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How Does Instacart Make Money – Ultimate Review
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by
Martin -
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CO-founder at Dropshipping.com
Martin is an agency owner and SaaS projects maker. His work is featured in the leading ecommerce brands, magazines and podcasts. Talks about Marketing, Business Development, and Growth Hacking!
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CO-founder at Dropshipping.com
13 minutes

Ever wondered how Instacart really makes its dough? Buckle up because I am about to spill the beans on the intriguing world of “How Does Instacart Make Money.” Sure, we all know it as the go-to for groceries at your doorstep, but what’s happening behind the scenes?

Prepare for a deep dive into Instacart’s business model. From the elusive freelancers who moonlight as personal shoppers to the exclusive deals Instacart strikes up with partner stores. And if you think you’ve seen it all with Instacart, think again.

Explore the cutting-edge features that amp up the user experience – AI-powered searches, in-app payments, and more.

But the real kicker? How on earth does Instacart rake in the cash? Spoiler alert: it’s a wild mix of revenue-sharing, delivery fees, subscription perks, in-app ads, and even selling stuff outright. So, let’s start!

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What Is Instacart?

how does instacart make money

Instacart is a service for getting food and other stuff delivered or ready for pick-up from nearby shops. Although people usually associate Instacart with groceries, it also sells things like electronics, clothes, toys, beauty products, and more.

instacart products

 You can use Instacart at over 80,000 stores, and they have a whopping 1 billion products in their catalog.

how does instacart make money

They’ve teamed up with more than 500 stores in the United States and Canada, including big names like ALDI, Costco, Kroger, and Sprouts.

Instacart even lets you grab your order without leaving your car at certain stores – you order online, then swing by to pick it up.

You can use Instacart through their website or on your phone with their apps for Android and iOS.

The Instacart Business Model

Instacart operates as an on-demand grocery delivery and pick-up service. The platform leverages technology and resources such as a user-friendly app, a vast network of shoppers, and real-time data to connect customers with nearby stores. So, the whole process is possible thanks to the company’s high-quality resources, like technology, apps, tools, shoppers, and partnerships.

In addition, customers can browse products, place orders through the app, and have their groceries delivered to their doorstep or prepared for pick-up. On the other hand, the shoppers can benefit from getting additional income and have flexible working schedules. However, this company is also beneficial for other grocery stores since shoppers buy groceries from there.

Instacart’s business model involves generating revenue through various channels like its Web app and Mobile app. Also, the company revenue streams come from including delivery fees, surge pricing during peak hours, partnerships with retailers, in-app advertising for brands, and subscription services like Instacart Express.

💡 Tip: Also read Everything You Need To Know: Dropshipping Business Model Explained.

Now, let’s discuss this in more detail and learn how does Instacart make money.

How Does Instacart Work? 

➡ For Customers

how does instacart work

When you place an order, a personal shopper, who isn’t a full-time employee but a freelancer, will gather your groceries and bring them to your doorstep.

These shoppers get paid only when they complete a delivery. Once an order is placed, nearby potential shoppers get a message and can choose to accept or decline.

The shopper who accepts the order, heads to the store, picks up your items, and brings them to your address. You can schedule deliveries for as soon as an hour or even more than a week in advance.

Since Instacart doesn’t own or sell groceries directly, if something is out of stock or unavailable, the shopper will let you know through the app. Together, you and the shopper can figure out a suitable replacement.

➡ For Stores

instacart stores

Stores are Instacart’s main partners, and unlike Uber, they’re listed under their own names. Therefore, users can choose their preferred store.

Instacart has special deals with these stores to help them make more money through online sales on Instacart.

➡ For Shoppers (Contractors)

instacart shoppers in store

Shoppers are the ones who actually do the shopping and delivery. They work on a contract basis, and some may be part-time.

full time instacart shoppers

Thus, shoppers get their orders on their smartphones and do the assigned work under the company’s brand. So, Instacart has two types of shoppers:

  • Full-Service Shoppers – These freelancers both shop and deliver orders. They need to have a vehicle and a smartphone.
  • In-Store Shoppers – These part-time Instacart employees select and bag orders in-store for customer pickup. They need a smartphone but don’t need a vehicle since they don’t handle deliveries.
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Instacart Features

🔸 User Profile

how does instacart make money

This feature lets you add your address and billing details, along with setting preferences for potential purchases. 

Moreover, you can also have access to your order history from grocery stores, as well as coupons, loyalty discounts, and gift cards for top-notch customer service.

how does instacart make money

So, when it comes to how does Instacart makes money, this is one of its best features. Their product search makes it easy for you to find what you need right on the home page. Thus, you can filter your search based on several criteria like in-store prices, fastest delivery, and product category. 

