Grocery shopping is one of the most essential activities for every individual, worldwide. In an era of competitive career and aspirational expectations, customers believe this activity to be a mundane task and have been looking for ways to minimize time spent on grocery shopping. The phenomenon led to the growth of online grocery stores that accept orders online and deliver at doorstep with a promise of fresh and high-quality products. The business model flew like rocket and today, there are hundreds of active online grocery stores trying to grab a slice of the profitable pie.
Online Grocery Delivery Business Opportunity
According to Statista, Global online grocery industry that attracted sales revenues of USD 48 billion in 2016 will grow over USD 150 billion in revenues by 2025.
With a great growth potential owing to rising demand, the industry offers several low-hanging fruits in developing as well as developed markets.
But how should one proceed with starting a grocery delivery service? Should an entrepreneur go for the marketplace model or inventory-based model? What are the factors he/she should have in mind while planning for launch? Let us shed some light on the nuances of online grocery business.
Online Grocery Business Model: To Tie or Not to Tie-up
Before entering any industry, it is a wise move to understand what are the popular business models? How the existing players earn revenues and if the model can be disrupted through innovative tech or astute planning? Well, the online grocery business model is simple. The online stores are either marketplaces that tie up with local vendors to deliver groceries or have built an inventory-based model where they handle everything from procurement to delivery.
Both marketplace and inventory-based models have their different revenue sources. While in a marketplace model, the online grocery store earns a commission on every order fulfilled by a vendor, the inventory-based model earns revenues through service charges for delivery and other conveniences.
Categorizing Revenue Streams
Primary Revenue Streams (For Marketplace-based Models)
- Commissions earned on every order forwarded to the vendor
- Subscription Fee from end-customer in lieu of some rewards, discounts, extra services or benefits
Primary Revenue Streams (For Inventory-based Models)
- Service Charges for Convenience & Delivery
- Subscription Fee
Additional Revenue Streams
- On-site partner/merchant promotion (in case of marketplace model)
- Banner advertisements & blog monetization
- Sponsored content partnerships
- Utility sales
How to start an online grocery store?
Now that you know the basics related to business model and revenue streams of an online grocery business, you can think about moving ahead with your decision. Remember, the revenues and profits depend on a host of factors such as the size of the target market, your operational area, marketing, among others. So, make sure to gauge the impact accurately to make a wise call.
-> Planning: Before anything else, you need to have a concrete business plan that will outline your business model, expected revenue streams, the future course of action, step-by-step processes. You can go with the popular business models or can think of a unique model that you can execute with your skills and knowledge. These things can be refined as you go, but everything needs to be planned to minimize chances of failure due to contingencies.
-> Target Market Analysis: Knowing your customers beforehand is one of the golden rules of business. So, before moving ahead with an online grocery business, you need to analyze the market, identify the opportunities and have clear answers that will help you define your target audience. You will need to define your operational horizon, have a hold over the demographic profile and define your approach strategy towards your audience.
-> Competitor Analysis: Before you actualize anything related to starting a grocery delivery service, you need to check who all are already catering to your target audience. What are their strategies and how solid is their business model? This will help you find out ways to beat your competition by attracting customers towards you.
-> Vendor Partnership Opportunities: If you are inclined towards the marketplace model, you will need to perform an on-ground research, talk with local grocery vendors and influence them to tie-up with your online portal. You will be required to lock a commission structure that is attractive to them as well as profitable to you at this stage.
-> Define Order Collection/Delivery Process: Before moving ahead with the development of a mobile app or online storefront for grocery business, you will have to define how are you planning to receive orders and how will you execute them. How many channels will be open to customers to place their order? Will your business work on an app-only model or will customers be able to call and place their orders, too? Also, you will need to define delivery roles, too. Will you develop a team of delivery executives or leave it to vendors to deliver the products to the customers? All these decisions will impact your app making decision.
-> Set up an office & backend staff: You will need a base for operations even if you have a marketplace model. You will also require a backend team to coordinate between vendors and customers and to answer grievance calls. As you grow you can think of building specialized teams for marketing and business development, too.
-> Commence grocery app development process: Once you are through with building a structure for starting a grocery store business, you will be required to invest in mobile app development of and online portal. This step can be moved up based on your preference. But here you need to focus your energies on engaging a professional team who understand the intricacies of developing an online grocery store.
-> Advertise & grow: When you have a solid app to acquire customers and process orders, you will be required to advertise openly about your newly launched online grocery delivery venture. Learn the intricacies of marketing and pave your way towards business growth.
Developing an Online Grocery App for Starting a Grocery Store
The most important element that will define the success of your online grocery store is your mobile app. This will serve as an interface between your business and your customers. You should always strive towards building an app that has the potential to offer an amazing user experience. If your online grocery storefront and mobile app will not have an elegant and engaging user interface, customers will hop on to your competitor without thinking twice.
Must-have features for your online grocery app
Modern customers seek simple and functional experience and you need to embed your mobile app with the right features to keep your customers hooked without complexing the user experience. You will need to create a balance between functionality and design to make sure you do not overwhelm a customer with everything you have to offer. For this, you will need to identify some interesting features that can engage your customers in a better way. Apart from common features to place orders, here are some features that you must incorporate in your grocery app for enhanced user experience:
How can we help?
If you are thinking of starting an online grocery store, you need an expert who understands the market and user expectations at the same time. We have helped several entrepreneurs in launching online grocery delivery operations in several regions around the world. Our expert developers provide comprehensive assistance when it comes to building a mobile app for grocery store. Having deep knowledge of consumer psyche, we identify the right features and functions that would make your mobile app popular within your target audience in no time! So, what are you waiting for? Get in touch with our experts now.