Do you want to start an online grocery delivery business? If YES, here is a 19-step guide on how to start a profitable online grocery delivery business with no money and no experience.
Daily activities are becoming more demanding thus making a lot of people to have less time to carry out household tasks such as shopping for their groceries. People want to streamline their schedules either to further their career, spend more time with family or engage in other beneficial tasks even if it means that they have to pay more for services like having their groceries delivered to them.
According to a study by Nielson, a quarter of shoppers in developed countries now prefer to shop online and about 55 percent of offline shoppers will be willing to shop online in the near future.
While this might seem like a lucrative business to get into, it is important to know what you are getting into because the grocery business in itself is a low margin business, and that isn’t likely to change in the nearest future. So, while you are thinking of the revenue that you intend to generate, be factual about how much you will spend in order to generate that revenue which means you shouldn’t take a thorough survey of the market for granted.
Early starters of online grocery delivery businesses failed because these companies didn’t take their time to study the market before attempting to offer a solution.
One central feature of starting an online grocery delivery business is the website because this is not only where you will display and promote the groceries in your inventory, but where your clients can make payments for the groceries they want delivered.
Most online grocery delivery websites give their clients options so as to remove any form of confusion. And so while you should ensure that your website is in line with what is obtainable, you can also choose to be innovative so that you can stand out from the rest.
Making a policy for returned items is very important and the fee that you intend to implement should be well calculated so that it is affordable to your clients as well as ensuring that your bottom line remains healthy.
Steps to Starting an Online Grocery Delivery Business
Table of Content
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide Which Niche to Concentrate On
- 4. Know Your Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 9. Discuss with an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Raise the Needed Startup Capital
- 14. Choose a Suitable Location for your Business
- 15. Hire Employees for your Technical and Manpower Needs
- 16. Write a Marketing Plan Packed with ideas & Strategies
- 17. Develop Iron-clad Competitive Strategies to Help You Win
- 18. Brainstorm Possible Ways to Retain Clients & Customers
- 19. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
1. Understand the Industry
The online grocery delivery business generates $13 billion and has an annual 10.1 percent growth between a five year period (2012 – 2017). There are more than 2,800 online grocery delivery stores in the United States employing more than 39,500 people.
Even though revenue for operators in this industry fell during the recession in 2008, this did not mar the overall performance of the industry for that period especially as more Americans were making use of the internet. The industry is still in its growth stage as its contribution to the economy of the United States is more than that of the general economic growth.
It is expected that within a decade, the industry’s value added will increase at an annual average rate of more than 8 percent, compared to the US GDP of 2 percent in the same time period, despite the weak performance the industry experienced immediately after the recession. This projected growth is due to the fact the industry is still in its infancy.
According to Statista, majority of grocery shopping is still done traditionally in offline retail stores but experts are suggesting that this may likely change in the next decade as retailers are not only becoming more tech savvy but also offering their customers various grocery delivery options.
As at 2016, only 5 percent of consumers in the United States prefer to shop for their groceries online and while the industry generated $7 billion in 2015, it is expected that it will generate at least $18 billion by 2022.
Consumers that no longer have the time are seeing online grocery delivery as not only convenient but also saves time. On an average, consumers visit about 2.2 different websites to shop for groceries, and as at 2015, about one third of consumers placed an order to have their groceries delivered to them.
The emerging generation, Millenials are known as not only heavy internet users but also open minded when it comes to using online grocery store services, which is why the future for the industry looks great.
In 2016, according to the market analysis for online grocery stores, purchases online for fresh groceries and consumer packaged goods were those that enjoyed a 36 percent growth year after year. This growth has shattered all predictions and projections and has pushed more entrepreneurs to look into entering the industry in order to get a share of the market for themselves.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those that use online grocery delivery service are not restricted to those that do not have the time to go and get the groceries themselves but those that prefer having someone else handle grocery delivery for them.
