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Business Operations Business Models

How Does Instacart Make Money (Business and Revenue Model)

The Instacart business model

How Does Instacart Make Money?
Here’s what you should know:
  • What is Instacart, and how does Instacart work?
  • How does Instacart make money?
  • Instacart Express (Subscription)
  • In-app advertising
  • Retail Partners (Commission)
  • Fees (delivery fees, service fees, pick up fees, and heavy fees)
  • Gift Cards
  • What is the Instacart business and revenue model?
  • Instacart’s profit and revenue
  • Instacart’s funding and valuation

So you use Instacart and wonder “How does Instacart make money?” Here is a full, in-depth, breakdown of their five (5) revenue streams and the different products and services they offer, as well as the Instacart business model, their year-over-year revenue, and how Instacart works.

What is Instacart, and how does Instacart work?

Instacart is an online grocery pick-up and delivery service that connects retailers with customers through personal shoppers who shop for and deliver the goods.

Founded in 2012 by Apoorva Mehta, Max Mullen, and Brandon Leonardo, Instacart has gone on to reach a valuation of $17.7 billion in 2020.

Some of Instacart’s competitors include DoorDashPostmates, Grubhub, Gopuff, Uber Eats, and other food delivery services.

Instacart App in Apple App Store | Instacart Business Model | How Does Instacart Make Money?
Source: Apple App Store | Instacart

How does Instacart make money?

As of April 2020, Instacart has more than 350,000 active shoppers. As well as 300 partnering retailers and 25,000 non-partnering retailers across 5,500 cities throughout North America.

So, how much money does Instacart make off of those 350,000 customers and more than 25,000 partnering and non-partnering retailers?

Let’s take a look below at their revenue model of how many revenue streams they have, how they’re monetizing each one and a price breakdown of how much they are charging for each service.

Here are the 5 ways of how Instacart makes money (in 2021):

Instacart has a revenue model that makes money in five (5) ways.

#1. Instacart Express (Subscription)

Instacart has a monthly subscription service called Instacart Express that offers free delivery to paying members on all orders over $35.

Customers have the option of choosing between a monthly membership or annual membership (saving 17.42% per year).

Membership Cost:

  • $9.99 per month
  • $99 per year
Instacart Express | How Does Instacart Make Money?
Source: Instacart

Note: Instacart Express customers, on average, spend $5,000 per year on the platform.

#2. In-app advertising

Instacart also earns revenue through advertising called Instacart Ads. A self-service marketing platform released in May 2020, which allows brands to advertise their products on Instacart’s marketplace to consumers.

Reported cost-per-click prices are:

  • $0.75 – $1.25 per click
Instacart advertising | Instacart Business Model
Source: Instacart

How it works is: Once the retailer has its storefront setup on Instacart’s website, they can create an ad account proving they are or are working for a CPG brand currently selling products on Instacart. Once the account is approved, they (1) choose what products they want to promote, (2) set a budget, (3) launch the campaign, and (4) get ad space relevant to what the consumer is searching for.

* Instacart raised $200 million in December 2020 to expand its growing advertising business.

#3. Retail Partners (Commission)

Instacart partners with more than 300 retailers nationwide through their Instacart Partnership Program. Amongst them, include a lot of the big chain stores like ALDI, Cosco, CVS, Sprouts, Sam’s Club, Kroger, Wegmans, amongst many others.

Facilitating more than $35 billion worth of grocery sale transactions in 2020, Instacart earns a percentage of the subtotal from each transaction handled through their marketplace.

Commission:

  • 10% or more of each order*
Instacart Partnerships
Source: Instacart

* As reported by The Wall Street Journal

#4. Fees (delivery fees, service fees, pick up fees, and heavy fees)

Instacart has a wide scope of fees ranging from delivery fees, service fees, heavy fees, and pick up fees.

*All orders must be at least $10 before being eligible for delivery.

  • Delivery Fees: $3.99 to $9.99
  • Service Fees: 5% – 10% of subtotal (additional service fee if purchasing alcohol)*
  • Pickup Fees: $1.99 for non-Express members
  • Heavy Fees: applied only to orders weighing above 50 pounds

*Additional service fees are structured based on the amount of alcohol purchased:

  1. $0-$35: $2.00 fee

  2. $35.01-$75: $4.00 fee

  3. $75.01-$110: $8.00 fee

  4. $110.01 or more: $10.00 fee

#5. Gift Cards

Instacart offers gift cards for customers to purchase for friends, family, colleagues, etc.

Pricing:

  • Solo gift cards: $25, $50, $100, $200, or custom
  • Instacart Express Membership gift cards: 3 months – $29, 6 months – $59, 1 year – $99
  • Bulk gift card orders: $2,000 purchase minimum
Gift Cards
Source: Instacart

Note: This strategy is a great way to recruit new customers and introduce them to their $10 per month subscription service.

What is the Instacart business and revenue model?

Instacart makes money through a few revenue models that they combine within their company, they are:

  • Software as a service (SaaS) business model
  • Advertising based business model
  • Commission based business model
  • Fee-for-service (FFS) business model
  • Marketplace business model
  • B2B2C (partnerships) business model
  • Transaction-based business model

Instacart’s profit and revenue

It’s estimated by Forbes that Instacart had revenues of roughly $2 billion in late 2017, but nothing has been accurately reported after that.

Instacart’s funding and valuation

According to Instacart’s Crunchbase profile, Instacart has raised $2.4 billion over 15 rounds with a valuation of $17.7 billion.