Decoding Zepto: India's First Unicorn in 2023

The black clouds of uncertainty in the Indian startup industry seem to be clearing out a bit. With the promotion of Zepto from Soonicorn status to Unicorn, India finally saw its first entry in the $1 billion group for 2023. Mumbai-based quick commerce platform Zepto raised funding of $200 million. This funding increased the startup’s valuation to $1.4 billion, granting them the VIP Pass to the Unicorn Club.

Zepto is a grocery delivery platform that promises to deliver grocery and household items within 10 minutes or less. It was founded in July 2021 by two teenage Stanford University dropouts, Kaivalya Vohra and Aditya Palicha. The company began with a different name, “Kiranakart”, which was renamed as Zepto. Zepto means a factor of 10⁻²¹.

Zepto achieved the milestone of becoming a unicorn at a time when the quick commerce industry has been seeing a downgrade in investments. This is proof of the potential investors see in the startup and the sector as a whole.

As per several research reports, the global online grocery delivery market is estimated to grow to $800 billion by 2025. In India, this sector is expected to jump from $300 million in 2021, about ₹2,478.9 crore, to $5 billion by 2025, which is around ₹41,315 crore. Zepto is giving good competition to companies like Zomato’s Blinkit, Tata Group’s BigBasket, and Dunzo, many of which have already been in the sector for years.

Zepto's $1.4 Billion Worth Business Model

With the tagline “Groceries Delivered in 10 Minutes'', Zepto became a brand new unicorn in just two years of its foundation. With the combination of a strategic business model and methodical planning, they were able to achieve what every startup desires. Belonging to the quick commerce sector, Zepto operates on the instant service model, which is customer-centric and needs flawless handling.

To carry out the stringent time frame of 10 minutes for every delivery placed on their app, Zepto has established “dark stores”. Dark stores are similar to 2,500-3,000 square feet of departmental stores or supermarkets (similar to DMart stores). The only difference dark stores have from department stores is that they are not open to the public. Instead, they are established for retailers to stock their inventories. Zepto, at present, has over 200+ dark stores in cities like Bangalore, Mumbai, Delhi, Chennai, Gurgaon, Hyderabad, Pune, and Noida.

So, Zepto adopted the strategy of establishing dark stores in the most populated areas in the metro cities mentioned above. They did so based on the customer’s shopping pattern and requirements. The most popular items, including cooking necessities, fresh produce, personal care items, snacks and beverages, and home cleaning items, are stocked at these dark stores. The delivery riders are kept on standby for different locations. As soon as the order is placed, an efficient team of workers come together to pack the order and get it delivered, all within 10 minutes.

Zepto’s CEO Aditya Palicha once mentioned that they have a secret software, most likely an AI tool, which assists them in packaging the ordered items in the large dark store within 60 seconds of the order being placed. This way, they can give the riders more than sufficient time to deliver the product to its destination. He refused to mention the name of the software as it is Zepto’s biggest secret weapon.

The average time of delivery at Zepto is 8 minutes and 47 seconds. Zepto makes money by charging a certain commission from the total order value of the customers.

Benefits Zepto Enjoys Over Competitors

Choosing the “dark store model” as the company’s business model brought forth various advantages. Some of those are:

Better Inventory Assortment & Time Management

Belonging to the quick commerce sector means constantly fighting time. The prospect of delivering an order within 10 minutes of the order being placed sounds too much to accomplish. But Zepto has been doing it with impressive success for over two years. Zepto boasts of delivering around 90% of its orders within the prior devised timeframes of 10 minutes.
Other orders might take 15-16 minutes due to obstacles like heavy traffic, delays in packaging or technical issues. Their dark stores are designed in a manner to decrease the time required to finish every step. The assortment of inventory also plays a big role in aiding workers to complete each order within a short window of 10 minutes. This is one of the main reasons for Zepto giving a good fight to competitors who have been in the field for a much longer time.

 Rapidly Increasing Customer Approach

Zepto stocks around 2500+ varieties of grocery and household category items. Thus, they provide the customers with a broader range of orderable options. Fruits, vegetables, milk, rice, packaged foods, desserts, bathing and cleaning essentials, makeup and beauty, and many more are available for consumers to shop from.

Another plus point for choosing Zepto over other available quick commerce platforms is the “Free Delivery” service. Zepto makes do by not charging any kind of delivery charge from its consumers. This way, Zepto has been successful in constantly increasing its customer base.

Contactless Experience

The quick commerce industry provides consumers an alternative to sweating in long queues in shopping centres. Business models like Zepto take this experience to another level by delivering the ordered items within a set timeline. So, no more spending hours on grocery shopping. Pick the items as per your shopping lists and do it all from anywhere.

Risks Associated with Zepto’s Business Model

Like every business model, Zepto also has certain risks associated with the business model it adopts. A few of those are:

Strict Timeline

Zepto's Unique Selling Point of delivering items under 10 minutes is also their biggest risk, as it can sometimes be difficult to achieve. From the production of the items to getting them delivered, even a small mishap can make delivering the order in a set timeline challenging. One of the mishaps is having trouble with the suppliers or a few minutes' delay in finding the ordered item in the dark store. Zepto might have enhanced its business model by considering these obstacles, but the danger remains.

Increasing Competition

Quick-commerce is a very popular sector in the startup industry, and for good reason. After the pandemic people's dependency on online shopping has increased. As a result, many entrepreneurs are entering the sector to eat a portion of the pie. In this way, competition is likely to increase, which may lead companies to reduce prices. Profits will become scarce, and the market share will be divided into several divisions. To deal with this possibility, companies must have something unique to offer. Hence, Zepto will have to think on its feet at every possible obstacle to be a part of the big game.

A Unicorn in Two Years

Zepto was founded by two teenagers who left Stanford University and the degrees they were pursuing there to create a grocery delivery platform in India. Kaivalya Vohra and Aditya Palicha collaborated on a few projects before Kiranamart, which later became the base for Zepto. Today, Vohra is the CTO of the company, and Palicha is the CEO. Like many, both the founders faced the difficulty that came with the absence of a good delivery platform. They encountered a problem that needed to be solved and thus decided to venture in this direction for their entrepreneurship.

During the Covid-19 pandemic, both founders saw the potential in the quick commerce field as people started preferring e-shopping platforms over physical stores. So, both young entrepreneurs decided to start a company in this sector and thus began brainstorming ideas for a solution to the grocery delivery problem. And in this way, Zepto was born.

Zepto recently raised $200 million, about ₹1652.6 crore, with StepStone Group being the lead investor in August. This investment took their valuation from millions to the billions group, $1.4 billion to be exact. Here is a list of all the investment rounds Zepto has held till now. (Source: Crunchbase) ⬇️

At present, several emerging businesses, be it Zomato or Paytm, are prioritising growth over profit and so is this company. With a proficient distribution chain and strong business model, Zepto is slowly but surely inching towards becoming the market leader of quick commerce. They have also started introducing their own product line of household items, allowing the company a new method to make revenue.

The Bottom Line

Customers increasingly demand faster and more efficient delivery options, and Zepto is meeting that demand. Due to delivering products faster than others in the field, the riders can deliver more items. Costs like fuel and storage are also cut down because of their promising business model. Zepto has succeeded in bringing something new to the quick commerce sector. With the company becoming a unicorn, more positive outcomes are expected. Zepto is now part of the big fish tank. It would be interesting to see how well it would fare when competing with the big boys.