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Zepto business model: All you need to know

Zepto business model: All you need to know

The grocery delivery business is flourishing in terms of attention, involvement, and financial commitment. The main drivers of the expansion of online grocery in these markets have been shifting consumer behaviour and customers are becoming more acclimated to online purchasing. As a result, the market for grocery delivery is considered to be quite hopeful.

Similar to this, the Indian grocery delivery business, which had a valuation of USD 2.9 billion in 2020, is anticipated to increase at a CAGR of 37.1 per cent from 2021 to 2028. But there are already companies like Swiggy, Instamart, Blinkit, BigBasket, and Amazon Fresh. Is there room for a new company to start up?

Yes! An aggregator is not only flourishing; it is also upending the supermarket delivery business. Indeed, the subject at hand is Zepto.

Zepto is simply the fastest-growing business and the grocery delivery service. Zepto promises to bring groceries in under 10 minutes to your door. But how does the incredibly quick delivery work? Unlike other grocery delivery services, which often take 30 minutes. The heart of Zepto is included in this blog. Continue reading to the end to learn more.

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About Zepto

A startup in Mumbai named Zepto provides a 10-minute grocery delivery service. Zepto is a startup founded by Aadit Palicha and Kaivalya Vohra that specialises in quick grocery delivery business.

Zepto is praised for being an expert at delivering food before the new year. In 2021, it produced more than one million deliveries while collaborating with 86+ owners of dark stores in thirteen different locations. Zepto uses its network of “cloud shops” or “micro-warehouses” to fill orders quickly.

Zepto’s key to success is its ability to regularly manufacture over 2,500 items for delivery in less than ten minutes. Everything the company does is centred around that, which is how they’ve been able to expand so swiftly while keeping amazing client loyalty.

The Parel-based speedy grocery delivery business has reduced the time it takes to deliver groceries to only 10 minutes, thanks to the dark store concept. Rapid commerce is reportedly the next big opportunity the grocery delivery industry wants to seize. Among the fastest-growing businesses in the faster-delivery industry are startups like Zepto in India and Fridge No More in New York City.

Zepto – Industry

Zepto: Industry The $1 trillion retail industry in India, where groceries account for the great majority of consumer expenditure, is helping e-grocery delivery gain pace. The Indian e-grocery market was estimated to be worth $2.9 billion in 2020, and from 2021 to 2028, it is anticipated to increase at a rate of 37.1 per cent.

Due to changing consumer preferences, increasing urbanisation, and a tech-savvy population that prefers to make purchases online, the industry has seen an increase in prominence over the past few months.

According to a RedSeer report, the fast commerce market will be worth $30 million by 2021. The same market was expected to rise by 15X to $5 billion in 2025.

Consumers increasingly use specialised and practical internet platforms for food shopping instead of going to their neighbourhood stores as their standard of living rises, and their daily schedules become busier.

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The appeal of internet grocery delivery business was more apparent after the COVID-19 outbreak. Due to social distance restrictions, consumers are switching to online food shopping because it is not only practical but also secure.

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Zepto – Founders and Team

Aadit Palicha and Kaivalya Vohra, two childhood friends who are both 19 years old, founded Zepto after leaving Stanford University’s esteemed computer science department to go back to their native India and launch a business. The business started operating in April of this year after being created in September of the previous year.

Aadit Palicha

The CEO and Co-Founder of both Zepto and KiranaKart is Aadit Palicha. Palicha completed a Bachelor’s degree in Computer Science at Stanford University after earning an IB diploma in Mathematics and Computer Science from GEMS Education. Following the completion of Y Combinator Grade: W21, Aadit began working as a Project Lead for PryvaSee. Then, at the age of 17, Aadit Palicha launched GoPool, his first firm. In April 2020, he quit the company and started KiranaKart and Zepto.

Kaivalya Vohra

Kaivalya Vohra is a co-founder and chief technology officer of both Zepto and KiranaKart. He attended Y Combinator with Aadit and has a computer science degree from Stanford University.

The number of employees at Zepto ranges from 51 to 200.

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Zepto – Startup Story

Even those of us who are the most creative struggle to see through our “startup ideas,” which are many. Palicha and Vohra had both enrolled at Stanford to pursue degrees in computer science but had left to pursue their interests in entrepreneurship.

Zepto was born out of the constraints of their homes during the Covid-19 outbreak. Groceries and other necessities would arrive in a few days due to increased demand for delivery services, leaving a gap for speedy delivery. Zepto was then developed using all of this knowledge.

These youngsters worked together on numerous initiatives, including a ride-hailing app for children, before being abruptly imprisoned in their Mumbai homes due to Covid restrictions. As the virus spread across the country, grocery delivery business—which local authorities still considered to be important—was still allowed in many areas. Still, the two struggled to receive their supplies as the epidemic grew.

Zepto is getting all the limelight, but Palicha and Vohra’s initial business, KiranaKart, did not get the same attention. On the other hand, Zepto draws inspiration from KiranaKart. KiranaKart was a grocery delivery business, as its name suggests. With Kirana traders, it has made arrangements to deliver groceries in 45 minutes or less. Global Founders Capital, 2 AM Ventures, Contrary Capital, and angel investors led a $730,000 pre-seed investment. At the time, Vohra and Palicha intended to charge Rs 1 for the initial 1.5 lakh delivery.

