Grocery shopping is an essential part of everyday life, and despite how hectic your schedule can be, this is something that can’t be put away. This is why grocery shopping apps have proven to be a boon for people with busy lives. Having the groceries delivered at the doorstep can be of great help; hence grocery delivery apps have been so welcomed. Using these apps not only saves time but even allows you to benefit from additional offers and discounts. Over time these apps have become more personalized and organized, and today the wide-ranging products and products provided by these apps might not be available at a store.
What Is Shipt?
This on-demand grocery delivery platform facilitates doorstep deliveries of groceries around the world. It has become a household name. This American firm was founded in 2014 by Bill Smith and had its headquarters in Alabama. Then in December 2017, it was acquired by the Target Corporation for $550 million. In 2018, Shipt registered immense growth, hitting the $1 billion market valuation mark. The app allows iOS and Android users to place online orders for groceries easily.
The success of Shipt has encouraged a lot of entrepreneurs to venture into this business and register growth. Presently, Shipt is available in more than 5000 cities in the USA, and almost 80 percent of the US households have access to it. Other than the groceries, the app also delivers home products and a few electronic appliances.
Last year, Shipt tweaked its business model for further growth. Earlier, it offered services on an annual and monthly membership basis, with an annual membership costing $99/year and a monthly one costing $14/month. It provides a pay-per-order option allowing people to order from Shipt without becoming a member. This way, the brand successfully competes with biggies like Amazon and Walmart. For pay-per-order, the consumers require buying Shipt Passes, priced based on the number of orders. The business charges $10 for one order, $9 for three orders, and $8 for five orders. In the annual membership, the app offers free deliveries on orders above $35.
Brief Story Of Shipt: How Did It All Start?
Today Shipt is a big name in the on-demand grocery delivery market in the USA, but its success was not overnight. Its foundation was not laid in Silicon Valley or Seattle, as is the case with Amazon. It was Bill Smith who invented the idea of Shipt.
Bill Smith’s idea was to integrate his home delivery option into retailers’ websites. He came up with a team of shoppers who delivered ordered groceries to the customers. However, this was a complex process for the customers, and even retailers were not convinced by this idea to integrate Shipt into their websites. Soon Smith realized that people needed a seamless experience, and for that, everything had to be done from a single platform, starting from ordering to checkout. This way, Smith came up with an integrated experience. This made people start using Shipt, and retailers began approaching the business to get themselves listed on the platform. Son, the memberships increased, and more and more retailers became partners, and this is a little success story of Shipt.
In 2018, the company earned a revenue of $1 billion, and then Target Corp acquired the business. This acquisition helped Shipt expand to more cities and states in the USA and compete with major players, such as Instacart, Amazon, and Walmart.
Shipt Funding, Valuation & Revenue
As per Crunchbase, Shipt raised a total sum of $65.2 million across three rounds of venture capital funding. Its investors include the names of Harbert Growth Partners and Greycroft e-Ventures. The business was acquired for $550 million in December 2017 by Target Corp, and ever since then, there has been no updated valuation or any revenue figures.
How Does Shipt Work?
It is pretty simple to understand the working of the Shipt app as it involves a number of easy steps, like for placing an online order, the app customers require completing a few steps and get selected groceries delivered to their home; the steps involved:
1. Install the app
The first step involves installing the Shipt app (Google/Apple) from the app store. Once the installation is done, the app must be registered with a name, email address, and a strong password. After the account has been created, the credentials can be used on Shipt’s web version. The app platform even accepts orders from its website that can be easily browsed from any browser or device. Creating the account involves no cost.
2. Enable the location
Once the app is registered, it is time to log in. Enable the app location allowing the app to detect the user location automatically. The user can enter the address where they desire the groceries to be delivered. The app shows the nearby grocery stores available to accept orders, so users can select stores where they want to buy groceries.
