A Complete Guide to Start a Grocery Delivery Business in 2022

June 16, 2022

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The shift of grocery business from offline to online has given rise to numerous business opportunities. Since covid, the trends of online grocery deliveries have been rising. It is common now as customers prefer grocery delivery apps to get their groceries delivered to their homes.

The on-demand grocery model depends upon quick delivery, and it has allowed offline business owners to deliver groceries as per the time preferred by customers.

Thus, with this trending change, startups are entering the on-demand grocery business market, taking advantage of the latest technology to reach the masses on their doorsteps.

On-demand grocery business stats

The on-demand Grocery market size worldwide is projected to acquire grocery delivery apps by 2027 at a CAGR of 24.8% between 2021 to 2027. In the grocery delivery business, Europe is the biggest market having a share above 30%, followed by Asia-Pacific and North America, having about 60 percent.

As per the survey done by McKinsey, customers prefer to shop for groceries online; the UK has a net intent of 5%, the Netherlands with 4%, and France with 2%, and the grocery market share in these countries has risen from 8% to 12% in 2021, increasing customer satisfaction.

Future of on-demand grocery business

On-demand grocery business will continue to expand in the coming years, with several factors considering user demand.

Developing customer behavior

Online businesses had extended their reach to a new customer segment before the pandemic online grocery business was limited to young and affluent families. But at the time of the pandemic, demand was more, and delivery slots were limited. This, in turn, has helped the grocery business to reach customers beyond the urban and affiliate group like rural areas, suburban areas, and small cities.

Increase in investment and competition

With the growth of the online market, the level of investment has increased. Venture capital (VC) funds and consumer-packaged goods (CPG) companies aspire to expand their direct-to-consumer business. Thus, competition is also increasing as entrepreneurs are now entering this business.

How to Start an On-demand Grocery Business?

Step 1: Plan your business first

A well-thought-out plan is important for business success. It will assist you in mapping out the precise details of your business and uncovering some unknowns.

What are the costs involved in opening a grocery delivery business?

The costs involved in starting your business will not be very expensive as you do not need a formal space. But you have to invest in technology to ease customers’ orders from you. You also need to take care of delivery, marketing, etc.

While researching about grocery business, there are a few questions that come to mind.

– Expenses to start a grocery delivery business?

The day-to-day expenses of the grocery business include salaries, equipment maintenance, and insurance.

– Who will be my business target audience?

Your target audience is the ones who prefer online shopping and want to save the time required to shop offline.

– How to make money in the grocery delivery business?

You can charge a membership fee and a markup on the total bill through the grocery business and include additional home location and food quality fees.

– How to charge customers?

Most grocery delivery services charge people by letting them sign up for a membership, around $100 per year, and some also charge a delivery fee.

Step 2: Form a Legal Entity

The important aspect of a business is its entity, such as LLC, Corporation, sole proprietorship, and partnership. Thus, for it, you need to get your business registered with a name, business type, compliances, etc.

Step 3: Register for Taxes

You must register your business for various state and federal taxes before opening it.

Step 4: Decide your business model

The online grocery delivery business plan relies on choosing an item from the seller and delivering it to the buyer at the designated time slot. Various on-demand grocery delivery model works in are as follows:

– Multi-Vendor Marketplace Model

Assume you are launching a grocery delivery business and have agreements with offline grocery distributors who do not provide delivery options. You create a grocery marketplace where you list all regional grocery vendors. The customer selects the nearest vendor, purchases the groceries from your website or mobile app, and has them delivered to their door.

– Inventory/ Storefront Model

The other option is to list all the grocery items on your grocery mobile app or website. Customers can select the item and quantity and put it in a bag or wishlist. After getting an order, you can buy groceries from the vendor and deliver them to your customers.

– Shopping Model

The last option is that when your users place an order, the admin selects the vendor and the delivery agent delivers it to the customer, just like Instacart.

Step 5: Develop Grocery App

To set up your grocery business, you need to hire an experienced grocery mobile app developer and get a mobile app developed. After selecting your business model, and features, you can finally go for developing an app.

– Custom mobile app development

If you go with custom development, the developers you hire will design and build an app per your requirements. This option will be expensive and takes time to develop from scratch.

– Ready-Made app solution

Ready-made solution for a grocery app is nothing but a prebuilt app on which alteration will be done as per your requirements, and you can launch it on Play Store or Android Store. You need to look for a development company that offers this solution. It is cheaper in contrast to the custom mobile application.

– SaaS-based solution

Prebuilt mobile app offered a subscription service and rebranded to your business name. This is the quick, inexpensive, and popular way to market. Still, the drawback is that you will not get total control of the platform, and it benefits you by offering various features and regular updates to stay on top of the market.

The grocery app will include three interfaces:

– Buyer Apps

Buyer apps are available round the clock, seven days a week. They offer adaptable solutions that act as a bridge between physical and virtual stores. Customers can order grocery items from the comforts of homes and deliver them to any place within the delivery area. The app includes many functionalities that provide buyers with a better shopping experience.

– Driver Apps

The grocery delivery interface includes features that help drivers with timely delivery. Features like geolocation, push notification, etc., for smooth deliveries.

– Admin app

Admin interface has all the permission to check customer information, analytics, monthly profits coming making, and much more. The owner of the delivery business uses it.

Critical features to include in an on-demand grocery delivery app.