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Zepto Business Model: Dark Store model

Dark storefronts may appear ominous, but they undercut one of the many clever strategies that have kept some retail establishments afloat during the pandemic. Dark stores are distribution centres that aren’t accessible to the public. These small warehouses efficiently and precisely fill orders, giving customers access to resources and choices, including online shopping, same-day delivery, and in-store pickup.

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The founders said that the dark store model’s brilliance is how quickly they pick, pack, and ship merchandise. The last mile is similar to every other delivery strategy, though.

A similar methodology has been used in Western countries, but it has never been investigated in the Indian setting. The “dark store model” eliminates the minor issues that any delivery service experiences, such as traffic jams, connectivity, and navigation. According to Zepto, the network’s performance has improved due to the use of location intelligence, geography, population, road patterns, traffic dynamics, weather, last-mile supply availability, real estate values, and other factors. Additionally, it currently operates over 40 dark stores across several locales.

Dark stores, however, can’t handle high sales volumes because they’re designed for rapid deliveries. Zepto, however, refused to make allowances for this model’s flaws. They have nearly a thousand items on display, including the finest deals on fresh vegetables, milk, meat, and kitchen supplies. Additionally, their AI-powered technologies guarantee a seamless changeover between selecting, packing, and shipping.

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Benefits of Zepto Business Model

  • Improved Distribution and faster delivery

Zepto can fulfil orders more swiftly and effectively thanks to the dark store. Micro and cold warehouses offer various distribution options, which also physically deliver groceries closer to a particular market group. Zepto can better regulate the distribution and market spread thanks to this.

  • Broader Customer Reach

The dark stores make distribution hubs more accessible to customers, and they accept orders 24/7 online. Customers are drawn to these platforms and employ their services as a result.

  • Contactless Shopping

The need for contact-free shopping has primarily influenced businesses’ adoption of the “dark store” strategy. Dark stores enable customers to buy food without interacting with other people or going into a physical store. They put things online and have them delivered right away.

  • Improved Inventory Control and Better Product Assortment 

Dark stores have no customers, greater inventory control, and can handle higher order quantities. Packers can move as swiftly as possible to pack the things in an order thanks to the dark stores’ convenient navigation. Additionally, Zepto’s AI-powered solutions maintain product assortment and inventory stock tracking.

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Zepto’s USPs

Zepto’s business strategy is absolutely focused on providing quick service to customers. Zepto, however, also offers several selling factors that distinguish it from its rivals. Nevertheless, the model also takes these into account.

Zepto is known for its rapid commerce and instant delivery. It claims to have a median delivery time of 8 minutes, 47 seconds and completes grocery deliveries in under 10 minutes.  

According to the founders, by the time a user verifies his order, it has already been dispatched for delivery. Additionally, practically all orders are completed in less than 10 minutes, although 1% of them may require 15–16 minutes or even longer.

Zepto offers free shipping. Although this USP pales compared to the first, there are no delivery fees. At the same time, other companies like Instacart, Amazon Fresh, and others charge a delivery fee.

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Free service does not imply more expensive goods. It offers some attractive discounts on the mentioned goods and foods, which is still another USP.

Zepto – Future Plans

The Mumbai-based company will use the money to expand its clientele, hire more staff, and open more dark stores in new cities. Bengaluru and the Delhi-National Capital Region have it already, and Hyderabad, Chennai, Pune, and Kolkata will get it within the next 30 days.

It plans to open 100 dark enterprises by the end of the year, covering about 100 pin codes. By the end of this year, quick commerce is expected to reach $300 million, and by the year 2025, it will grow to $5 billion.

No one in India has fully grasped marketing, according to co-founder Palicha. He continued by saying that when you look at a few older organisations who are trying to follow this strategy, you’ll discover that many of them lack the consistency to run on a single model and are unfocused. They engage in various activities, which is the biggest problem in every major company.

“We have seen our median delivery times stabilise if not decrease, mainly because as we scale our coverage and our expansion, it ends up being a factor of individual cloud stores and how they perform,” he said.

Express delivery is not a fresh idea; the majority of current e-grocers have tried it in the past, with varying degrees of success. These platforms have been bringing back quick delivery to customers, especially via the dark-store concept, in response to the Covid-19 pandemic’s quicker acceptance of online groceries.

Conclusion

Zepto has secured $100 million in Series C funding, valued at $570 million, led by Y Combinator’s Continuity Fund. The founders say that investments in Zepto will help it reach more customers and provide them with better service. As of now, Zepto operates in the Indian metros. However, it has not revealed its consumer count, but sources say Zepto is growing at 200% every month.

As we mentioned earlier, the 10 min grocery delivery service has disrupted the grocery delivery space. When it became clear that it couldn’t deliver groceries in under 10 minutes, Blinkit (December 2021) announced a temporary suspension of its operation in those locations. While the market leader Swiggy announced a $700 million investment in its grocery delivery business, Swiggy Instamart, and plans to complete deliveries in 15 minutes by January 2022. By the end of Q2 in FY22, Fraazo, a grocery delivery business with headquarters in Mumbai, plans to triple the number of its dark stores to 750. Dunzo and BigBasket are vying to enter the quick-commerce market.

Returning to Zepto, it takes a mix of a laser-like focus, swift action, and a resilient team. Additionally, it entered the supermarket delivery area at an excellent time.

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