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How to Start a Grocery Store Online?

by GK April 22, 2019

No matter what’s the trend, grocery supplies will always be in demand. People will constantly buy their daily supplies from the grocery stores. However, the challenging part is inviting customers to buy from your business.

Running a grocery store online is a great business idea to attract as many customers by offering a more convenient way to shop from the stores. With added benefits like home delivery, diverse product catalog, and better discounts, you can make your grocery supplies business more prevalent among this special segment of consistent shoppers.

Online grocery delivery businesses are already a trend in developed countries like the US, UK, Japan, and France. One-fourth of their population shops grocery supplies online, and the rest of 55% to have shown a great interest in adopting this trend.

In short, the consumer base is already quite massive, and it’s logical expecting it would grow mammoth in the impending future.

If you are interested in clutching a stake in this lucrative pie, it’s time you set up a grocery store online or start a grocery delivery service of your own.

How to start a grocery store online? We will get into that soon enough. Before that, let me introduce you to this business model. It’s crucial you know who the top players are and how these businesses function to make money.

Online grocery delivery service business model

The online model of a grocery business is purely based on the marketplace model of eCommerce. All the top players like Instacart, Amazon Prime now, Good eggs, and Peapod follow the same model. They set up a grocery store online in two major steps-

Step 1: They tie-up with the local grocery stores/farmers/producers/whole sellers, and

Step 2: Establish a robust and fast delivery network to deliver the orders to the customers.

Here is a flow chart that will make the business process clear to you-

In short, this flow makes your business more of a grocery delivery business rather than an online inventory of grocery supplies. It’s because-

  • You don’t sell from your own inventory.
  • Your website connects the sellers with the buyers.
  • Your business takes care of the delivery of the orders.

Hence, you would not actually be selling stuff but promoting, and then delivering the ordered stuff to the customers. However, the customers actually don’t bother if you are selling or connecting. For them, you sell grocery online and also deliver orders to their homes.

How to make money with a grocery delivery business?

As explained above, it’s purely a marketplace. So there are four stakeholders in an online grocery delivery business.

  • Business owner –Admin
  • Store owners- Sellers/Vendors/Whole-sellers/Producers
  • Customers
  • Delivery partners

You can adopt both primary and secondary revenue generation streams to make money.

Primary revenue streams

The primary revenue streams ensure that cash flows directly from the stakeholders. Here is a breakdown of the same:

Commission model

You can charge commission cut from the sellers on each sale they make through your online grocery selling platform. It’s quite the straight forward. However, you can further customize this model to maximize your profits and attract as many sellers to your platform. You can charge

  • Different commissions from different sellers
  • Different commissions on different product categories

Subscription model

This revenue model actually is a two-way money maker. You can apply this model to both the customers and the sellers on the platform:

  • You can charge monthly subscription costs from sellers to let them sell on your platform.
  • You can charge monthly subscription costs from the customers to let them use the platform or avail additional benefits like free delivery, exclusive offers, etc.

Hybrid model

This is actually a more realistic model considering the extreme competition in the market. As the name suggests, it’s a mix of multiple models. You can adopt both the commission and subscription model to maximize your profits and also attract more sellers on your platform.

Amazon prime now is a perfect example here. It follows the commission model with the sellers and the subscription model with the customers. With Amazon, prime subscription customers can avail free grocery delivery services and many value-added services.

Secondary Revenue streams

In addition to the above streams, you can adopt numerous other ways to make some additional money with your grocery delivery business:

  • Featured sellers: Charge extra fee from sellers to promote their stores or products on the site.
  • Value-added services: Sell extra value-added services with the additional cost from the customers.
  • Speedier delivery: Charge extra fee from the customers for availing priority delivery services.
  • Scheduled delivery: Charge an extra fee and let customers schedule the delivery in a preferred time-frame.

Challenges in an Online Grocery Business

The online grocery business is not as simple as it seems. The nature of the grocery products and delivery mechanism makes it quite a challenging task in the real sense. Here is how-

Complex storage infrastructure

I know I said you would not be selling from your own inventory. However, if you look at the perishable nature of the grocery supplies, the sellers actually have to bear the cost of managing a complex inventory. If the total cost of operations is more for the sellers, it would automatically raise for you as well.

