Grocery markets have seen a drastic transformation in recent years. Online grocery start-ups have benefitted from on-demand economies that attract investors while attracting customers directly, becoming one of the quickest-growing segments of eCommerce in 2020.
According to reports, the on-demand grocery delivery app market is projected to surpass $94 billion this year. Customer demand for grocery apps continues to increase due to their convenience and comfort for use by end customers.
With the continued evolution of grocery delivery businesses, understanding their various business models and potential areas for expansion has become essential to being competitive and succeeding in them.
Consumer trends are drastically altering the grocery retail landscape. Consumers today prefer having their groceries delivered right to their door rather than visiting a physical store and picking them up, prompting online grocery delivery services to experience exponential growth.
Grocery app development service dates back several centuries, once considered exclusively available to privileged classes. Thanks to Internet technology and mobile phones, however, grocery delivery has become accessible to anyone with smartphone ownership.
What Is a Grocery Delivery App?
A grocery delivery app provides users access to online grocery store-like goods at home – much like an e-commerce marketplace but for food purchases with faster delivery times. Consumers browse a virtual catalog, select what goods are needed from one or multiple stores, add them directly into the cart through payment directly within the app, wait for a courier pickup of order now, pay now in-app for their shipment via couriers who come right out with it all – all using GPS tracking technology, AI/machine learning algorithms-based personalization features to personalize orders further for users.
Business Model for Grocery Delivery Apps
Here are several business models for food supply you might consider using.
Inventory Model
With an Inventory-based business model, the owner manages the acquisition and accumulation of inventory. They buy products from various organizations before maintaining a godown for storage purposes – they then serve as responsible parties when it comes to controlling it, communicating with consumers about products delivered promptly, and speaking to suppliers proactively about orders being fulfilled on schedule.
Such an arrangement is typically utilized by stores offering single products (for instance, milk and vegetable supply).
Businesses that implement inventory models regularly assess whether manufactured goods are compatible. Furthermore, those managing their supply chain exclusively through direct procurement enjoy higher profit margins.
This model comes at an extremely high expense due to requiring warehouse construction, management, and transportation expenses. By contrast, inventory models appear more realistic in e-grocery markets due to initial capital requirements.
Multi-Vendor Marketplace Model
In this model, sellers and buyers gather through an on-demand grocery delivery app solutions for trading purposes. Since inventory management does not fall on one individual or organization alone, this model is also known as the zero-inventory model.
Packaging and distribution will either be managed directly by the sellers themselves or handled by their owners; E-commerce players charge a specific percentage as commission on sales made through their platform.
Due to its success in the marketplace and contribution towards increasing conversion, this business model has become an invaluable part of an on-demand delivery solution.
Click and Collect Business Model
This model offers customers an alternative shopping option: buying online before collecting from physical stores at their convenience. This omnichannel retail strategy lets consumers place grocery orders online before physically collecting from stores later. Click-and-collect is an attractive business model, offering retailers a more straightforward route into online grocery retailing than door-to-door service.
- Buy Online: Pickup In-Store is one of the primary forms of contactless delivery currently famous worldwide, most frequently employed by grocery retailers or wholesalers who own grocery stores, like Walmart and Instacart, who have developed click-and-collect business models to take advantage of it.
The Shopping Model
When discussing global markets, shopping models stand out. Nearly every global giant relies on this model in either single or hybrid forms, like multi-vendor marketplace models. Still, without customers having the freedom of selecting which store to order from when placing orders, platforms provide their delivery network service instead.
Once an order is placed on a platform, its details are given directly to individuals assigned as purchase agents for that order and its delivery to customers. It is an incredible expansion as all you need is strong delivery networks and store tie-ups; alternatively, existing infrastructure could be leveraged to deliver couriers’ gifts and other products directly through this process.
Hyperlocal Grocery Business Model
This hyperlocal grocery business model meets the needs of consumers in a specific geographical periphery by meeting consumer demand for groceries with multiple supply options in many ways, enabling local offline retailers to integrate technology and expand their businesses further.
As in Multi-vendor business models, entrepreneurs must establish strong ties with local suppliers for maximum inventory availability. Like Multi-Vendor models, however, in this model, there is no grocery store; instead, they provide an on-demand delivery solution allowing grocers to list and trade products through an on-demand platform.
Hyperlocal business models hinge upon fast delivery to end-users; when adhering to such an approach, eCommerce grocery stores can collaborate with local vendors in fulfilling orders as quickly as possible.
Revenue Model
Niche offers various revenue models depending on your chosen business model, with food distribution and multi-vendor eCommerce models as its core source for income generation. To increase revenue streams, you could adopt any combination of:
- Commission: Charge sellers/stores a commission fee on each sale through your platform, considering market and supply chain conditions and different goods or regions sold from them. Furthermore, commission prices could differ accordingly.
- Subscription Model: Want customers to take advantage of subscription models to have specific items shipped regularly? For instance, milk could fit right in with this concept: you could set aside regular milk deliveries; weekly fruit/veggie deliveries could work nicely, as would grooming equipment/supplies.
- Membership: You should offer customers valuable benefits like spike charge waiver, early arrival notification, and no shipping rates to subscribe for. Likewise, store/partner subscription plans could allow them to sell on your platform while receiving additional advantages from this opportunity.
- Service Charges: To encourage stores/partners who have yet to subscribe, ask them to pay an additional service charge on every sale they make; this can encourage them to subscribe to eliminate future service charges.
- Promotions: Enable shops to pay an additional fee and gain greater exposure on their home pages or searches. Display advertising banners for vendors is another beneficial aspect. At the same time, such programs could even offer membership discounts or deals.
- Merchandises: A common way for companies with this work model to make money is by selling merchandise they own online. First, you build up your brand identity online before selling branded items such as cans, bottles, and kitchen appliances through grocery delivery apps that pay you directly.
Conclusion
Before embarking on an online grocery business venture, a thorough knowledge of each aspect of this industry must exist. When selecting your ideal business model, be sure it perfectly suits all your business’s needs.
As the intermediary between sellers and customers, your job as an online grocery delivery business model requires you to ensure orders arrive on time for customers’ preferred times – this helps drive word-of-mouth marketing opportunities as you expand customer bases through regular deliveries.
Grocery Delivery App Development Company has identified several essential considerations when creating an online grocery delivery platform involving multiple vendors. With several solutions at your disposal, selecting an efficient one to speed up the launch of your business should be easy.
