In terms of attention, participation, and investment, grocery delivery is a massive business. Customers becoming more accustomed to online shopping and changing consumer behaviour have been key factors in the growth of online grocery in these markets. As a result, the grocery delivery sector is viewed as a very promising market. Similarly, the Indian grocery delivery industry was valued at USD 2.9 billion in 2020 and is expected to grow at a compound annual growth rate of 37.1 percent between 2021 and 2028. However, Swiggy Instamart, Blinkit, BigBasket, and Amazon Fresh are already on the market. Is there room for a new business?
A couple of successful instant grocery delivery startup founders created the Zepto business model. A couple of teenagers founded the company. Zepto recently raised $100 million to fund its operations. This funding round, led by Y Combinator, increased Zepto’s valuation to $570 million in just five months after they began operations in India. The Zepto business model operates in India’s thriving quick commerce sector. Zepto was founded by Aadit Palecha and his childhood friend Kaivalya Vohra, both of whom were 19 at the time.
Both Zepto founders were studying computer science at Stanford University when they dropped out to pursue quick commerce in India. The Zepto business model guarantees that your groceries will be delivered in 10 minutes. The company launched in Mumbai in 2021 and has since expanded to Delhi, Bangalore, and four other major cities. The online grocery delivery business is already taking off in India, where a $1 trillion retail market is anticipated. The majority of your retail spending is spent on groceries.
When Did Zepto Came in India?
Even the startup’s arrival in India was remarkable. Kaivalya Vohra and Aadit Palicha had both returned to India for a vacation shortly before the coronavirus pandemic hit. Both of these teenagers had previously collaborated on a number of other projects. They created a ride-hailing commute app for school-aged children. However, when they arrived in Mumbai, they found themselves locked in their homes. Both teenagers were struggling to get their groceries as the pandemic raged mercilessly. This was despite the fact that the government classified grocery deliveries as essential. They saw the need for an online player in India’s grocery delivery sector. Despite being one of the world’s largest markets,
Dark Store Model of Zepto Business
Dark stores may appear sinister, but they undercut one of the many brilliant ideas that have helped several retail businesses survive the pandemic. Dark stores are distribution centres that are not open to the public. These micro warehouses fill orders quickly and accurately, providing shoppers with resources and options such as purchasing products online, same-day delivery, or in-store pickup.
According to the founders, the magic of the dark store model is how they pick, pack, and ship goods in under 60 seconds. The last mile, on the other hand, is similar to any other delivery model.
Such a model has been implemented in developed countries, but it has never been investigated in the Indian context. The “dark store model” eliminates the minor issues that any delivery service faces, such as traffic congestion, navigation, and connectivity. According to Zepto, the network’s performance has improved by utilising location intelligence, geography, population, road patterns, traffic dynamics, weather, last-mile supply availability, real estate values, and so on. It now has over 40 dark stores in various locations.
Dark stores, on the other hand, are designed for quick deliveries and cannot handle high sales volumes. However, Zepto refused to accept this model’s flaws. They have over a thousand products on display, including fresh produce, milk, meat, kitchen supplies, and much more at the best prices.
Furthermore, their AI-powered tools ensure a seamless transition from picking to packing to delivering.
$100 Million of Funding
Zepto’s new funding comes just 45 days after they raised $60 million at a valuation of $225 million. This information was provided by Aadit Palicha, the CEO and co-founder of Zepto, during one of his interviews. Aside from a significant contribution from Y Combinator’s continuity fund, the Zepto business model was also successful in attracting investments from existing and new players such as Nexus Venture Partners, Glade Brook Capital Partners, Breyer Capital, and a Silicon Valley investor named Lachy Groom.
Competition of Zepto
However, in India, the Zepto app is up against stiff competition in the form of Blinkit. It is a Softbank Group Corporation-backed startup. Dunzo, which is backed by Google, is another competitor Zepto must contend with. Swiggy’s Instamart is backed by Naspers Limited. Flipkart is backed by Walmart Inc. and other companies such as Amazon.com Inc. However, the startup Zepto is rapidly expanding, and the company’s core unit economics are quite strong, according to CEO Palicha.
