the main ways Instacart makes money is through delivery fees and service fees charged to customers. When you place an order on Instacart, you pay a fee for the convenience of having your groceries delivered to your door. These fees vary depending on factors such as order size, delivery time, and whether the customer is a member of Instacart’s subscription service, Instacart+.

• Delivery Fees: For non-Instacart+ members, delivery fees typically range from $3.99 to $9.99 per order, depending on the size of the order and the delivery window. Faster delivery times often come with higher fees.
• Service Fees: In addition to delivery fees, Instacart charges a service fee, which is a percentage of the total order value. This fee helps cover operational costs such as customer support and technology maintenance. The service fee typically ranges from 5% to 10%.

These fees represent a significant portion of Instacart’s revenue, as customers pay for the convenience of home delivery.

2. Instacart+ Membership

Instacart also offers a subscription service called Instacart+ (formerly known as Instacart Express), which provides customers with benefits like free delivery on orders over a certain amount and reduced service fees. Instacart+ members pay either a monthly or yearly subscription fee:

• Monthly Subscription: $9.99 per month
• Annual Subscription: $99 per year

By offering this subscription service, Instacart generates recurring revenue from loyal customers who frequently use the platform. Instacart+ encourages customers to place more orders, as they can save on delivery fees over time, making it a win-win for both Instacart and its users.

3. Retailer Partnerships and Revenue Sharing

Instacart has built partnerships with major grocery retailers such as Costco, Kroger, Safeway, and Walmart. These partnerships are mutually beneficial—Instacart provides the technology and delivery infrastructure, while retailers can offer online shopping and delivery without having to build their own systems.

In return for facilitating the sales, Instacart takes a cut of each order placed through its platform. This revenue-sharing model allows Instacart to earn a commission on every purchase made through its platform, which is typically a percentage of the total sale.

Additionally, retailers may pay Instacart to have their stores featured more prominently on the platform or to receive priority in delivery times, which boosts their visibility and increases sales.

4. In-App Advertising

Another significant revenue stream for Instacart is in-app advertising. Brands and retailers can pay to promote their products within the Instacart app, allowing them to appear at the top of search results or in featured sections. These paid promotions increase visibility for certain products and encourage customers to add them to their carts.

Brands typically pay on a cost-per-click (CPC) or cost-per-impression (CPM) basis, meaning they are charged whenever a user clicks on their ad or when their ad is shown to users. This advertising model allows Instacart to monetize its large customer base while helping brands and retailers increase sales.

5. Markups on Product Prices

In some cases, Instacart applies a markup to the prices of items compared to what they cost in-store. While this is not always the case, many retailers allow Instacart to charge slightly higher prices than what customers would pay if they shopped in person. This difference between the in-store price and the Instacart price serves as an additional revenue stream for the company.

Customers are notified when prices are marked up, and Instacart offers a feature called “Everyday Store Prices,” where customers can see whether the prices listed on the app match in-store prices.

6. Instacart for Business

Instacart has expanded its services to cater to corporate clients through Instacart for Business. This service allows businesses to place large grocery orders for offices, events, or employee perks. By catering to businesses, Instacart taps into a new market and generates revenue from bulk orders.

Businesses may also opt for recurring deliveries, providing another source of steady, predictable revenue for Instacart.

7. Partnerships with Alcohol Retailers

Instacart has partnered with alcohol retailers to offer same-day delivery of beer, wine, and spirits. This expands Instacart’s product offerings and provides an additional revenue stream. Delivery of alcohol typically involves additional fees, and alcohol sales can have higher profit margins compared to regular grocery items.

8. Tipping for Shoppers

While Instacart doesn’t make money directly from tips, tipping plays a role in customer satisfaction and order volume. Instacart shoppers, who pick and deliver groceries, rely on tips as part of their earnings. Happier shoppers result in better customer service, which in turn encourages more frequent use of the platform.

Instacart suggests a default tip amount (usually 5-10%), but customers can adjust it as they see fit. This ensures that shoppers are compensated fairly for their efforts, which leads to a more positive experience for customers, making them more likely to order again.

Conclusion

Instacart’s business model is built on multiple revenue streams, including delivery and service fees, Instacart+ memberships, partnerships with retailers, advertising, and markups on product prices. By diversifying its income sources, Instacart has grown into a major player in the grocery delivery market. As demand for online shopping continues to rise, Instacart’s flexible and customer-centric approach will likely keep it at the forefront of the industry.