Also, in their search bar, you can type in the products or stores you are interested in using a keyword.

What’s more, they even highlight important grocery items so clients can filter results by things like price and color. This filtered product search helps boost visibility and gives more buying options from the entire inventory.

Instacart recently added AI-powered search to their app. This feature gives you answers to their questions and suggests new ideas. 

The integration of AI enhances the app’s personalization and improves the overall customer experience. Plus, you can also integrate ChatGPT into your app.

💡 Tip: Also learn about GPT-4 for Ecommerce: What You Should Know in 2024.

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🔸 In-app Payment

how does instacart make money

This function provides various payment options for customers, including cash, credit/debit cards, wallets, vouchers, coupons, and gift cards

After the order is placed, send the invoice to the customer and link the order record to their history.

🔸 Checkout

This feature covers actions like:

  • Viewing and editing local grocery products and whole foods
  • Applying coupon codes, if available
  • Setting a tip for the shopper or delivery person
  • Choosing the delivery time and date
  • Adding payment and contact details
  • Paying and confirming the order

🔸 Track Orders

Using GPS or other location-based technologies, you can also track your order delivery and area. Thus, this ensures you can go about your day worry-free, building trust in the process.

🔸 Admin Panel

This function is designed to assist administrators in efficiently managing various aspects of their business operations. 

It includes handling shoppers and customers, overseeing and managing delivery orders within different areas, and activating or deactivating shopper accounts as needed. 

What’s more, you can even manage relationships with stores and partners, and generate comprehensive reports on the overall service performance.

🔸 Shopper Panel

shopper panel

As an approved shopper you will get access to the shopper panel. Thus, from here, you can monitor your account, indicate availability, and track earnings on a daily, weekly, and monthly basis in an organized manner.

How Does Instacart Make Money?

🔸 Revenue Sharing

Instacart takes a cut from each order processed, but this comes from the retailer, not the customer. 

They have agreements with retailers, getting a percentage of the item’s sale price, sometimes intentionally selling items at a higher price for added profit. However, most prices are set by the retailer, and these are transparently shown on the app and website.

🔸 Delivery Fees

Customers pay delivery fees based on factors like city, location, and timeframe. 

So, standard fees for orders above $35 are $3.99 for scheduled or 2-hour delivery and $5.99 for 1-hour delivery. 

However, keep in mind that additional charges may apply, including a ‘heavy’ fee for exceeding a weight limit, a bag fee, a bottle deposit fee, and an alcohol service fee. 

Customers can also tip their shoppers. Instacart adjusts prices during peak hours, similar to ride-sharing surge pricing. There’s even a pick-up fee if customers choose to pick up their own orders.

🔸 Instacart Express (Instacart +)

instacart plus

When it comes to how does Instacart make money, Instacart+ feature is actually a great deal. Hence, lots of customers pay more in order to get better deals. 

So, this subscription service offers unlimited free delivery for a monthly or annual fee. For $9.99/month or $99/year, customers enjoy benefits like no delivery fees on orders over $35, reduced service charges, no surge pricing, and access to exclusive offers

Also, while delivery times remain the same, subscriptions create a steady income stream for Instacart.

🔸 In-App Ads

With almost ten million users, Instacart sells advertising space to brands. This targeted advertising includes sponsored listings, coupons, brand pages, and display ads, all monetized on a cost-per-click basis

So, the platform ensures your products get noticed by millions of ready-to-buy consumers. With a presence in 1,400+ retail banners at over 80,000 locations, Instacart reaches more than 95% of households in the U.S. and Canada.

Not just that, but the platform also offers various marketing tools, and connects with Shopify as well. So, in their Ads Manager, you can find tools for optimized bidding, A/B testing, Sales insights, Product library, and more.

ads

The platform charges advertisers based on various factors, including the brand’s size, the ad space, and the campaign duration.

🔸 Interchange Fees

Instacart introduced a credit card that earns customers cashback rewards

So, how does Instacart make money with this?

The company makes money through interchange fees charged to merchants accepting these payments. They share this revenue with Chase and Mastercard.

🔸 Selling Items Itself

Last but not least, the next thing on “how does Instacart make money” is through selling items. 

Instacart sells items sourced by the company, primarily through strategically placed micro fulfillment centers. 

These centers, known as dark stores, focus on essential items with consistent demand. 

Instacart profits from these instant deliveries by selling products directly, utilizing real-time access to data, and leveraging its extensive network of shoppers.