3. Membership & Passes
To understand this step, one needs to understand the Shipt cost, so we have discussed the pricing model. The app is available to download for free from Play Store and App Store, so if the users want to purchase something, there are two options, such as Membership & Passes. Membership is available on a Monthly and Annual basis, and annual membership costs $99/year, while the monthly plan costs $14/month. Most people prefer a yearly plan due to its cost-effectiveness. This also makes the user experience smooth as the users are not required to pay every month. The membership allows users to wave off delivery charges as they are free for orders above $35. And then, there are Shipt Passes for users who want to purchase groceries for a one-time or pick pay-per-delivery method.
Once the store has been selected, it is time to browse the items available in that store. The app has categorized all open items that enhance the user experience. The app also displays the available products at discounted rates or are on sale. Once the items and quantity have been selected, they can be added to the cart. The regular users can also view the past orders, and the app recommends some specific items users might want to add. Before placing the order, the users can use a checklist of products in the cart, quantity, and price breakdown. After that, they can proceed with checkout.
5. Choose grocery delivery time.
Once the checkout is processed, the app asks for the preferred delivery time. The time slot can be chosen as per your convenience, a phone number and address can be added for the grocery delivery. Users can choose the payment method as per their convenience, like debit/credit card. However, the app doesn’t offer a pay-on-delivery option. Also, it has now started delivering the groceries on the same day of booking. However, it depends on the order placing time and the store’s distance from the delivery location. The time-slot option shown in the app is for the next three days to choose any day from the next three.
The app comes with a substitute feature that can be used when a few items selected by the users are not available in the store. Hence, the substitute feature offers the users three options, they are:
- Do not substitute
- Choose for me
- Contact me so I can choose
The users can select any of these options, like if they have chosen cereals of a particular brand that are out of stock at that moment, so the users can pick the cereals of another brand or allow the app to do that for you. If the users only want a chosen brand, they have the option ‘Do Not Substitute.’
7. Order Delivery
After the order has been placed, the Shipt system assigns a shopper to pick the ordered items from the store and collect them. Then the notification is sent to the user when the shopper has collected the items. Then the users are allowed to make the changes to the orders until the delivery person picks them up. Post the order has been selected for delivery, no updates are accepted. The items are delivered to the doorstep in the preferred time slot.
USPs Of Shipt App
1. For Users
The users can comfort groceries being delivered to their doorstep, saving them a lot of time. Also, this can be an excellent option for older citizens who are unable to go out on their own.
2. For Shoppers
Some people love to shop, so they can use their passion for shopping for something good and work as freelance shoppers.
3. For Stores
The offline grocery stores can utilize the on-demand delivery market and take their sales to greater heights.
Online Grocery Delivery Market Size, Demographics, Business Opportunities
The success of Shipt wasn’t overnight, and its growth involved consistent efforts to provide its customers with what they needed. From 2015 the online grocery market was growing at a CAGR of 20% in the USA, and then in 2019, its valuation had reached a whopping amount of $28.6 billion. And this data is before the pandemic, like a post that this market has been soaring non-stop, with grocery delivery apps becoming an essential service. This is the reason that its customer base has tripled since 2020.
Meanwhile, Shipt is not alone in the grocery delivery service arena, as other biggies like Walmart, Instacart, and Amazon successfully hold their ground.
How Much Do Shipt Shoppers Make?
In February 2020, Shipt announced a change in its Shopper pay structure. Earlier, the Shoppers were earning 7.5 percent of overall receipt and a $5 flat rate. For instance, when a user ordered groceries worth $100, the Shopper made $12.5 ($5 base fee plus $7.5 on the receipt). The new pay structure is quite different as it moves away from using cart size and instead looks at factors like the time it takes to complete the order. Hence, the overall amount made by a Shopper depends on the number of orders they meet and the market they work in.
Shipt has stated that the seasoned shopper can make anywhere between $16 to $22/hour, and when considering a standard 40-hour workweek, the shoppers have the opportunity to earn $2560 to $3520 per month. Take into account that expenses like fuel or insurance need to be covered by Shoppers themselves.
