The Grocery Delivery Tip

The Tipping Point

Tipping for grocery delivery services like Instacart and Shipt isn’t guaranteed.  Some customers even ask, “Should I leave a grocery delivery tip?”  In a previous post, I carefully detailed how not using grocery delivery services like Instacart and Shipt could save you $700+ annually but I know that the super convenience is a major selling point for delivery services.  I demonstrated how essential grocery items were marked up between 12-20% to help defray shopper/delivery fees and how you could easily choose your groceries online with Kroger or Walmart and pick them up without ever having to get out of the car.

Still, I know that many will find the ultra convenience of grocery delivery services too good to pass up and what’s 12-20% between friends?  Add the current delivery Instacart fee of $5.99 and service charge of 5% or a monthly subscription to Shipt for $8.25.  When you look at it that way, then you convince yourself that you’ve paid plenty and tips aren’t needed.  That’s what the premium price is for right?  And the delivery fee or markup should pay the shopper/delivery?

In a word, no.  The premium price you pay is for Instacart and Shipt to develop application interfaces between the customer and grocery inventory, slick, cutting-edge algorithms for shopper logistics, and the beginnings of food warehousing.  Instacart pays shoppers and delivery contractors by marking up groceries as one would imagine.  Kroger recently announced they are hiring thousands of employees to commit to improving customer satisfaction, and store experience but their online Clicklist orders are also growing.  Whether Kroger pays a part-time employee minimum wage to shop for online requests so that a delivery service can pick them up or a contractor completes the whole job, what this all boils down to are two things:

1. How much a customer is willing to pay for an item to be hand-picked and delivered.
2. How a Kroger or Walmart employee who provides shopping or picking services competes with a contract shopper.

If you care nothing about the logic in the rest of this post, know that you should always tip your grocery delivery person whether they shopped the items or not.  Instacart and Shipt pay delivery fees or item commissions based on what is purchased.  They sometimes bump prices up if there are long distances or heavy loads.  The problem is that sometimes, even those things don’t add up to much when you consider the time and vehicle investment.  What follows is the full analysis to help you understand why.

Do You Tip For Grocery Delivery

Yes.  Provide a grocery delivery tip to any contractor committed to customer service.  Groceries, ride-sharing, delivery, and food take out are different gig economy mechanisms for someone to give you a service and make a living.  Those individuals live and work in your communities; they aren’t in air-conditioned spaces somewhere in San Francisco.  Instacart pays their contractors for delivery and picking items.  I spent an average 1.33 hours on each customer for the full shopping and delivery service as an example.  I know this because of the data I collected.

So that leaves us with two fundamental questions because we already know you should tip.

1. How much should you tip for grocery delivery?
2. Should you tip cash or use the mobile app or website?

First: How Much Should You Tip

For a moment I want you to think back to a time you were in a restaurant an had table service.  Did you tip?  I’ll bet it was a genuine effort to add 10-20% to the check for a tip.  You probably spent at least an hour being waited on while the attendant came to your table several times to check on your needs.  You probably paid 400% of the fundamental food ingredient values just for the privilege of ambiance, table service, sweet music, and maybe an eclectic crowd.  Then you added a tip.

I probably couldn’t say it any better than Shark Tank Businessman, Kevin O’Leary, when he says, “Tipping is an investment.  If you’re investing, and you want to establish a relationship, and you get great service, put a 20 dollar bill down.”  That’s on top of your original tip!  He goes on to say, ” that [20 dollar bill] is theirs, and you’re showing respect that they don’t get from anybody else.  You’re saying to them, you were great to me, and I want you to remember me, I’m investing in you.”

He makes an excellent point about investing in the relationship.  Count how many times you’ve had table service in the last 30 days.  Now count the number of times you purchased groceries.  That number probably isn’t that much different.

Since I’ve dabbled in grocery delivery contracting with Instacart I surprisingly found that 38% of my customers did not tip, but the ones that did I appreciated and valued.   In reference back to O’Leary’s comments about tipping: I did not forget the customers who tip me in cash.

This year, Instacart announced some changes in the way they charge for grocery delivery.

One day, I pulled into the customer’s driveway.  Immediately I noticed the Wounded Warrior and Veteran car tags.  A sound came from the garage, and a male voice said, “You can come through the garage door.”.  I grabbed my insulated bag plus two more paper sacks and headed in.  Mr. Customer asked as I placed the groceries on his table, “Is this bag yours?”, he indicated to the insulated bag.  “Yes, Sir, that keeps your groceries cold!”.  I finished unloading the groceries, and he continued to tell me about his last negative experience with grocery delivery.  I explained how to rate and detail any negative experiences.  That’s the only way they can be fixed, and often, a delivery person doesn’t understand what they are doing might not be exactly what you want.  Also, sometimes delivery drivers bring your groceries, and they don’t care how they were packaged.  He handed me $5.00 when I turned to leave.  His 9% tip was well received, and I will not forget how appreciative he was of my service.