Intricate return and replacement

It’s simple for regular online stores, but not for the grocery stores where most of the product are perishable and cannot be resold. Regular stores have enough time to manage issues like delayed delivery, wrong item delivery, and returns. However, grocery supplies do not give you enough time frame for such mistakes. If you deliver the wrong or spoiled product, the cost is lost for good. You cannot re-sell spoiled milk can or an opened cheese packet.

Low-profit margins

Today, shoppers choose an online counterpart of a physical store for two reasons- Home delivery and cheaper prices. However, considering the cost of storage of perishable items, delivery infrastructure, and quality assurance, it’s quite challenging to maintain low cost on the products.

How to tackle the challenges in the grocery business?

If there are challenges, there are also ways to tackle them. With proper business planning you can adopt an array of strategies to maximize the profit and survive the challenges:

  • Integrate Just-in-time inventory management to reduce storage and wastage cost.
  • Tie up with as many local suppliers, producers, farmers, and whole-sellers.
  • Tie up with local brick and mortar stores who want to expand their reach.
  • Partner with a reliable delivery service provider with a big-sized fleet.
  • Add more non-perishable products in your catalog.
  • Offer nearby pick up services to let customers order online and pick up directly from the stores.
  • Integrate iBeacon in your physical stores to merge the online and offline shopping experience.

How to set up a grocery store online?

Now that we have a good comprehension of the business model, revenue streams, challenges and the ways to tackle the challenges, it’s time we get into the technicalities.  So how to start an online grocery delivery business and set up your store online?

Let’s cover everything step-by-step

Step 1: Select the perfect business model

Select the business model that suits you the best. I would not recommend the inventory model, as you can see the issues in the challenges explained above. A pure marketplace operation would always be a less risky and more beneficial strategy.

As per the revenue models are concerned, go for hybrid approach and adopt at least commission and subscription models. Additionally, you can practice any of the models explained above in the article. Now, let’s move to a very crucial part.

Step 2: Find a groovy domain name

You would be creating a brand by starting a grocery delivery service. You need a domain name that is synchronous to your brand identity. Moreover, you would not want to make it complicated by selecting a really hard to spell name. The best approach to choose a great domain name would involve the following recommended practices:

  • It should be available with the .com extension
  • It should be easy to remember, pronounce, and type.
  • It should be as short as possible
  • It should be completely unique from other brands
  • It should not contain hyphens

After picking up a great domain name, verify it on the following grounds before registering:

  • Ensure other variants are also available (like .com, .net, .us, .uk, .info, etc)
  • Ensure the social media usernames are also available in the same name.

Step 3: Get the required software solutions

The software solutions required for implementing an online grocery delivery business plan demand a multi-faceted approach. A single touchpoint or website would not be enough. Every stakeholder must be connected with an easy to use touchpoint to make your business completely online. Besides that, for every solution, there are different ways to implement them at different cost and time consumption. Let’s comprehend in detail.

How to get the required software solutions?

There are two major ways to get all the software solutions required to start your own grocery delivery business:

Outsource or develop from the scratch

Gather your business requirements and outsource the development task to a software development company. However, this approach would involve an uncapped investment, as it is a very time-consuming process to develop all the solutions from scratch.

Alternatively, if you have the skills, you can develop them all by yourself. Conversely, it is very unrealistic considering the size of the development and number of solutions you would need.

You need a more realistic, speedier and cost-effective way to develop the software solutions. That’s why the next approach is a perfect method in my opinion.

Purchase and customize a turnkey solution

There are many software development companies who have already developed the solutions and sell them as ready-made products. These solutions are open-source code, self-hosted, and fully customizable. You can purchase them and customize the source code to personalize the features and UI according to your need. Get the most suitable solution and customize it.

For example, to start your grocery delivery business, you can buy an Instacart clone script. Such clones scripts possess ready-made features like that of Instacart grocery delivery business. The biggest advantage is-

  • You get every feature as ready-to-use and by default
  • You don’t have to waste time and money developing from scratch
  • You can customize the source code to match your custom requirements
  • You can customize the theme to match your custom brand identity.

You can use our Gencart Instacart clone script to setup your grocery delivery business in just a few hours. This is a ready-made script enabled with every set of features required to set up your business. Besides that, you can also get the ready-made native Android and iOS apps by choosing the respective packages.  It’s purely a one-time investment and does not demand any monthly rental or usage fee. You can host your website on a server of your choice. Being developed on LAMP stack it is highly optimized and easy to use.

Why a turnkey script like Gencart?

You can use any good clone script from the market you find perfect for your cause. It’s not about Gencart. It’s about the ready-made scripts.