The fact that more people are on the internet through their computers, tablets and smartphones has made it easy for the online delivery business to thrive. Therefore, if you are looking to define the demographics for your online grocery delivery business, you should strive to make it as all-encompassing as possible.
3. Decide Which Niche to Concentrate On
Online grocery delivery businesses usually sell grocery items through an online medium. Operators in this industry usually either have physical stores whilst selling their products online or are just based online. Whatever might be the case, it is important that you understand that your scale and amount of start-up capital will determine what kind of groceries you will be delivering to your customers.
It is important that you take a thorough study of the niches available so that you do not end up offering a service that will not be profitable to your business. Below are some of the niche ideas within this particular business that you can specialize in;
- Sale of canned goods
- Sale of dry goods
- Sale of frozen goods
- Sale of produce
The Level of Competition in the Industry
The level of competition in the online grocery delivery business industry depends a lot on where the business is located because even though operating online means one can operate from anywhere, timely delivery has made competition to be concentrated in the hub of the target market.
Even though the world has become so fast paced that individuals no longer have the time to get their groceries themselves, customers still prefer that their groceries be delivered to them safe and on time. As long as an online grocery delivery business has a good track record with consumer’s orders, customers do not mind paying for the service no matter how expensive it might be.
There are many online grocery delivery businesses that are springing up all over the United States, demanding a share of the market and so if you are looking to start your own business, you should ensure that you know who your competitors will be and that you have strategies in place that will enable you compete against small, medium and large scale online delivery grocery businesses.
4. Know Your Major Competitors in the Industry
In every industry, there are brands that stand out due to their efficiency, customer service, their publicity strategies as well as other factors and the online grocery delivery business is no different. Below are some of the well-known brands in the industry within the United States of America;
- Amazon Grocery
Grocery delivery trucks are now common place especially in busy cities where most individuals live a fast paced life and technology has, and is continually reshaping the market as consumers can now shop online through websites or an app conveniently and have their groceries delivered to them at the specified destination.
Customers that have been drawn to the online grocery delivery business are those that have a different set of needs and expectations from the traditional grocery shopper. These customers prefer to have a personalized experience because most platforms store relevant customer data which makes it easier whenever they go to these platforms to shop.
Other customers that have been drawn to the online grocery delivery business are those that do not want to have to visit a grocery store either due to work, personal or other reasons and so usually prefer it delivered to them.
However, while this might mean that the industry can only be growing, recent statistics claim the industry is actually failing as only a few percent of people steadily purchase their groceries online, while there are still a large number of people who do not order for their groceries online especially due to the loyalty factor, where most of these customers have a favorite grocery store which they prefer to shop at.
5. Decide Whether to Buy a Franchise or Start from Scratch
When looking to start any business, one option that you will face will be whether to start the business from scratch or whether to purchase a franchise for your business, keeping in mind that what your end goal for your business is should determine your decision and that no decision is a guarantee that your business will become a success.
Be that as it may, it is important to note that there are no franchise opportunities available yet when looking to start an online grocery delivery business due to the fact that the sector is still a growing one and so you will need to start from the scratch.
Starting a business from the scratch might look overwhelming to any entrepreneur especially one who hasn’t run any business before, which is why it is often advised that a business plan be written especially as the entrepreneur will be overseeing several important aspects of the business such as finance, management and marketing.
Writing a business plan helps the entrepreneur to conduct a thorough survey about the business and know what challenges lie in starting or running the business. Starting a business from scratch also affords the entrepreneur the ability to dictate the pace at which the business will grow.
6. Know the Possible Threats and Challenges You Will Face
As an entrepreneur looking to start any business, you should be aware that not everything will go smoothly and so you should be prepared and have solutions for challenges and threats that might occur. However, it is worthy to note that not all threats and challenges can easily be handled and when this occurs, the best you can do is remain focused and hope that they pass.