Lesson:  You can’t base all of your tip amounts on prior experience and if you don’t let the person know that they are providing less than adequate service, how can they improve?  Thus, you should always tip,  aim at 15% for full-service shopping, 5-10% for delivery only, and 1-5% for less than marginal service with a suggestion for improvement.  If you refuse to tip anything, you are saying, “I know you live and work in the same community I live but I don’t think you are worth any added value.”

Reminder: Many of the groceries you order from Instacart and Shipt are already marked up 10-20% so why short the tip?

Second:  Cash or App?

A tip, is a tip, is a tip.  It truly is; it’s income, and grocery delivery contractors or shoppers are thankful for when they occur.  To give you some real data, I performed full shopping and grocery delivery services for 200+ Instacart customers as my test case.  In that number, eight times the grocery delivery tip was cash.  I remember the location and customer of the cash tips.  I was especially grateful $20 that a man with a walker handed me as I left his apartment building.  I also remember having some conversation with another customer as I placed his groceries.  After leaving, while in my car, I readied the next location in maps and suddenly he appeared at the door with $2.  I will not forget someone who suddenly realized the effort I  made and probably grabbed the last cash he had.

Note: My tips averaged $9.31 or typically 12% of the Publix cost of groceries (refer to a prior post to understand the cost of groceries).

And that, my friends, is the same amount Instacart marks up your Publix and Kroger groceries on average to provide you with the service.  Shipt is about 18%.

When you can, you should always provide the grocery delivery tip in cash.  This and other gig economy contracting jobs are the only ones where the hourly wage, or speculation of it, are fodder for social media.  It’s the only job where the wage is discussed at length and on the news.  Nowhere in corporate America do you sit around and ask, “Hey, how much you make an hour?“.  There is no privacy for the ride-sharing business owner.  They are always sensitive to the begging the question:  Just how much do you make at this side gig? 

I Never Have Cash

Okay, if you refuse to have the cash for tips then using the app is okay, but you only have (3) days to change that tip after the fact in Instacart!  If the default tip on Instacart is 5%, I highly suggest changing that to 10-15.

Living Versus Sustaining

I’m sharing my personal experience and test case because I want you to tip for the job your community is providing.  Ride-sharing, Shopping, and delivery services allow you the freedom to focus on other things or avoid tasks you hate.  They could offer a real living wage to your fellow community.  Companies like Lyft, Uber, Instacart, Shipt, etc., really don’t need to know how much tips contractors get.   Unfortunately, they do and adjust accordingly based on more data science, but you can do your part and tip in cash.  All of these gig economy companies can change their contractor rates at any given moment and often do.

You already know companies like Uber, Lyft, Shipt, and Instacart are not providing health care, retirement savings programs, or other necessities, so they don’t need to see what contractors get in tips.  They use that data to adjust earnings because data science may demonstrate that if they lower their delivery fees and markup prices maybe they’ll carve another million or two into funding to gamble on a future public offering.  If I damaged my car during my delivery work, I would have been unable to generate income and have no benefits to cover me.  It’s up to you to take care of your community by ensuring the disposable income that pays for things like 12-18% markup on groceries/food can also pay tips-and preferably in cash.

Grocery Delivery Tip Balancing Act

What do grocery delivery tips mean in a gig economy contractor’s ability to work for a living or sustaining wage?  Let’s take a look at what makes up the contractor pay.  Take a look at the following chart for March and April 2018.  The blue line is the delivery fees I earned, and the green line represents the item commissions (for grocery shopping).  Notice that most of the income is from item commission, not tips or delivery fees.  I completed more orders from April 1-23 than I did in the whole month of March.  That’s because my efficiency was increasing so I could finish more orders, but eventually, I would hit the ceiling due mostly due to continually onboarding contractors who perform part-time.

This is the March and April Income from Grocery Shopping and Delivery for all customers.

For a delivery only contractor, the green line would entirely disappear, and the bulk of their income would be in tips.

Let’s look at the chart in a different way.  I worked over 140 hours from April 1-24.  I grossed $1,534.00 for the month, and I averaged about $486 per week.  If we take out a $300 gasoline expense, what’s left has to cover mortgage/rent ($850),  Medical Insurance ($436),  Auto Insurance ($80), Mobile/Data ($80), Utilities ($150), Food/Personal ($400 )- I’m so in the red, there is no need to bother discussing paying for my own workers compensation insurance, Federal taxes, SS/Medicare taxes.  (Side note:  I got a $100 bonus last week for providing 5-star service to my customers.  All contractors strive for this bonus each week but only top 25% nail it.)