Why would you want to re-invent the wheel to build your grocery delivery business? The ready-made online store builders, save you from the extra expense, where-

  • You don’t need coding skills to start a business
  • You can set up a site or application in a few hours

Gone are the days when only coding experts could think about creating an eCommerce site. Today, with these clone scripts, you can –

  • Create an online marketplace without coding.
  • Create a web-store by using a graphical user interface.
  • Test the free trial versions and online demo before buying the script.

Software required for online grocery delivery service

Be it any solution or approach, here are the software solutions you would need to start an online grocery store.

Many ready-made solutions in the market combine one or two solutions in one and make applications usable by multiple stakeholders. For example, you might also find that the mobile app for the customers can also be used by the sellers to manage their stores and orders. Whatever be the case, you need the software implementations for all the above-mentioned stakeholders. So, ensure if the software vendor is offering them all in one or the other form.

Features to look/develop in a grocery delivery solution

Whether you are purchasing a ready-made script or outsourcing your development, you need the following features for running a grocery store online

Fundamental features for a grocery store Admin

  • Product management System: Features to upload a product, browse product listing and their details, manage product categories.
  • Product Catalogue system: Manage different categories of products, add products to the featured listing, add products to multiple categories, etc.
  • Seller/Store Management: Allow seller sign up, approve/disapprove seller sign-ups, monitor seller product listing, ban/dis-ban existing sellers, seller messaging, etc.
  • Commission/subscription management system: Revenue management system to set commission rates, create subscription packages, and set package rules. Based on the revenue model, the admin should be able to browse detailed analytics of the sales made, commissions earned, and seller details.
  • Shopping Management: Manage product pages, product details, product mapping, category pages, and virtual cart, etc.
  • Check out management: virtual cart review, checkout process, payment gateways, and shipping options, etc.
  • Order Management: Conform an order, track seller order status, order status update to customers, and invoice generation, etc.
  • Product delivery management: Assign shipping method, schedule order-pickup, track shipment, and confirm order delivery, etc.
  • Return Management: Set return rules, Map return methods to products, exclude certain products from return rules, schedule return Pickup, track refund/ return status, generate return invoice, and return-slip generation, etc.
  • Review Management: Write product review, seller review, Approve/disapprove reviews, show reviews on the product page and seller page, and delete certain reviews.

Fundamental features for the customers

  • Mobile Responsive UI – The website should be accessible on mobile devices. However, getting a customer mobile app is also recommended.
  • Browse products based on geo-location – Filter the product catalog and store-listing based on the serviceable geo-locations.
  • Browse stores: Besides regular product catalog, customers should also be able to browse different stores and sellers separately in the serviceable locations.
  • Google Maps integration–Google Maps integration to let users track real-time product delivery status.
  • Payment processors–multiple payment gateways to support most of the popular payment methods like PayPal, credit cards, debit cards, and digital wallets.
  • Google Analytics integration– every website needs Google Analytics for tracking SEO and other metrics.
  • Dispute management system–An integrated ticket system is a plus point. Otherwise, the script must support API integration for popular ticket systems like Zendesk.
  • Social sharing–Integration with social media platforms for sharing wish list, product pages, and other details with friends on social media. Should also support social media login.
  • Multi-Currency and multi-lingual support–useful when operating in multiple locations.

Advanced features for a grocery marketplace

  • Order request- Features for the sellers and admin to accept/reject an order request.
  • Shipping algorithm- Integrated Google Map and Algorithm to select the most suitable route for delivery.
  • Live chat system- Ability for users to communicate with the support in real-time through integrated live chat or Facebook Messenger bots. The same can also be used to build a seller-to-admin support system.
  • Dedicate dashboards– Every user should have a dedicated dashboard with corresponding features and access control to manage their tasks and browse other concerned details.
  • Robust search system– Advanced algorithm to search products based on multiple aspects like keyword, categories, price, seller, geo-location, etc.

Grocery shopping will always stay in trend. It’s a fundamental human need, and people constantly look for convenient and cheaper alternatives to do that. From small grocery store ideas to the biggest chains of stores, a perfectly crafted disposition can make you a successful entrepreneur in this niche.

You just have to know the important aspects, business opportunities, challenges, and their solutions-  sell grocery online is not tough with the right technology, correct trend analysis, and planned marketing. You just identify the opportunities and pick up the resources you can capitalize on, the technology part is nowadays well-covered by the turnkey solutions.

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