Quick Commerce and Zepto: An Overview

Background

• Pre-2020 E-commerce in India: Slow and fragmented; followed a US warehousing model.
  • Products stored in warehouses on the city outskirts, then delivered to customers.
  • Problems: Long wait times (2-3 days); ineffective in a market saturated with nearby Kirana stores.

Founders of Zepto

• Origin: Aadit and Kaivalya during the pandemic.
• Inspiration: Instacart (US company, $13 Billion valuation).
• Key Insight: Time is of the essence for Indian consumers.
• Initial Attempts: Started local grocery deliveries using WhatsApp (Kiranakart).
• Challenges: Found that the service was needed only during lockdowns.

Pivot to Quick Commerce

• Rebranding: Kiranakart became Zepto in April 2021.
• Model Change: Adopted dark-store model.
  • Suggested by Suvir Sujan, co-founder of Nexus Venture Partners.
  • Funding: 6.5 Million dollars in Series A round from Nexus Partners.

Success Factors

• Efficiency: Key to Zepto's success.
  • Daily Orders: 520,000 from 360 dark stores (~1450 orders per store per day).
  • High revenue generation: 580,000 Rs daily per store.
  • 75% of dark stores are profitable.
  • Expansion Plans: Double dark stores to 700 within a year.
  • Tech and Optimization: Packers informed of efficient packing order, local delivery hiring, redesigned delivery bags.
• Private Labels: Launched 'Relish' (fresh meat brand); aiming for 1000 Crore Rs revenue in a year.

Challenges

• Delivery Fees: Issues with Zepto Pass implementation.
  • Hidden manual removal of fees even with free delivery pass.
  • Pricing of passes: Currently discounted, future price hike may discourage users.
  • Example from Swiggy: Market share drop after increasing fees.
• Zepto Cafes: Attempt to deliver quick snacks.
  • Previous failures from competitors (Swiggy Instacafes, Zomato's 10-minute food delivery).

Future Ambitions

• Target: Becoming the next DMART of India in 18-24 months.
  • Current and Target Valuation: DMART ($37 Billion) vs Zepto ($3.6 Billion, needs to grow 10x).
  • Market Focus: Indian grocery market projected at $850 billion by FY29.
  • Consumer Spending: 40% directed toward groceries.
• Financially Ready: Recently raised 665 Million dollars; aims for IPO in 2-3 years.

Conclusion

• Zepto's Journey: Transformative growth in a traditionally slow sector.
• Replicable Model: Quick commerce now adopted widely in the Indian e-commerce sector.
• Prediction: On the right track to significant success, but various challenges need careful management.