So what happens if every customer tips?  Let’s remove any customers who don’t tip and watch what happens to the income.

This is the March and April Income from Grocery Shopping and Delivery for tipping customers only.

The grocery delivery tip category become the significant proportion of income.  This means that if all customers tipped, I might avoid going into the red and rely less on the government to support me which would eventually happen at less than $20,000 per year.  If it continues, I could get subsidized healthcare that I would never use because I couldn’t afford the high deductible anyway.  How will I contribute positively to your community?

That’s Nice; But I’m Still Not Tipping

Let’s say that half of the almost 40% non-tipping customers just won’t tip.  It is part of the service fee, right?  The shopper got 40 cents per item! I paid the price for the delivery so I shouldn’t have to tip.  How many other service workers spend an hour carefully collecting something you’ve chosen with such specificity that no alternatives will do and get a delivery fee less than $5.00?  None.  There are contract shoppers who do.

I know many people who will spend over an hour in a salon chair, cash out in the $100+20%tip range and only leave with a fresh dye job or a new look.  But a weeks’ worth of food delivery doesn’t hold the same service value 38% of the time.  If you genuinely feel that way, then you do need to order your groceries via the Walmart interface and pick them up yourself.  That saves you tips, delivery fees, item fees, and the whole lot!

“Can I make a living with grocery delivery?”

Define living.  I belong to a couple of social media sites where ride-sharing (Uber and Lyft) or grocery delivery contractors attempt to share insights.  That question is often asked but rarely do they add a note detailing what their required living wage is.  There are some huge disparities in month/annual outlay for some.  Like health insurance.  I pay $437 monthly for health insurance that has a high deductible.  Others, who may have had a less than $30k annual income in previous years may pay less because of state subsidies.

Uber and Lyft have been in the news lately either decrying the incredible findings of an MIT professor’s and his team’s study or publishing their results.  I’ve driven for Lyft in the Atlanta area, and as long as you chase the power zones and follow Terry’s Tips, you should be able to get at least where Lyft says in the $16-$20 range.   Keep in mind that’s gross hourly wage, and with ridesharing, the miles rack up much faster. (Terry has the inside scoop on driving rideshare in the ATL, and some of his catchphrases are hands-down awesome.  I hope that if you hail a ride-share in Atlanta that Terry is at the wheel!)

With Instacart I paired my gross hourly wage down to two factors which I just showed you in charts above.  With tips or without tips – as you’ve seen it makes a huge difference.  Other than a healthy grocery delivery tips, other relevant variables impact an Instacart contractor’s hourly rate: unique item count.  Unfortunately with food delivery many treat the Publix like a sandwich shop and order a rotisserie chicken and a sub sandwich.  That’s a $.80 commission and $3.50 (typical day) delivery fee.  Add the average of 10 miles and what you have is the contractor working at a negative.  Even at 3 miles in Atlanta around 4:30, same thing.

But can you make a living working full time?  If only 60% of customers provide a grocery delivery tip it is impossible.  Let’s do a scenario:  If a customer shops 26 items and the contractor spends less than an hour shopping, picking, and packing, then travel to/from store and customers house, and all customers pay a minimum of 10% tip, then her estimated gross hourly wage is about $24.  If she works 40 hours in a week, then she’s making at least $3840 per month.  Not too shabby?  But I know after 200+ shops for customers that 26 (items) is not the typical or average order for my test, it’s 16.  There are too many customers ordering the minimum amount of groceries just to get over the stipulated threshold (Instacart is $35 as of this writing).  The problem is that the low dollar orders, delivery only orders, and non-tipping customers deflate the increased value orders and customers who tip.

The Grocery Delivery Tip Calculator

I’ve packed this blog post with facts and in-depth information pertaining to your grocery shopping and delivery contractors.  I hope the next time someone Google’s “How much should I tip grocery delivery” that it means intentions are to tip but not really sure where the figure comes from.

This is how you should calculate tips for grocery delivery:

1. Did you order groceries online and have someone bring them to you? Tip 10% of the total grocery bill and Go to #2.
2. Did you like the service and they shopped for you (not a corporate shopper with benefits)?  Add 5% to the 10% and Go to #3.
3. Did your experience go above and beyond?  Add 5% to the 15% and go to #4.
4. Tip in Cash whenever possible.

It’s that simple.  If you can pay a 10% premium on grocery prices and pay a company like Instacart and Shipt for the ability to do so, then adding a 10-25% tip should not be very hard.  Instacart and Shipt are companies that develop the interface between the customer and the food they want all the while charging premium prices.  It is peers in your communities who are shopping and delivering your food.