- What is Shipt, and how does it work?
- How does Shipt make money?
- Shipt Membership (Subscription)
- Shipt Passes
- Fees (delivery fees, pickup fees, and service fees)
- Retailer Partnerships (commission)
- Gift Cards
- Shipt’s profit and revenue
- What is the Shipt business and revenue model?
- Shipt’s funding and valuation
So you use Shipt and wonder “How does Shipt 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 Shipt business model, their year-over-year revenue, and how Shipt works.
What is Shipt, and how does it work?
Shipt is an online grocery store delivery service that offers members same-day shipping from partnering retailers in over 260 U.S. cities.
Founded by Bill Smith in 2014, Shipt has later gone on to be acquired by Target for $550 million in December 2017.
How does Shipt make money?
Shipt operates across more than 270 major metro cities throughout the U.S., partnering with big-box retailers like Target, Costco, BestBuy, CVS, Kroger, Petco, and many more.
Target, the parent company of Shipt, does not disclose much information in regards to how many users are on their site or how many retailers they partner with.
But what is made clear is all of Shipt’s revenue streams and how they make money off their users and partnering retailers.
So, below is a breakdown of how Shipt makes their money, their revenue model, the services they offer, and how much they charge for each.
Here are the 5 ways of how Shipt makes money (in 2021):
Shipt has a revenue model that makes money in five (5) ways.
#1. Shipt Membership (Subscription)
Shipt operates on a software as a service (SaaS) business model that allows paying customers to have unlimited grocery deliveries for free on all orders over $35.
Customers have the option to choose between a monthly or annual membership, which will save them 41% per year. And because Shipt is a membership-based service, non-membership customers cannot place orders on Shipt.
Membership Cost:
- $14 per month ($168/year)
- $99 per year
Note: You must have a membership to place orders. Non-members cannot use the service.
#2. Shipt Passes
Shipt Passes are optional add-ons that customers can purchase to save money on the $10 delivery fee that’s added to each order.
Passes can be purchased in packs of 3 or 5. Alternatively, you can purchase a Shipt Everyday for $99, which gives you free deliveries on all orders over $35 for one year.
Cost:
- 3 pack: $27 ($9 a pass)
- 5 pack: $40 ($8 a pass)
- Shipt Everyday: $99 per year (free deliveries over $35 for one year)
#3. Fees (delivery fees, pickup fees, and service fees)
Shipt also makes money by tacking on a few fees at checkout, including delivery fees, pickup fees, and service fees.
Delivery Fee: Unless you have a Shipt Pass, Shipt Everyday, or your order is not over $35 with a paid membership – you will incur a delivery fee on each order.
- $7-$10 delivery fee (on orders less than $35)
Note: If you purchase alcohol, customers may still see a $7 delivery fee regardless if the order is over $35.
Pickup Fee: If customers choose to pickup their order rather than delivery, Shipt will add a pickup fee to all orders under $35.
- $7 pickup fee (on orders less than $35)
Service Fee: Shipt adds a service fee to each order by tacking it onto the price of each item. This fee will vary depending on the retailer and item.
- varies by retailer and item
#4. Retailer Partnerships (commission)
Although Shipt does not disclose how many retail stores they partner with, they are in over 260 cities across the U.S. with some major national retail chains like Target, Costco, BestBuy, CVS, Kroger, Petco, and many more.
Note: Shipt does not disclose how much commission, or revenue split, they get from each retail order.
#5. Gift Cards
Another revenue model for Shipt is through gift cards. Customers to purchase for friends, family, colleagues, etc.
Since you cannot order anything on Shipt without a paying membership, you can only gift others memberships.
Pricing:
- 6-month gift membership: $49
- 12-month gift membership: $99
Shipt’s profit and revenue
Target has not disclosed Shipt’s revenue, but speculation is that it hovers somewhere around $464.7 million according to Growjo.
Note: Because Target, the parent company of Shipt, is a publicly-traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the SEC. You can find all of Target’s publicly released financial reports through their reports and presentations.
What is the Shipt business and revenue model?
Shipt makes money through a few revenue models that they combine within their company, they are:
- Software as a service (SaaS) business model
- Commission based business model
- Fee-for-service (FFS) business model
- Marketplace business model
- Transaction-based business model
- Business-to-business (B2B) revenue model
- B2B2C (partnerships) business model
Shipt’s funding and valuation
Bill Smith, the founder of Shipt, self-funded the startup from inception for the first 2 years. Smith first started with $100,000 of his own funds that he had from previous companies he sold. Over those 2 years, Smith contributed $3 million of his own capital into the business.
Since then, Shipt has raised a total of $65.2 million over 3 rounds, according to Shipt’s Crunchbase profile.
