Top 6 Business Models For Grocery Delivery Apps

By James Tredwell on December 4, 2020

The grocery market has witnessed a lot of changes in the last few years. Online grocery start-ups have benefited from a handful of on-demand economies and have drawn the attention of industry investors. It is one of the quickest-growing segments of eCommerce in 2020. According to a Nielsen study, by 2024, 70% of consumers will sell groceries online.

The ongoing development of the on-demand grocery delivery business, it’s become necessary to have an understanding of the multiple business models and rising opportunities in the grocery delivery business.

Suppose you are thinking of starting a grocery delivery, It is significant to understand the deepness of the industry. An in-depth analysis of online grocery shopping and online delivery business will assist you in better planning your e-Grocery business.

Before we jump into various business models to launch an on-demand grocery delivery app, let’s talk about the opportunities in the online grocery delivery business.

Opportunities In The Online Grocery Store:

In the past years, some consumers resisted online shopping to avoid shipping costs. Though, the COVID-19 has pushed the people to make changes to their primary buying preferences. The outbreak has stimulated the online grocery industry. The blend of worry of people stepping out and the administration’s lockdown enforcement has escalated the demand for on-demand grocery delivery services.

In this pandemic situation, people are seeking easy, contactless daily needs. As it is convenient, time saver, money saver and you can shop for others easily people are leaning towards an on-demand economy.

Top 6 Business Model For Grocery Delivery Apps:

  1. Inventory Model:

In the inventory-based business model, the owner oversees procuring and accumulating the inventory. The owner buys products from various organizations and maintains a godown by himself. And, they are responsible for managing inventory, interacting with consumers, and ensuring timely delivery of products.

Such a model is commonly utilized for single-product stores. Such examples are milk & vegetable supply.

The businesses that adopt inventory models monitor the compatibility of manufactured products. In addition, when businesses manage the supply chain entirely from direct procurement, they have higher profit margins.

This model exhibits a huge cost because it requires to build a warehouse, warehouse administration, and transportation. The inventory model appears to be more optimistic in the e-grocery market based on the initial investment.

Grofers is a successful example that works on an inventory-based model.

  1. Multi-vendor Marketplace Model:

In this model, diverse sellers and buyers come together for trading via the on-demand grocery delivery app. Since the responsibility of inventory management does not lie with the owner, it is also known as the zero inventory model.

As far as packaging and distribution are concerned, either the seller will take care of the logistics himself or the owner will manage the remittance. Ecommerce Players take a specific percentage of overall sales as a commission.

This business model becomes an invaluable complement to the online or on-demand delivery solution, due to its success in the marketplace and the role it plays in maximizing conversion.

Peapod is an example of a multi-vendor business model.

  1. Click and Collect Business Model:

This model allows customers to buy products online and collect them later from the physical store based on their convenience. It’s an omnichannel type of retail strategy where shoppers order online grocery essentials and later pick them from the store physically. There is a great opportunity for retailers to get into the online grocery space via this business model as it is not as daunting as door-to-door service.

It is also known as BOPIS (Buy Online, Pick-up In-Store). It is the primary form of contactless delivery that is trending during this pandemic time. This model is usually followed by grocery retailers or wholesalers who have their own grocery store. Walmart and Instacart have taken the initiative of developing plans to click and collect business models.

  1. The Shopping Model:

Talking about the global market, the shopping model is the most prominent option. Almost every giant follows this model in a single or hybrid form. It functions more like the multi-vendor marketplace model, except that customers don’t choose the store they want to purchase the product while ordering. The platform operates its in-house delivery network.

Once the order is received, the platform transfers the delivery of the details directly to its individual persons, whose job is to purchase the items and deliver them to the customers. It’s a really great extension, as you only need a strong delivery network and store tie-ups. In addition, the platform can use the existing infrastructure and business model to deliver couriers, gifts, and other items.

  1. Hyper-local Model:

The Hyperlocal grocery business model meets the needs of consumers within a certain geographical periphery. This business model helps to balance the demand for groceries with multiple supply options in many ways. It has allowed local offline retailers to incorporate technology and take their business to different levels.

The entrepreneur must ensure that he cooperates with maximum local suppliers for the availability of inventory. Similar to the Multi-vendor business model, in this case, the entrepreneur does not have any grocery store. Rather, they offer an on-demand delivery solution to allow grocers to deal with their products on the platform.

The most crucial driving factor for a hyperlocal business model is the ability to deliver the products to end-users at rocketing speed. When adhering to the hyperlocal business model, the eCommerce grocery store can collaborate with local vendors to fulfill orders.

Instacart is a leading example that provides hyper-local on-demand grocery delivery by linking customers with individual shoppers.

  1. Revenue Model:

Depending on your chosen business model, Niche offers multiple channels to make money. In fact, it derives most of its revenue channels from existing food distribution and multi-vendor eCommerce models. To increase your revenue you can adopt a combination of the following channels:

  • Commission:

Charge a commission from sellers/stores on every sale received from your platform.  Depending on various factors such as market and supply chain, different commission prices for different goods and regions can also be charged from them.

  • Subscription:

Allow customers to subscribe to certain products for regular delivery without having to order each time. Products that customers use regularly may fit the model properly. For example, a regular supply of milk, a weekly supply of fruits/vegetables, a monthly supply of grooming equipment and supplies, etc.

  • Membership:

Provide customers with valuable benefits such as spike charge, early arrival, and no shipping rates to be subscribed. You can offer a similar subscription plan for stores/partners and also allow them to sell on your platform or receive additional benefits.

  • Service Charges:

You can ask stores/partners who have not subscribed to your membership to pay an additional service charge for each sale they make. This will encourage them to buy the subscription package to avoid service charges.

  • Promotions:

Enable shops to pay an additional fee and get boosted visibility on the home page or the searches concerned. Displaying advertising banners for vendors can also fit right into this stream. These programs may also be clubs to promote discounts on membership plans.

  • Merchandises:

One of the most famous ways in which companies with this work model make money is by selling their own merchandise online. First, you establish your brand, your authority online, and later your branded items and products such as reusable containers, cans, bottles, kitchen appliances, can be sold separately on your grocery delivery app which will pay you directly.

If you are ready to set up your online grocery business, then it is necessary to understand two vital components to start your business:

  • Product Sourcing: Stock-up the inventory or tie-up with local stores or bring-in big suppliers.
  • Product Delivery: Maintain an in-house network or outsource it or allow shops to manage the delivery.

It is advised that profit margins and opportunities to incorporate some revenue models depend strictly on how you manage the above two components.

Choose your business model as per your convenience and future goal. And to accomplish your dream find the best software development company out of the market.

You can go for either scratch development or a readymade clone script to develop your on-demand grocery delivery solution. You would need a responsive website, separate mobile iOS and Android apps for delivery personnel and customers, and a powerful back-end panel. Therefore hire dedicated development teams for your online business model.

Summing Up:

To start an online grocery business it is necessary to have deep knowledge of every aspect of the grocery industry. When selecting a business model, make sure that you choose the one that best suits your business needs.

Being a connecting link between sellers and customers, you need to ensure that the order is delivered on time, as it is the core of the online grocery delivery business model. In addition, by delivering groceries at consumers’ preferred times, you can reap the benefits of word-by-mouth marketing and grow your customer base.

This article is contributed by Mushahid Khatri – Chief Executive Officer of Yelowsoft which is one of the leading on demand food delivery solution.

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