Some of the threats and challenges that you are likely to face when starting an online grocery delivery business are changes in customers’ tastes and preferences, adverse government policies, arrival of a major competitor and being an unknown startup.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
When making the consideration to start a new business, the legal entity you intend to use for your business will go a long way in determining how much of a growth the business will experience as well as its impact in its industry.
If for example, you are looking to grow a business that will be recognized in the international market, choosing an inappropriate legal entity might sorely limit your business. This is why you should take time to know what kind of business you want to run and the various legal options that are available to you.
As an entrepreneur starting a business newly in the United States, there are several legal entities available that you can choose from such as sole proprietorship, partnership, limited liability company (LLC) and corporation. Each legal entity has its strengths and weaknesses depending on the type of business that the entrepreneur is looking to run and so it is necessary to engage the services of an attorney who understands the industry.
Even though most entrepreneurs in the United States start off as sole proprietors because of the ease of the legal entity when it comes to set up, taxation and ownership and control, this usually depends on the kind of business as some businesses under a sole proprietorship might end up losing in the long run especially when the business fails or they get sued.
One good thing however about starting off as a sole proprietor is that while it enables you learn the ropes about the business on a small scale, you can easily switch to a more appropriate legal entity as the business expands. A lawyer can always help in this regard when it comes to advice and later changing one’s legal entity.
The LLC and corporation are regarded as more formalized legal entities due to the fact that it is not so easy to set up and requires more formalities when it comes to management and control. However, the assets of the entrepreneur are protected under these types of legal entities as the businesses are seen as separate entities from the owners of the business.
8. Choose a Catchy Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for an online grocery delivery business are;
- Instant Service
9. Discuss with an Agent to Know the Best Insurance Policies for You
Every endeavor regardless of the platform that it is being started on, carries with it a risk and the online grocery delivery business is no different and so as an entrepreneur, the wise thing will be to ensure that you are not bearing any unnecessary risks regarding your business by securing adequate business insurance that will protect your investment, employees, yourself and your bottom line.
While there are usually so many insurance policies that you can purchase, engaging the services of an insurance agent will help as they know which insurance policies will be suitable for your business.
Below are some of the insurance policies that you can purchase when starting your online grocery delivery business;
- General Liability Insurance
- Casualty Insurance
- Workers’ Compensation Insurance
- Product Liability Insurance
- Errors and Omissions Insurance
- Umbrella Policies
- Business Auto Insurance
- Mechanical Breakdown
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
Every business that is started in the United States requires intellectual property protection of some sorts; however, while it might be important for certain businesses, it is not so for all businesses and so as an entrepreneur, you will need to look at your kind of business in order to determine how important certain aspects of it are and then get an intellectual property protection lawyer to help you file your application.
In the online grocery delivery business, you can choose to protect your logo, domain name and any other property that you deem critical to the success of your business.
11. Get the Necessary Professional Certification
The online grocery delivery business does not require any sort of professional certification before the business can be started or run as all customers want is that their groceries are delivered on time and as ordered.
However, if you are looking to get professional certifications that will enable you run your business better, then it is not a bad idea to do so as you can get certified in areas such as business management, finance, customer relationship etc.
12. Get the Necessary Legal Documents You Need to Operate
When looking to start any business in the United States regardless of the location, there are certain documents that you are required as an entrepreneur to have so that you do not run into any trouble with the law. If you do not have an idea of what documents will be required, it is advised that you engage the services of an attorney to help you out.
Some of the legal documents that you will need to run an online grocery delivery business include;
- Certificate of Incorporation
- Operating Agreements for LLCs
- Business Plan
- Business License and Permit
- Insurance Policy
- Non-Disclosure Agreement
- Employment Agreement
- Contract Documents
- Employer Identification Number (EIN)
- Federal Tax Identification Number (TIN)
13. Raise the Needed Startup Capital
When looking to start any kind of business in the United States no matter how little, you will require start-up capital to take care of overhead and running expenses that the business will incur till it starts to generate revenue.