In essence, Instacart employs a mix of revenue-sharing models, fees, subscriptions, advertising, credit card partnerships, and direct sales to sustain its business.

How To Make Money With Instacart?

To make money with Instacart, there are some basic requirements you need to meet:

  • Age Requirement: You must be at least 18 years old. If you plan to deliver alcohol, which can lead to bigger tips, you’ll need to be at least 21 in certain states.
  • Physical Ability: You should be able to lift 30-plus pounds. The website mentions “up to 40lbs” without needing special accommodation.
  • Smartphone: You need a smartphone, either an iPhone (with iOS 14 or later) or an Android (5.0 or later).
  • Background Check: Instacart requires you to pass a background check. Most shoppers are cleared within 10 business days, but the timeframe can vary by location.
  • Bank Account: Since paychecks are via direct deposit, you’ll need a checking account to receive your earnings.

Moreover, for full-service shoppers, additional requirements include:

  • Driver’s License and Car Access: You need a valid driver’s license and access to a car. Additionally, your insurance coverage should meet state requirements.
  • Insulated Bags: Full-service shoppers must have insulated bags or hard coolers to keep food at the right temperature while on the move. Instacart offers approved bags through the Shopper app.

How To Start Using Instacart As A Shopper?

So instead of asking how does Instacart make money, let’s see how you can make money with Instacart. 

Create an Account

Thus, once you click on the “Sign up” button from the right upper corner of their website, the first thing you need to do is provide basic information like your name and location and grant permission for a background check.

sign up process

Provide a phone number

Next, the company requires your phone number so they can send you a text with the Shopper app link. So, once you enter the phone number, click on the “Text me” button. 

provide phone number

Download the Instacart app

Thus, since I am an Apple user, this would be the  “ Instacart Shopper” app for me, so I will download the app. 

instacart app

Next, there are several questions and requirements that you must fulfill, like your age, ability to lift 40 pounds, if you have a car, etc. 

how does instacart make money

Set up your account

Also, you need to choose between two options

  • Shop Only: If you’re an in-store shopper, attend an in-person orientation by choosing a session in the app. This is part of the onboarding process.
  • Shop & Drive: Full-service shoppers sign a contractor agreement and W-9 tax form. In-store shoppers become Instacart employees, signing an offer letter and W-4 tax form.

Thus, once you choose your option, you need to verify your identity. So, you need to take a selfie and take a photo of your ID card (front and back) as well. 

create a profile

Now, Instacart asks for your shipping address so they can send you an Instacart card with which you can buy groceries. So, new shoppers typically receive their card within five to seven business days.

However, the good thing is that if you don’t want to wait 5-7 days, you can add your Apple wallet and start using the card immediately.

verification process

Finally, your next step is setting up your Instacart card, and finish the Alcohol quiz. Afterward, you are all set up and ready to start!

create profile

Instacart Pros & Cons

PROSCONS
✅ Simple to navigate❌ Service and product prices are somewhat higher compared to in-store prices
✅ Handy grocery delivery service❌ Lacks coupons, discounts, cashback, or special offers
✅ Accessible across the United States, Canada, and San Francisco❌ Additional fees apply
✅ Various options from local grocery store chains
✅ Welcoming shoppers and drivers
✅ Access to numerous local stores and flexible delivery times
✅ Offers same-day grocery delivery services

Instacart Shoppers Reviews – How Much Did They Make?

Lots of Instacart Shoppers actually give excellent reviews for the company and claim that is worth trying out. For instance, Trevor explains how he managed to earn $287+ within 13 hours.

Also, another impressive story is the one of Aphid Cart, who earned more than $700 in 7 days.

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Conclusion

In summary, this article delves into the inner workings of Instacart, shedding light on how the company makes money. From the roles of personal shoppers and partnerships with stores to the various features enhancing user experience, I’ve explored the pros and cons of Instacart’s operations.

Opinion time: Instacart’s hustle is as real as it gets. The mix of revenue streams, coupled with its user-friendly features, paints a compelling picture. So, for those seeking a flexible side gig, becoming an Instacart shopper might just be the gig you’ve been waiting for. 

Sure, it’s not without its quirks and fees, but the potential benefits, especially with Instacart Express, could make it a worthwhile venture.

So, there you have it – the backstage pass, the financial breakdown, and a personal take. Ready to don the Instacart apron and dive into the world of on-demand delivery? The choice is yours!

About the Author

Profile picture of Martin
Martin Stoimenov
Martin is an agency owner and SaaS projects maker. His work is featured in the leading ecommerce brands, magazines and podcasts. Talks about Marketing, Business Development, and Growth Hacking!