In our daily life, grocery shopping is a must. It can be quite challenging to manage a busy schedule and go grocery shopping. Online delivery is a convenient solution for everyone. To date, there are a number of applications, and one such application is Shipt. Below, we have tried to expand on how Shipt makes money.
What is Shipt?
Shipt is a delivery platform that allows customers to order groceries and other household items. And they give door-to-door service. You can either use the website or phone application available both on Android and iOS devices to make an order. Before you make any order, you must have a monthly or yearly membership.
Also, you have the advantage of cancelling it at any time. Shipt is partnered with shoppers, and it is a private contractor that delivers the ordered items. They work with almost a hundred retailers, for instance, Kroger, Lidl, etc. They are available in almost 260 cities across the United States. Customers also have the advantage of mentioning the time frame during which they want the order.
They will make sure that after placing the order, you get the order within 1 hour. If the customers want, they can even interact with the assigned shopper. This will help you in those situations when an item is not available. You do not need to tip your shopper, and it is not a compulsory thing. But in case you want to, then you can give them a tip in cash either at the time of delivery or within the app.
How Does Shipt Make Money?
Through subscriptions, delivery and service fees selling items at higher prices along with commission, Shipt makes money. We have discussed each of the revenue down.
1. Membership Fees
The revenue was generated by the membership fee that the users pay either monthly or annually. This membership allows users to access discounts, and also users do not have to pay for the shipping or any order above $35. The monthly subscription cost is $14, whereas the annual membership is $99 per year. If you want, you can also cancel the membership at any time. You can test the membership for 2 weeks free of charge.
2. Delivery & Service Fees
This is like any other delivery service. The users need to pay the delivery and service fees. The delivery fee covers the cost of shipment along with the service fees. After that, the shoppers use the fee, and in most cases, the Shipt keeps a few portion fees for themselves.
3. Commission On Sales
Every time a product is sold on this platform, Shipt receives a commission. And they receive this because of the revenue sharing agreement with its retailer. Generally, the company keeps a percentage of items sold. The main amount is from the agreement it made with the retailer. Even though retail is characterised as a lower margin. That can be assumed as a single-digit percentage range.
4. Price Markup
For your information, by marking up the price, Shipt generates revenue. Generally, prices are between 10-20% higher compared to in-store shopping. Hence $10 of a product in a grocery store is $11 to $12 on Shipt. The employees are trying their best to forecast the teams and determine the price using statistical methods.
5. Funding, Valuation And Revenue
The company raised a total sum of $65.2 million in capital funding. The investors’ names are Harbert Growth Partners and Greycroft e-Ventures. In December, the business was acquired for $550 by Target Corp.
What is the History of Shipt Company?
It is such a long story. Shipt was founded in 2014 by Bill Smith, and the headquarters is in Birmingham, Alabama. They shed a lot of blood, sweat and tears to be in this position. In the early 2000s, his first business was in a retail store selling cell phones to small businesses.
And then expanded by opening a second store. He was eventually making $ 4,000 to 5000 every month from the store alone, and he tried to maintain his academics as well.
Then, he built a small company that used to give small loans, and it ran for 6 years. With the help of the loan business, Insight Card Services was formed in the year 2009. This company sells re-loadable prepaid visa cards. Green Dit Bank obtained the business in 2014, leaving Smith with millions in the bank.
In this time phase, Amazon Prime was slowly heading towards delivery. Various companies like Doordash and Uber were helping to redefine convenience. In 2011, a service named Postmates was established. Smith’s business uses independent contractors to make the delivery on behalf of the firm. The first version was launched in November 2014 months in Birmingham.
From here, he invested $3 million of his own capital, which helped him to hire a few employees. But eventually, it proved to be a complete failure. Finally, the company became bankrupt.
How Was Shipt Formed?
They made a video that was uploaded, and Shipt sold its 1000th membership. A few months later, they launched the revamped version of Shipt. After launching in Birmingham, they decided to expand the service to western cities like Dallas, Nashville and Tampa. Their key strategy is to focus on the mid-western region, and this allows Shipt to grow with much competition.
In early 2016 they first got funding with $5.2 million in capital, and by this time, they already launched in 23 cities. Famous brands like Starbucks wanted a partnership with Shipt. By the end of 2018, Shipt had 65% of American households across 180 markets. In 2019, he was replaced by Kelly Caruso, who was with Target for more than 22 years. Target launched a shopping site where customers could choose from over 6500 items.
The company became highly successful in the year 2020, and the reason was the coronavirus. People had to stay at home and were forced to order food. This makes them add 100,000 new shoppers. But unfortunately, things were not the same. The Shipt couriers started to demand better wages and removed the fear culture and high pressure that were present in Shipt.
After a few weeks, Shipt implemented a new compensation rate. Shipt provided the shoppers with masks, gloves and sanitation. Moreover, if they completed 50 to 100 orders in a month, then they would receive $ 1000 bonuses and $200 for more than 100 orders. In the present view, Shipt is available in over 260 markets across the United States, with more than 1000 people working.
Working of Shipt
It is quite easy to understand how the Shipt works. It involves simple, easy steps such as placing orders, app customers, etc. We have tried to explain the process down below:
- The very first thing that you need to do is to install the app. After that, register your name, email address and a strong password. You might observe that after creating an account, the credentials are being used in the web version of Shipt. It even accepts orders from the website. Also, no amount is needed to create the account.
- Now log in to the account and enable the location. This will detect the user’s location automatically. You can enter the address where the groceries need to be delivered. The app will show you the nearby grocery shop. Thus, you have the right to select the store.
- The app is completely free from the Play Store and App Store. In case you want to purchase something, there are two options: membership and passes. You will get the membership either on a monthly basis or annual basis. The annual membership costs $99/year, while the monthly cost $14/month. Hence, the user experience is smooth.
- After deciding on the store you also can choose the delivery time. Along with this, you also have the choice of payment medium.
We have tried to make a clear vision of how Shipt makes money. Along with this, we have also tried to give some additional information. That will help you to understand the working process of Shipt.