However, sourcing for startup capital for one’s business especially if looking to start on a huge scale is usually not an easy task for any entrepreneur which is why it is usually advised that every entrepreneur has a business plan as this will easily help convince investors of how committed the entrepreneur is regarding the business.
Some of the ways you can finance your online grocery delivery business are;
- Generate part of your start-up capital from your personal savings and sale of stocks
- Source for soft loans from family members and friends
- Source for capital from external investors and business partners
- Source for loan from commercial bank
14. Choose a Suitable Location for your Business
The online grocery delivery business does not require you meeting physically with your clients when it comes to ordering and so it can be located anywhere especially as the business is conducted over the internet.
However, the fact that the business can be located anywhere does not mean that where you are located has little or no impact on how successful your business can become. This is because regardless of the fact that customers will be ordering online and having their groceries delivered to them, the groceries usually need to be stored in a physical location.
And so if you closely look at the trends in the industry regarding online grocery delivery businesses, you will find that they are located in busy cities where individuals live a more fast paced life.
This therefore means that the location of your online grocery delivery business has a lot of impact on how you can attain your goals and objectives as a business and so entrepreneurs do not mind having to lease a facility that will be in a visible location that is within the hub of their target market, no matter how much it costs.
The fact that you intend to locate your business in an area that is visible to your target market does not mean that you should spend your entire budget on location alone. Ensure that you have set aside how much you are going to be willing to spend so that you do not end up causing a strain on your overall budget.
If you aren’t used to the area where you intend to locate your business, ensure that you engage the services of a real estate agent or consultant, who has a grasp of not only the city but also your kind of industry, to help out.
15. Hire Employees for your Technical and Manpower Needs
Starting an online grocery delivery business is less expensive than starting an offline retail store; however just like people visit a real store to pick what they want, you will need to create a website where people can pick the groceries they want and have it delivered to them.
Before creating the website, you need to first buy a domain name that relates to the grocery store before you start to source for manufacturers or suppliers of the products you intend to sell.
Because of how important the website is to the business, it is pertinent to ensure that the website can be easily loaded and navigated by users. Also, because payments will be done on the website, it is important that the website is secure so that hackers cannot easily hack the page to get at the information of customers.
There are certain things that are needed to ensure that you are able to run your business efficiently and these are an easy domain name, a secure website, delivery vehicles, filing cabinets, phones, computers and printers.
Building a solid business structure is very important for the success of any business and so you must recruit capable individuals who understand what your goals and objectives are and who would be willing to help you attain them.
Some of those that you will need to recruit include; Chief Executive Officer, an Admin and Human Resource Manager, ICT Consultant, Business Development Executive/Marketing Executive, logistics manager, Customer Service Officer or Front Desk Officer, Accountant and Driver.
Over and above, you would need a minimum of 8 key staff to effectively run a medium scale but standard online grocery delivery company.
The Service Delivery Process of the Business
An online grocery delivery business is one where individuals and other businesses purchase their groceries online and have it delivered to them. The platform used for this service is usually an ecommerce website or a mobile app.
Most online grocery delivery stores usually have a warehouse to store inventory that will enable them to deliver to customers once their orders have been placed.
The orders are then shipped to the customers using a courier service or the company’s courier service. The services offered by the online grocers are usually for a wide delivery area.
16. Write a Marketing Plan Packed with ideas & Strategies
As one looking to start an online grocery delivery business, you should be aware of how competitive the industry is and therefore have strategies on how you intend to stand out from others in the same industry, which is why it is vital to have effective marketing strategies for your business.
Marketing involves anticipating the needs of your clients and then looking for how to meet those needs, while also competing favorably against their competitors.
However, before any marketing ideas and strategies can be used, a marketing plan has to be in place to act as an overall guide for whatever strategies will be created. The difference between a marketing plan and strategy is that while marketing plans may rarely change, marketing strategies can be changed or adjusted in order to suit the overall plan.
