How to start a grocery delivery business

Before launching your new venture, give it the best chance for success by understanding these key points.

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Over the last few years, the demand for grocery delivery services has surged – and as a result of the COVID-19 pandemic, its popularity has skyrocketed even further.

If you're looking to capitalise on this booming industry and launch your own grocery delivery business, we've outlined all the steps you need to take to get started.

What is a grocery delivery business?

A grocery delivery business sources fresh produce from wholesalers to resell to customers at a profit. Grocery delivery businesses generally market their service online using a website with product information pages.

The skills you need

A comprehensive understanding of the intricacies of running a business and how the grocery delivery industry works are essential. Having excellent problem-solving skills and being a strong communicator, so you can deal with any issues that may come up, are also important. To stand out from the competition, consider a niche market such as farmers market produce or organic fruit and vegetables.

man delivering groceries

Business courses

While there's no set requirement to have a qualification to run your grocery delivery venture, understanding how to run a business is important. If you'd like to look into some extra study, a range of business courses are available in-person and online.

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    Buy the right equipment

    • Vehicles. Reliable vehicles for deliveries are a must. Keep in mind that there are special vehicle requirements for transporting perishables like meat or dairy.
    • Storage. If you store groceries on your premises or with a grocery store shopfront, you'll need shelves and fridges to store food in a way that meets Safe Food Australia's mandatory standards.
    • Software. CRM (or customer relationship management) software will assist with building relationships between the business and customers, as well as help to retain and grow your customer base.
    • Website. You'll also want a user-friendly website. Equip it with features to allow customers to order groceries online, including:
      • Product information pages
      • A shopping cart
      • Checkout process
      • Order tracking

    To keep your website up and running, you'll also need a quality web hosting platform.

    Choose a business structure

    Before starting your grocery delivery business, you'll need to decide on a business structure. These structures have different legal requirements and determine things like your liability and tax implications. The most common business structures in Australia are:

    • Sole Trader. A Sole Trader is a one-person business and is a relatively simple structure to set up. However, Sole Traders also have unlimited liability should the business incur losses – meaning potential creditors have the right to claim against your business and your personal assets too.
    • Partnership. A Partnership is two or more people going into business together. Partnerships can be general or limited. In a general Partnership, the partners manage the business together sharing legal liability. In a limited Partnership, one or more general partners will have unlimited liability while the other partner/s hold only limited liability.
    • Company. A Company is considered a separate legal entity from the owner/s, therefore the risks lie with the Company rather than you personally.

    If you might expand your grocery delivery business throughout Australia and overseas, a Partnership or Company structure will be the best option for you.

    Register your business

    Before launching your grocery delivery business, it's important to get all your legal documents in place. Here are some important documents to consider:

    • Wholesale Agreement. If you're contracting with a wholesale supplier, you'll need a Wholesale Agreement setting out the terms between the supplier and you, the buyer.
    • Partnership Agreement. If you're entering the business in a Partnership, a Partnership Agreement outlines each person's roles and responsibilities.
    • Website Terms and Conditions. Website Terms and Conditions are a type of "catch-all" for many legal disclosure requirements including consumer guarantees under the Australian Consumer Law, as well as policies for things like delivery, returns and refunds.
    • Website Privacy Policy. If your website is collecting customers' personal data, you'll need a Privacy Policy covering how the information is collected, used, stored and managed.
    • Employment Agreement. If you hire employees, it's a legal requirement to have an Employment Agreement that includes the responsibilities of the employee and their payment.

    You'll also need to meet the requirements of the Australian Consumer Law while operating your grocery delivery business. You can find legal advice and services available online, as well as templates which you can compare below.

    Name Product What's offered? Starting price to become a member Annual Fee from Free legal documents available?
    Lawpath
    Legal documents and templates, Access to lawyers, Legal guides, Legal advice
    $79 per month
    Essentials: $288, legal advice: $828
    You can view samples for free and you can create your first document for free.
    Choose an annual plan from just $288 and get unlimited revisions to your legal or business documents. Plus, unlock exclusive partner offers.
    LawDepot
    Legal documents and templates, Legal guides
    $4.99 per month
    $59.88
    Free one week trial available which gives access to hundreds of documents.
    Customise and download legal documents in as little as five minutes. Plus, LawDepot offers peace of mind with two service guarantees.
    Legal123
    Legal documents and templates, Legal guides
    Varies per template
    N/A
    No
    Legal123 offers a range of individual templates or document packages for consultants, app developers, personal trainers and more.
    LegalVision
    Legal documents and templates, Legal guides, Legal advice
    $49 + GST per week
    $2,548 + GST
    No
    Your business can take advantage of unlimited lawyer consultations, fast turnaround times and free legal templates with LegalVision.
    Law Central
    Legal documents and templates, Legal guides
    Free for the Silver membership
    Gold: $99
    You can view samples and create your own document for free with the Silver membership.
    Law Central offers a large number of legal templates for super, trusts, estate planning, employment and commercial uses.
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    Essential paperwork

    • Business plan. A business plan is essential when starting any type of business, especially if you're planning to apply for finance through a bank or investor.
    • Licences. As a grocery delivery business, you'll need a food licence, food transport licence and drivers' licences for you or any employees delivering the products. Licensing and permit requirements differ state by state, so check your relevant state authority to see what's needed.
    • Tax accounting. If your annual business turnover is $75,000 or greater, you have a legal requirement to pay goods and services tax (GST) on all sales. If you employ staff, you'll also need to make pay-as-you-go (PAYG) instalments. Read more on where to begin at tax time if you run a small business.
    • Insurance. To help protect your grocery delivery business from risk, you'll want to consider business insurance, Public Liability Cover, commercial car insurance, equipment insurance and Income Protection Insurance.

    How much to charge your customers

    To work out your pricing, factor in all of the costs involved with running your grocery delivery business. This ensures that the sale price of your products generates a profit while still remaining competitive with other businesses on the market.

    Researching competitors will also help you get a ballpark figure for what customers will expect to pay.

    For example, at the time of writing, delivery fees from some of the larger supermarkets in Australia can cost as little as $4 or as much as $20 depending on location, delivery speed and the value of your order.

    Some companies will even waive delivery fees altogether for orders over a certain amount.

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    Frequently asked questions

    How can I find customers?

    Tools you can use to create awareness for your grocery delivery business include:

    • Word-of-mouth recommendations
    • Display signage

    Is a grocery delivery business profitable?

    Yes, it can be highly profitable if you set up and run your business well. Keep a close eye on where you're spending money and ensure that you implement efficient processes. For example, delivering orders to the same postcode in the same time window minimises travel costs.

    How can I increase my profits?

    Besides the profit margin on groceries, you can generate revenue through other avenues. For example:

    • Last-minute delivery fees. You could offer a "rush" service whereby a customer can order groceries to be delivered within a short time period.
    • On demand. You could set up an on-demand service. Rather than storing fresh produce that is perishable, you could collect groceries from a wholesaler only when a customer orders them. You need to factor in travel costs and stock levels for this.

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