Online Grocery Shopping Marketplace: Business Model, Essential Features, Challenges and Opportunities

Among different niches present in online commerce, grocery is growing rapidly, and many startups are setting foot in this niche. The revenue of this niche has doubled in almost two years.

Digital grocery sales in the U.S. reached $23.9 billion in 2018. By contrast, sales in China and Japan reached $50.9 billion and $31.9 billion, respectively. Not only is China the most significant digital grocery player in the world, but its revenues are also set to nearly quadruple by 2023.

Grocery shopping sales in the world

Source: Statista

The U.S online grocery Market generated sales worth about 28.68 Billion U.S. dollars in 2019, with sales forecast to reach 59.5 billion U.S. dollars by 2023. Click To Tweet

These stats imply that people have become more accustomed to ordering food items online.

Consumer packaged goods have always been accessible online. They are now understanding the convenience associated with ordering groceries online. However, consumers are still not familiarized with buying from online grocery stores. This may change once an online grocery shopping marketplace wins the trust of consumers.

Market Leaders in Online Grocery Shopping Industry

Amazon owns the largest market share of U.S. food and beverage ecommerce sales in 2019 at 32.7%. But Walmart, Target, and Kroger are all leveraging their sizable brick-and-mortar footprints and click-and-collect capabilities to aggressively ramp up their sales and challenge Amazon. Other popular names in this segment are:

Popular Online Grocery Shopping Stores
  • AmazonFresh
  • Koninklijke Ahold Delhaize N.V.
  • Fresh Direct
  • mySupermarket
  • NetGrocer
  • Wal-Mart
  • Safeway
  • ShopFoodEx
  • Schwan Food Company
  • My Brands

Business Model for starting an Online Grocery Shopping Marketplace

Every niche brings with it some unique set of challenges that the admin and the seller have to keep into account to provide maximum satisfaction to its customers.

The most prominent challenge for the entrepreneur would be to keep a check on delivery and logistics. Below is the primary business model that any online grocery shopping marketplace must follow to provide the best experience:

  • The user registers on the website through the email address or social logins.
  • Selects the location where he/she wants the groceries to be delivered.
  • Browses items from the website and adds them to the shopping cart.
  • Makes the payments and selects the preferred date and time of delivery.
  • The seller receives the order and immediately starts with the logistics to procure and deliver the desired item.
  • The seller will receive the payment, which is being transferred to the vendor’s wallet after the commission is deducted.
Multi-vendor grocery business model

Aggregator Model

In this model, companies partner with existing grocery stores or supermarkets to collect orders and then deliver them to the customers. This model is prefered by entrepreneurs as it reduce the cost of warehousing.

Store-pick up model

Consumers can order the grocery through the website and pick up the order from the store according to the preferred time. There is a scope for retailers to enter into the online-grocery space through click and collect model since it is less intimidating than door-to-door service.

Pure-Play and Warehouse-pick Model

This model is followed by those businesses that do not have a brick and mortar store, and neither work on the aggregator model. The grocery seller has to buy directly from the manufacturer or producer and store it in his warehouse.

Revenue Model of the Online Grocery Shopping Marketplace

It means the mode through which the entrepreneurs will earn money. Some sources of revenue are:

Commission: The first source for any marketplace owner is to collect commissions on each transaction. The commission rate can be finalized by the admin beforehand. When an order is placed, the amount is received by the admin after deducting the commission, the amount is sent to the seller.

Premium Membership: A membership plan can be offered to the seller who wants to list a certain number of products. Depending on the number of products listed, the amount will vary. Extra benefits may include - advertising their products on the homepage. Premium membership can also be availed by a buyer who wants quick delivery.

Advertising: Due to the hefty amount of traffic that a grocery website experiences, a lot of brands would want to partner with the website for advertising. Through display ads and PPC, the grocery shopping marketplace can enjoy a lot of revenue by redirecting the website traffic to relevant websites.

Challenges Faced By Online Grocery Shopping Marketplace (With Solution)

Delivery, storage, operational cost: The delivery, warehousing, and operational cost are one of the significant chunks where the revenue of the online grocery marketplace is utilized. The price goes on increasing every year. Marginalized profits, the dissatisfaction of customers, and the management of perishable items are some of the significant reasons the operational cost rises for an online grocery shopping marketplace. Solution:Some online grocery shopping marketplace owners prefer to work on the aggregator business model to save them from the initial investment. However, in the beginning, the operating costs are likely to be more than the revenue itself. By incorporating smart management strategies and systems, the operating losses can be minimized to a great deal.

Inefficiency in Delivering Groceries: This is because relying on a delivery executive for delivering perishable items is extremely difficult. Late delivery, lost packages, quality of the items delivered, etc. are some of delivery related issues faced by customers of an online grocery shopping marketplace. Solution:One solution can be to provide training to staff members on effective delivery practices. Another solution for this can be to reward delivery executives for excellent performance.

Inventory Management: Most owners are not able to manage the inventory, thus spoiling the shopping experience of the end customers. The user experience is affected when the "Out of Stock" message is displayed after the product is added to the cart. Solution:You can launch your online grocery shopping marketplace with a solution that provides effective inventory management features, which may ease the job for the Entrepreneurs and also offer a better user experience.