However, before any marketing strategies can be created, a thorough market survey has to be conducted. This allows the brand know who the intended target market is and then ensure that the ideas are created to suit the preferences and tastes of these target market.
Ensure that you engage the services of a marketing consultant or in-house marketing executives that thoroughly understand your overall marketing plan and will therefore work to ensure that strategies created are in line with your core goals and objectives.
Below are some of the marketing ideas and strategies that you can use for this particular business;
- Empower your marketing executives to engage in activities – both online and offline – that will create awareness about your online grocery delivery business
- Install a billboard and flexi banners in strategic locations and advertise your business
- Ensure that your online grocery delivery business is listed in online directories
- Attend webinars, seminars, expos and events in order to promote your online grocery delivery business
- Use social media platforms such as Facebook, Twitter, Instagram and Pinterest to create awareness for and advertise your business
- Create a secure and safe website with easy user interface in order to promote your online grocery business
17. Develop Iron-clad Competitive Strategies to Help You Win
The online delivery business industry is very competitive and so it is important that you come up with strategies that will enable you to outsmart your competitors in the industry.
It is important to note that while you will need strategies to contend with those that are already in the business, you will also need innovative strategies that will enable you compete with those that will crop up while you are running your business.
Some of the competitive strategies that you will need to be able to win your competitors in this industry is to ensure that your services are hinged on accuracy and timely delivery.
Customers do not want their orders mixed up and they also want their orders delivered on time. Another competitive strategy is to ensure that you have an excellent customer service that will ensure that inquiries, complaints and feedbacks are promptly handled.
18. Brainstorm Possible Ways to Retain Clients & Customers
An online business just like any other business requires customers in order that it might be able to achieve its goals and objectives, which is why it is important that you create strategies that will attract customers to your brand.
However, while it is very important to attract customers, it is more important to ensure that you are able to retain at least a high number of customers for this particular business.
According to statistics, companies that retained a high number of their customers ended up spending less than companies that lost their customers all the time because while continuously attracting new customers is important for the growth of a business, retained customers are not only seen as satisfied individuals or groups but as brand ambassadors because they consciously or unconsciously promote a brand.
Therefore to increase customer retention for your brand, you should know why customers leave a brand for another and one of them is due to poor quality of product or service. Customers do not want to have to deal with a crappy or defective product all the time and so it is essential that you offer top notch services all the times.
Another reason why customers leave one brand for another is the customer service. Customers want to be treated as invaluable and so love a brand that is prompt in attending to their enquiries, requests and in also resolving their complaints.
Customers also love incentives and so brands that give out incentives regularly are likely to have a higher retention of customers than those that don’t.
19. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
Whatever business you are looking to start, it is important that you make plans on how you intend to make the brand become well known by your target audience and stakeholders.
Boosting one’s brand is however not something that should be handled trivially because boosting one’s brand brings the desired awareness for the business, which is why many companies take publicity campaigns very seriously.
If your intentions are to make your business attain wide recognition not just within your area but on a national and even international level, then it is necessary that you engage in publicity activities to promote and advertise your brand as well as create a corporate identity that will be positively communicated to your target market.
One thing with promoting your brand is that it is not all activities that will require you to spend money especially with the advent of technology and so when engaging the services of a publicity consultant ensure that you lay out your core objectives as well as how much you intend to set aside, this will then ensure that whatever strategies are created are in line with what you are looking to achieve.
Some of the platforms that you can leverage on when looking to boost awareness for your brand and create a corporate identity for your company include;
- Advertise your online grocery delivery business in popular blogs and forums
- Ensure that your website has search engine optimization so that it can easily pop up in search engines
- Create social media platforms such as Facebook, Twitter, Instagram and Pinterest in order to promote your online grocery delivery business
- Encourage your loyal and satisfied customers to help spread the word about your business
- Sponsor and engage in popular activities online and offline in order to promote your brand
- Distribute handbills and fliers in various strategic locations around the city where you are operating your business from