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Surge in on-demand grocery business, Zepto an emerging winner

The current era of technology has provided us with ample proof that ours is a generation which is hooked to their smartphones and other devices. They often look for things that would make their lives convenient and fast, and smart devise is the answer for them. This has resulted in the increase in demand for various instant solutions across the globe. While Uber was the first on-demand app which was introduced in the market, and proved to be a massive hit, it paved way for lot other businesses to start joining the on-demand industry bandwagon.

The days are long gone when people loved to visit offline grocery stores to purchase various things. With the advent of various on-demand grocery apps, it has become convenient for people to order groceries online from and get them delivered within a few hours. The last few years have witnessed a sudden surge in the demand for grocery apps. It is true that change in consumer’s purchasing pattern is a reason for this sudden surge, but the ongoing pandemic made the on-demand grocery apps a necessity. When the virus struck the world in 2020, people were advised to stay indoors and follow social distancing while in public. As consumers became more health conscious, online grocery apps were a saviour for them. Moreover, the new COVID variant, Omicron has caused a havoc in most of the countries around the globe. hence, its true when we say, that on-demand grocery apps are definitely here to stay.

Businesses have established that venturing into grocery start-up business is going to be a great deal. Hence, there has been a sudden surge in the grocery apps development. The global online grocery delivery market is dominated by giants such as Amazon, Walmart, Instacart etc. But if we look at the Indian on-demand grocery delivery market, names such as Bigbasket, Flipkart Supermart, Just Hap, Dunzo and Grofers are the leaders.

Recently, another start-up Zepto, has raised $100 million in a series C round, led by Y Combinator’s Continuity Fund at a valuation of $560 million. This marks a 2X jump from its valuation nearly 45 days ago, when it had bagged $60 million. The round witnessed participation from investors, including Glade Brook, Nexus, Breyer Capital, Lachy Groom, Global Founders Capital, Contrary Capital, among others.

Zepto’s co-founder and CEO Aadit Palicha has metioned that with the new funding, they plan to increase their workforce by 800, for its dark stores, supply chain, marketing, finances and operations. The 19-year-old co-founder said, "We have grown aggressively and are now present across major Indian metros. The current funds infusion will further help us expand to towns and cities beyond metros. We have a strong 400 members team now and are hiring 800 more in 2022-23 across various verticals."

The e-commerce industry has grown very quickly. The advent of COVID-19 has increased this growth, and as a result the industry has become highly competitive. The mantra to win for each player in this industry is to have a model which would make them stand out among others. Zepto has a unique execution model, which has spiked investor’s interest in the company. The company’s growth rate stands on an exceptional number of 200% month-on-month. Aadit Palicha believes, “the time we took to scale, is a fraction of the time which was taken by food delivery majors like Zomato and Swiggy.” Furthermore, he also said, "We are looking at our execution in the long-term in a more sustainable manner. Currently we have 100 dark stores strategically located which can handle large volumes as compared to most of our rivals.” Speaking about the highly-competitive quick-commerce delivery model, Palicha mentioned the concerns it lays on gig workers, the workers which work in a temporary job typically in the service sector as an independent contractor or freelancer. “Our rider workforce retention rate is 60 per cent, which is due to the fact that in our business, the workers are not expected to ride for long distances like food delivery service industry and are provided more convenient options when they are placed with a specific dark store and can serve the areas only in proximity. Being able to deliver within 10 minutes doesn't mean that the riders will have to drive faster, but it is the efficiency of the whole process including fulfilment, the dark store operations and its proximity to the delivery areas on which this model thrives,"

Speaking about the confidence in their business, company’s co-founder and CTO Kaivalya Vohra said, "Delivering groceries in 10 minutes is a game changing experience for customers and it reflects in our strong product-market fit metrics. Today, our month-on-month buyer retention is 65 per cent with an 88-point Net Promoter Score (NPS). This data has given us the confidence to expand the 10-minute model across the country. In just five months, we've launched 100 micro warehouses, each of which has the capacity to do 2,500+ orders/day, and we're planning to launch at an even faster rate going forward."

Originally, Zepto had launched a different model but swiftly pivoted to quick commerce in August 2021. Now, they are adding 1,00,000 new customers every week, among which 60 per cent constitute women. Their attention to detail on the logistics experience is unparalleled and this has enabled Zepto to scale to most major metros in just 5 months. Anu Hariharan from Y Combinator said that she is excited to double down and lead this round in Zepto. She firmly believes that Zepto will win in this space over the long-term.




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