The Rise In The Online Grocery Delivery App Market
Due to lockdowns in 2020 and then again in 2021, the grocery delivery app market witnessed massive growth as almost everyone was looking for ‘online grocery delivery near me. In 2019, the on-demand grocery sales were $28.6 billion in the USA, and the market was growing at a CAGR of 20% for the last four years. However, things took a considerable turn post the pandemic with back-to-back lockdowns, and since then, buying online groceries has become a go-to option for people. Resultantly, the number of users using online grocery delivery services has increased by three times in 2020.
This shift greatly impacted the market; for instance, food delivery apps started integrating grocery delivery into their system, and even the conventional grocery stores started developing individual apps to boost their business. The business that already had apps began to improve its user experience and invested more in the platform. For instance, Kroger introduced a new version of their app in 2020, and this move increased Kroger’s online sales by 92%. Even the business models are being adapted to meet the current requirements of the consumers. Like, they now offer same-week, same-day, and scheduled delivery options.
List Of Stores Working With Shipt
The success registered by Shipt has been exemplary, and one of the main contributing factors is the participation offered by the many grocery stores all across the USA. This amalgamation has favored both parties as Shipt is getting to serve in many locations while the stores have registered increased sales. Shipt offers the opportunity to the offline stores to benefit from the on-demand economy. The list of stores that have been working with Shipt are:
- Office Depot
- ABC Fine Wine
- Piggly Wiggly
- Lowes Foods
- Winn Dixie
How Does Shipt Make Money?
There are several ways in which Shipt makes money, such as subscriptions, service and delivery fees, sales commission, and also by selling the items at higher prices. The revenue models used by Shipt have been described here:
A significant share of Shipt’s revenue comes from the membership fee that its users pay on a monthly/annual basis. The membership enables the users to access discounts, and also it benefits the users more because they don’t have to pay shipping costs on orders above $35. As discussed above, the annual membership fee is $99/year, while the monthly membership fee is $14/month. The users are free to cancel the membership at any time, and the memberships can be tested for two weeks free of charge.
Delivery & Service Fees
The users must pay the delivery and service fees as with any other delivery service here. Delivery fees account for the shipment cost, and the service fees cover things like grocery collection. This fee is used to pay the Shoppers, and in most cases, the delivery platforms like Shipt keep a portion of these fees for themselves.
A commission amount goes to Shipt every time a product is sold via its platform. This is because it has a revenue-sharing agreement with the retailers, and Shipt gets a percentage of the price that the products sell for, and here the actual amount is determined by the agreement made with the retailer. Keeping in mind that lower margins often characterize retail, it is assumed that the commission must be anywhere in the single-digit percentage range.
This is another revenue stream used by Shipt, where it makes money through price markup. Usually, the prices are 10 to 20 percent higher on the platform than in-store shopping. Hence, an item that sells for $10 in the grocery store might cost between $11 to $12 on the Shipt platform. It is believed that Shipt employs a dedicated forecasting team using statistical methods for determining the ‘right’ prices.
Shipt Annual Revenue
In 2018, Shipt had an estimated annual revenue of $1 billion, and now, post its acquisition by Target, it is fast expanding in the US market and generating more revenue. Its revenue has greatly increased during and after the lockdown, with a massive demand for on-demand grocery apps.
Developing Online Grocery Delivery App Like Shipt
To develop an on-demand grocery delivery app like Shipt, you will require to hire a reputed mobile app development company with a good track record of developing successful mobile apps. These app development companies have an experienced team working for them that consists of:
- Project Manager
- Android/iOS Developers
- UX/UI Designers
- Back-end Developers
- Graphic Designers
- QA professional
- Delivery Manager
Next, we discussed other essential aspects of developing an online grocery delivery app.
Required Features For On-Demand Grocery App
As it comes to the business model for Shipt, it involves three entities, i.e., the users, the shoppers, and the stores.
Users: The users are provided with a smartphone app enabling them to pick a store to receive groceries in a particular time slot, and for this service, an online payment needs to be paid.
Shoppers: The shoppers are responsible for receiving the orders from the app. The app assigns shoppers to get a particular order depending on the store’s proximity and the end-user.