Opportunities For An Online Grocery Shopping Marketplace

Early Movers have an advantage

Customer expectation about each element of the experience is being shaped by the offering that the industry giants have to offer. For instance, the type and speed of service - which is evolving as quickly as new startups are coming in the industry.

For Example, Amazon and Instacart are offering same-day delivery in major cities across the United States. There was no need for it, nor were people clamoring for it, but after seeing the value, people’s expectations grew.

Other changes which are influencing consumers are:

  • Order tracking and delivery slot notifications
  • Expanded assortments
  • Online and in-store price matching
  • Low per-order fees
  • Attractive subscription plans

Changing Consumer Habits And Preference

Consumers' habits and preferences change according to their demographics. Take, for instance, in the U.S., where the majority of the people are millennials. In the U.K., millennials seek healthier food and want to know where their food is coming from. They expect companies to be socially and environmentally responsible for their products. At the same time, they expect deals and discounts.

Understanding the demographic in which you want to sell is highly relevant. Especially in the case of grocery, one common habit of baby boomers and millennials is they do not prefer to cook. This trend brings in a new opportunity for the online grocery shopping marketplace to sell pre-cooked meals on their website.

New and innovative technologies

Two factors on which the customer relies the most are - experience and delivery. Innovative technologies have come up to improve these two factors to increase the conversion rate of the website.

Automation in the delivery of groceries and pick up facilities have helped customers in getting the things they need almost immediately.

Entrepreneurs have to keep a keen eye on technologies and innovations that are in the market. Investing in developing innovative technologies can help gather traffic and conversion on the website.

Keep an eye on technologies and innovations that are in the market to get more traffic and conversion on the website. Click To Tweet

Essential Features Of An Online Grocery Shopping Marketplace

Cart Sharing & Multi-cart Checkout: The entrepreneur should understand that groceries are standard items that can be purchased by different people in a household. Cart sharing and multi-cart checkout gives the freedom to the customer to share the cart with loved ones and checkout together.

Delivery Scheduler: The website should allow customers to schedule the delivery of their groceries according to their time preference.

Repeat Order: The website should allow customers to repeat their orders in just one click so that they do not have to select the items again and again.

Catalog Management: There are several categories with base products and specifications. Make sure that the online marketplace platform that you choose has a catalog management feature.

Review and Rating: This feature can enable customers to leave reviews and ratings for the product they purchased.

Buy Online and pick up in store: - One of the immensely popular and fairly popular functionality of online grocery websites. The customer can order items online via the website and pick up the order from the store or a pick-up point. This way the customers get the grocery timely and the website owner can save the delivery costing.

Multiple Payments: Customers want choice when placing an order, and they want the payment option which they prefer. An online grocery shopping marketplace must have various payment options, including COD.

Product Return: Some products can be returned and a whole list of products that cannot be returned as they are perishable. Adding returnable or non-returnable options with the product will help streamline the process.

Membership: An online grocery shopping marketplace should be able to earn revenue by premium membership option. Additional benefits can be given to premium members like free delivery, quick delivery, bonus points, extra discount, etc.

Reporting and analytics: Reports and analytical data should be present for the admin and seller to check to devise a plan for the coming months or to set goals for future. The sales count, visitor count, revenue increased, profit margin etc. to be showcased on the homepage of the admin / seller panel.

Smart Recommendation: for grocery shopping there are some people who abide by the grocery list that they have created but there are quite a few customers who just like to shop. Smart recommendation will help target these customers to buy more and more products through the website.

Multilingual Functionality: If you are planning to launch your online grocery shopping marketplace in the global market. Then the multilingual functionality will help you easily expand to any country or region.

Tips To Succeed In The Online Grocery Sphere

Understand what drives the shoppers: Regardless of the price, experience, choice, quality, and convenience, understand what brings in the traffic that your website needs.

Add value through digital experience: People have become tech-savvy these days, and they can quickly determine if a brand can add value to their lives.

Consider channels holistically: Understand different channels and respect the difference between channels. Each channel should complement each other and drive sales.

Know your Shoppers: As marketing is going more towards personalization, the business has to keep a tab on what influenced the customers to make the purchase decision. Use this knowledge to create micro-moments throughout the website.

Measure and Adjust: Monitoring customer behavior on the website is essential to yield maximum ROI.

Establish Credibility and Exceed Expectation: Check the concerns and resentment people have with buying products online. Such issues should be resolved by creating buyer-friendly policies.

Make it Easy: The website and mobile app should have a similar user experience, which allows a customer to add products in the cart quickly and checkout.

Understand the Market: Study the market thoroughly. There is no one size fits all solution, so entrepreneurs have to put extra effort in analyzing the market.


All over the world, consumers are shifting to digital for their everyday needs. Grocery being a daily need, people want convenience and want to avoid standing in line to get groceries. The demand is increasing, and there is still a gap in the number of the marketplace for online grocery shopping. Understanding the pain points of the customers and investing in the right platform and technology is essential for being an entrepreneur in the digital world.

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