Order Management Features

  • Wallet

  • Online Payment

  • Omnichannel Login

  • Business Categories

  • Order Tracking

Delivery Management features

  • Route-optimization

  • Agent Allocation

Admin and Vendor features

  • Vendor Panels

  • Access Control

  • Automated Taxes and Commissions

  • Admin Panels

  • Real-Time Analytics

  • Goo-fencing

  • Marketplace Settings

  • Custom Checkout

  • Design Themes

Marketing Features

  • Referral Programs

  • Promo codes

  • Loyalty Programs

  • SEO

Challenges of a grocery delivery business

– Storage

Grocery items can decay quickly and must be kept refrigerated. This means you’ll need a storage facility, a room, or a refrigerated van.

– Profit margin is low

Customers nowadays have a variety of choices and are hesitant to pay. There is little room for a profit with numerous websites that offer steep discounts on their products.

– High level of competition

The grocery industry is among the most well-known globally. It already has countless major players, which makes it a difficult market for a new startup to enter.

– Logistics and delivery

Offline shops handle postponed delivery, incorrect item delivery, or expired products easily, but these issues can be very troublesome for your on-demand business. Customers who order online want their orders delivered quickly. This can be solved by hiring employees and having a smart delivery management system.

Revenue Model for Online Grocery Business

– On-site Promotion and Banner Ads

Owners can allow vendors to run ads using banners and schemes on the platform’s homepage to generate revenue. The admin can charge the vendors for the area and campaigns they wish to run.

– Commission on Every Transaction

A fee is charged to the vendor/seller for each sale made on the online market. In this manner, the owner can profit from the sales on their platform.

– Fees for Vendor Subscriptions

It is also known as a membership fee, which can be used to introduce vendors who are not happy with the commission model by charging a fixed yearly/monthly subscription.

– Commission on Every Delivery

In this model, the buyer and driver are charged a fee for ordering and delivery, which is credited to the owner’s account whenever an order is completed.

Tech Stack For Developing A Grocery Delivery Platform

The tech stacks used to develop normal grocery delivery apps will depend upon the platform.

  • Backend: Laravel

  • Admin panel: CSS, JavaScript and Laravel Nova, HTML5

  • Mobile development: Swift for iOS app, Java/React Native for Android app

  • Databases: MySQL/MongoDB

  • Phone verification: Nexmo, Twilio

  • Payment gateway: PayPal, Braintree, Stripe

  • Geolocation: Google Maps API

  • Utilities: Firebase, Twilio, Facebook SDK, Google SDK

  • Server: AWS

Required Team

To develop an app, you need a team who will handle their development work as per their expertise.

  • Project manager

  • UX/UI designer

  • Backend developer

  • Quality assurance tester

  • Business analyst

  • Mobile developer

Why Choose a Grocery App Development Company?

If you look to hire freelancers, you need to take the time to hire a proper team, including the developer, designer, tester, etc. But choosing an ideal development company saves your time as they have the development team.

Thus, while looking for an app development company, you must take into consideration these factors:

– Experience

Look for the total years of experience that the company has developing apps.

– Expertise level

Examine an app development company’s experience developing grocery apps, similar tech stacks, or solving complex issues.

– Portfolio of projects

Examine their portfolio to confirm their capacity to deliver on your project.

How Much Does It Cost To Start An On-Demand Grocery Business?

While developing an on-demand grocery delivery app, the first thing to consider is the cost, and the key cost aspect is complexity. This includes the features and functions that will be added, as well as the time required to implement them.

A comprehensive on-demand platform with high-end functionalities will cost more, but the development depends on resource availability and the location of the company you hire. Normally, a grocery delivery app can develop between 1900 and 2400 hours. As a result, it can range between $19,999 and $20,0000.

Grocery App Development Stage Hours

App Discovery

80+ hrs

Idea validation

40+ hrs

Documentation

60 hrs

Backend development

300+ hrs

UI/UX design

130–190 hrs

Admin panel development

60 hrs

Android development

500–800 hrs

iOS development

600–800 hrs

Visual prototyping

60 hrs

Testing & Quality Check

60 – 120 hrs

Total

1900–2400+

How does Location Affect the Development Cost?

Team location Rate per hour Cost of an MVP Cost of an app
India $25 $30,000 $50,000
Ukraine $40 $50,000 $80,000
US $150 $150,000 $200,000
Europe $90 $90,000 $130,000
UK $100 $100,000 $150,000

How do different types of grocery apps affect the cost?

We have taken a few examples of online grocery apps to calculate the app development cost by comparing the hourly rates of Indian developers.

Type APP Cost of similar app development
Brand grocery delivery app Walmart Grocery $30,000
Subscription-based delivery Hungryroot $50,000
Grocery delivery on-demand Uber Eats $60,000
Personal shoppers Amazon Fresh, Instacar $250,000

Wrapping up

Developing a successful grocery delivery app requires more than just developing a functional application. You must work hard to develop an appropriate business model to help your venture grow. However, as the number of features increases, the cost will increase. Also, the major role will be of an app development company, so look for an experienced company. Choose the location as per your development budget because the hourly development cost varies in different countries.

About the Author Ranjit Singh is the Chief Executive Officer (CEO) at RV Technologies. In the past 10+ years, he has focused on helping clients to expand their business through the best digital solutions. Leading a team of 100+ employees, he knows how to implement the best market practices to transform a client’s business growth and help him achieve dedicated goals.

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