Stores: The stores have a tie-up with Shipt, which helps them increase their sales and revenue. Once assigned an order, the shopper reaches the store and collects the ordered items.
Here we have mentioned the features of different panels:
Features Of User Panel
- User profile creation
- Customer reviews
- Search Option
- Tracking Delivery Status
- Managing Orders
- Payment Options
- Delivery Scheduling
Features Of Admin Panel
- Order allocation
- Payment Management
- Customer Management
- Shopper Management
- Inventory Management
Features Of Shopper Panel
- Option to accept/reject the delivery request.
- New Delivery Notifications
- Chat Feature
- In-app calling
- Delivery confirmation
Cost For Developing An App Like Shipt
The cost of developing a grocery app depends on several important factors, where the primary factor is the mobile app development firm chosen to develop the app. It is essential to assign the project to a grocery app development expertise and work with an experienced team of app developers, app designers, and testers. A great app development team will handle the production, UX/UI, and testing remarkably well as a freelancer.
Next are the operating systems on which the app is being developed. An app business can choose to develop the app for iOS and Android. However, getting the app developed for two platforms will double the development cost, a primary deciding factor. Then comes a Quality Analysis team that tests the app to find any potential issues and errors, as bugs can impact the app’s performance and user experience. Then, a tech stack and cloud hosting affect the cost.
Before calculating the final price of the app, it is vital to break down the pricing, like:
- App Development may take around $10,000 to $20,000
- UX/UI Designing may take around $1500 to $3000
- Quality Analysis or Testing may take around $2000 to $4000
Keeping these factors in mind, the overall app development cost to create an app like Shipt should take somewhere between $25000 to $30000, whereas creating an app with advanced features and more than one platform should be somewhere around $50000–$60000.
FAQ’S On Grocery Delivery App Like Shipt
With Shipt, the shoppers have complete control over when they would like to work and which parts of the area they would like to shop. Shipt allows its shoppers to set their schedules as per their busy lives, and they can choose to shop for and deliver the groceries to Shipt’s members within a requested time frame. The Shopper is responsible for scheduling, accepting, and shopping the orders. Anyone can apply to become a Shipt Shopper, and once the approval has come, the Shoppers are provided with a Shipt card and a Shipt shirt at no cost.
The customers are not required to tip the delivery person, but tips are highly appreciated. The customers can show appreciation to the delivery person for their services by tipping any amount of their choice. Also, the tipping can be in cash or within the app once the delivery has been received and the 100% tip goes to the shopper.
Shipt accepts all the major US credit/debit cards, including reloadable gift cards. These cards must have a three-digit CVC code, which is usually located on the back of the card. At the moment, Shipt cannot accept store gift cards or TargetREDcards, and even the TargetREDcard, 5% discount, is not applicable on Shipt purchases.
At the moment, Shipt doesn’t reimburse for the mileage, so the Shipt shoppers are responsible for covering the cost of the gas. However, the Shoppers can track and file it with their taxes at the end of the year. The shoppers can get in touch with a tax professional for more information.
They are both considered significant for their services to app users and the work environment to shoppers.
Each Shipt order starts at $5, and then there is a commission of 7.5 percent of the total order amount added to the delivery person’s pay. For instance, if an order picked by the delivery person costs $150, he will be paid a total of $16. 25.
The Shipt competitors are Burpy, Instacart, Grower, goPuff, Rappi, FreshDirect, OurHarvest, etc.
As it comes to availability and store selection, Instacart is undoubtedly better than Shipt. However, the users can save more money and earn more discounts through referrals with Shipt. And this is especially true when the users plan to order groceries online regularly.
Suppose you are looking to get a grocery delivery app developed. In that case, several app development companies are available out there providing app development services, or you can choose to hire a freelancer if the budget is low. However, your app can significantly benefit when going with an app development company as the experience and expertise of the app developers can immensely help the app.
However, several factors need to be considered to determine the cost of grocery app development to give an approximate. Idea: The cost of grocery app development with essential features and for a single app platform should be around $25000–$30000,