How to start a grocery delivery business

Over the last few years, demand for grocery delivery has surged. As a result of COVID-19, 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 rounded up the important considerations you'll need to get your head around first.

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What skills, knowledge or requirements do I need to start a grocery delivery business?

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 really strong communicator to deal with any issues that come up are also crucial.

What courses or qualifications do I need to complete?

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

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Equipment and software needed to start a grocery delivery business

Reliable vehicles for deliveries are a must and keep in mind that there are special vehicle requirements to meet for transporting perishables like meat or dairy.

If you store groceries on your premises, you'll need shelves and fridges to store food in a way that meets Safe Food Australia's mandatory standards. Elsewhere, CRM (or customer relationship management) software will assist with building relationships between the business and customers as well as helping retain and grow your customer base.

You'll also want to your website is user-friendly and equipped with features to allow customers to make their grocery orders including product information pages, shopping cart, checkout and order tracking.

To house your website, you'll typically need to use a web hosting platform.

What business structures do I need to consider?

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.

How do I register my business?

Check whether the business name you'd like to use is available using ASIC's business names register search tool then register for an Australian Business Number (ABN). If you choose a company structure, you'll also receive an Australian Company Number (ACN). You can register a company name as well (again, check availability first) but this isn't compulsory.

Do I need any legal documents written up before I start operating? What about online legal services?

Before launching your grocery delivery business, it's important to get all your legal documents in place. Here are some important ones 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 of a business's 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. There's plenty of legal advice and services available online as well as templates (see below).

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What other systems do I need to have in place when starting my grocery delivery business?

• 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.
• Licenses. 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 GST on all sales. If you employ staff, you'll also need to make 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 should I charge my customers?

When working out your pricing, you'll need to factor in all of the costs involved with running your grocery delivery business ensuring that the sale price of your products generates a profit while still remaining competitive with other businesses on the market.

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Frequently asked questions

How can I build up my customer base?

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

• Social media.
• Advertising.
• Marketing initiatives, like CRMs campaigns and promotional competitions.
• 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, it would be wise to deliver orders to the same postcode in the same time window to minimise travel costs.

How can I increase my profits?

Besides the profit margin on groceries, you can generate revenue through other avenues such as offering a "rush" service whereby a customer can order groceries to be delivered within a short time period.