How does the grocery D2C Business work?

Are you currently looking into starting an on-demand online delivery business, and you are unsure which apps are the most profitable? 

In recent years, grocery delivery has become a part of many people’s everyday lives due to the ongoing pandemic. 

Not only that but also the biggest existing food delivery applications, such as Uber Eats, took advantage of this opportunity and introduced the grocery delivery concept. 

How does the business model work step by step? 

Like food delivery applications, Grocery delivery begins with suitable software and application. When an on-demand company creates a platform, they collaborate with local grocery stores, pharmacies, and drug stores. 

Using an on-demand delivery application, the consumer orders the products they require and has them delivered to their doorstep.

The application is usually in charge of the delivery system. Their collaborations with local retailers, on the other hand, work a little differently in each scenario. Delivery applications use a number of various business models.

1.- The inventory model

The inventory model is based on a physical inventory owned by the ordering platform and sold directly to consumers. 

The branding and packaging of the ordering application are included when the customer places an order through their system and gets their products delivered to their address. 

The advantages of this model include more transparency and control over the available and sold items through the platform since inventory management is happening internally. 

In addition, the company can implement a higher profit margin, as it manages its stock internally and has the right to put its price on the acquired products. 

However, it is also associated with more costs due to the required storage space. 

2.- The multi-store marketplace

Comparing the inventory model, the platform does not handle the stock and inventory in this scenario. 

Instead, it is an intermediary connecting the ordering application and the local stores. After the customer places their order, an internal delivery system assists in getting the product from a shop to the customer’s door. 

Often, the ordering platform has its delivery employees responsible for the transport, collection of items, and delivery. In this case, the branding remains under the producer’s name, and the grocery delivery platform is only responsible for the logistics. 

The advantage of this model is that the model eliminates the requirement for additional expenses associated with having a storage space. 

Also, the supply chain is a little more simple, as they do not need an inventory management system. The downside, however, is that the is no room for an additional profit margin since the store itself indicates the prices. 

3.- Hyper-local model

The hyper-local model focuses on a specific geographical location, as you can tell by its name. 

The focus of the grocery delivery model is providing delivery access in line with the resident’s needs. In this case, proximity and convenience are of the essence. 

The local community expects to see similar products online, as they would in their nearby grocery store. 

The advantage of this model is getting to know the customer and their needs better. 

Collecting data on the most frequent purchases allows for a certain level of predictability and forecasting of customer behavior. Since the data is cached locally, it allows for more accurate insight on the local customer on a smaller scale. 

Since the hyper-local model does not indent to have a very wide range of items, it is also simpler to manage internally. 

4.- The shopping model

The shopping model is one of the most popular solutions on a global scale. This model works quite similarly to the multi-store model. 

However, in this case, the shoppers select from a collection of items and do not select the specific store they would like to purchase from. The stores are the ones that are responsible for the distribution and inventory of products. 

The delivery system, along with internal employees, belongs to the application, and they are responsible for communication and managing the order from the logistics perspective. 

Why is it a good idea to start a D2C grocery business?

As mentioned before, the on-demand grocery delivery shifted from a luxury experience to an everyday necessity. 

It became the perfect solution for people who were either too busy or physically unable to shop independently. 

There is still plenty of potential and room for improvement in grocery delivery. Most importantly, the demand is growing every year. 

Regardless of which model you decide to follow, building an on-demand delivery requires quite a lot of time and preparation. 

Firstly, the necessary element of every business is the right technology and a platform, which will facilitate the process. 

When choosing a provider, be sure to consider whether they include a high level of customization.

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