How Zepto Provide The 10-Minute Delivery
The Zepto business model’s concept of 10-minute delivery has proven to be a game changer. This was conveyed by Zepto’s other co-founder, Vohra. He is also the organization’s chief technology officer. This new funding also means that the Mumbai-based startup can expand its team and expand into newer markets and cities to broaden its reach.
This brings us one step closer to Zepto’s second method, the “dark shop model.” Dark shops are essentially mini-warehouses that can serve all clients within a 3-kilometer radius. Locus is a one-of-a-kind product used by Zepto. This solution monitors the customer’s geostatistical data, traffic dynamics, and the time required for last-mile delivery. As a result, it decided whether or not to construct a new Dark Store in that location.
The Advantages of the Zepto Business Model
The Zepto Business Model has numerous advantages. We’ll mention a few in the blog’s following section.
1. Improved distribution and faster delivery
Zepto can now fulfil orders more quickly and efficiently thanks to the dark store. Furthermore, micro and cold warehouses provide multiple distribution options and bring groceries closer to a specific market segment. As a result, Zepto has greater control over market spread and distribution. It is yet another reason why Zepto is India’s fastest delivery app.
2. Improved and expanded customer reach
One of the most important aspects of dark stores is that they bring distribution centres closer to the consumers. The best thing about these stores is that they are always open for business and ready to take orders. It is what drives customers to such platforms and makes them use their services. As a result, it is one of the key elements that contributed to the success of the Zepto marketing strategy.
3. Contact-Free Shopping
There is no denying that the need for contact-free shopping is a critical factor in businesses adopting the “dark store” strategy. The dark stores allow customers to buy groceries without having to enter a physical store. All you have to do is place orders, and they will be delivered immediately.
4. Improved Inventory Control and Product Selection
Because they chose dark stores, Zepto’s business model and marketing strategy were successful. The dark stores are customer-free zones, and they have better inventory control. As a result, they can easily handle higher order volumes. Furthermore, the dark stores are designed to be easy to navigate, allowing packers to move quickly and pack the items in an order. Additionally, the AI-powered tools track inventory stock and provide product assortment.
How Business of Zepto Works
Zepto operates more than 100 dark stores or micro fulfilment centres in high-demand neighbourhoods. These dark stores employ technology to perform tasks such as product placement. Other responsibilities include determining store locations and mapping delivery routes to avoid heavy traffic congestion. The company already delivers over 2500 items, including cooking essentials, fresh produce, personal care items, snacks and beverages, and home cleaning supplies.
Zepto’s founders apply an execution model similar to Doordash to their q-commerce Zepto business model. Anu Hariharan, a partner in Y Combinator’s continuity fund, revealed this information. This amazing startup is adding 100,000 new customers to their list every week.
Challenges For Zepto
- Retainers – Because the majority of these organisations already have significant retainers, Zepto finds it more difficult to acquire and retain customers.
- Income economies – “Economies of scale” is the third thread. Swiggy, Big Basket, and Grofers will have more cash than Zepto because their daily earnings are likely to be quite substantial, and they have also been provided with investment.
- Price Power Maintenance – Quick deliveries are very expensive, especially if there are no delivery fees. Running low prices and speed at the same time is much more difficult, and it necessitates a significant amount of cash flow and funding.
Conclusion:-
Zepto’s marketing strategy has assisted the brand in becoming India’s fastest delivery app. The Zepto app intends to expand into newer cities as soon as possible. They also intend to expand their reach into micro-markets and become industry leaders. Several other competitors are attempting to enter the market and grow quickly. They cannot, however, consistently guarantee 10-minute delivery. Zepto is a detail-oriented and intense company with technical and operational discipline that enables them to meet 10-minute delivery.