Zepto Business Model

Zepto’s ultra-fast delivery service operates under the quick commerce business model which itself is underpinned by dark store distribution centers.

Understanding Zepto’s business model

Zepto is an Indian-based platform that promises to deliver groceries in under ten minutes.

The company was founded by Aadit Palicha and Kaivalya Vohra in 2021 and has recently secured a Y-Combinator-led funding round worth $200 million.

Zepto’s fast delivery business model is supported by a network of over 100 dark stores and micro fulfillment centers.

These facilities, which allow the company to fulfill its ten-minute promise on up to 90% of orders, possess the following characteristics:

  • They are not open to the public.
  • They are located in high-demand neighborhoods.
  • They stock only the most commonly ordered items.
  • They are ergonomically designed to ensure order packers can move as swiftly and efficiently as possible.

Zepto’s business model is also supplemented by technology that determines where a dark store should be built and optimal delivery routes that avoid traffic and connectivity issues.

Technology is also used to improve delivery network performance by considering factors such as weather, road patterns, population, geography, and last-mile supply availability.

Like most other quick commerce companies, Zepto is also focused on increasing order frequency to drive better economics.

In the Indian market where it operates, many of the company’s regular customers make three to four orders per week with an average order volume of 400-500 Indian rupees.

Value Proposition:

  • Ultra-Fast Delivery: Zepto’s primary value proposition revolves around its promise to deliver groceries in under ten minutes. This ultra-fast delivery service caters to customers who prioritize speed and convenience in their grocery shopping.
  • Dark Store Model: Zepto’s use of dark stores and micro fulfillment centers ensures efficient order fulfillment and quick delivery. These facilities are strategically located, well-stocked with commonly ordered items, and designed for swift packing, enhancing the overall customer experience.
  • Technology Integration: Zepto leverages technology to optimize various aspects of its operations, including the selection of dark store locations, delivery route planning, and network performance. This tech-driven approach contributes to reliable and efficient service.

Customer Segments:

  • Urban Consumers: Zepto primarily targets urban consumers in India who value rapid grocery delivery. This includes individuals and families with busy lifestyles who seek a convenient and time-saving solution for their grocery needs.
  • Repeat Shoppers: Zepto aims to attract repeat customers who make frequent grocery purchases. These customers are likely to place multiple orders per week, contributing to order frequency and revenue.

Distribution Strategy:

  • Dark Store Network: Zepto’s distribution strategy relies on a network of over 100 dark stores and micro fulfillment centers strategically positioned in high-demand neighborhoods. These facilities serve as the backbone of the ultra-fast delivery promise, ensuring quick access to products.
  • Optimized Delivery Routes: The company employs technology to optimize delivery routes, taking into account factors such as traffic, weather, population density, and last-mile supply availability. This optimization enhances the efficiency and reliability of its delivery network.

Marketing Strategy:

  • Speed and Convenience: Zepto’s marketing strategy highlights the speed and convenience of its service. It emphasizes the ability to deliver groceries in under ten minutes, appealing to customers seeking immediate gratification and time-saving solutions.
  • Competition: In a competitive market that includes established players like Dunzo, Zomato, Amazon, and Flipkart, Zepto aims to differentiate itself through its ultra-fast delivery model. Marketing efforts likely focus on this unique selling proposition.
  • Expansion Plans: Zepto’s growth and scalability are integral to its marketing strategy. It plans to expand to additional Indian cities, leveraging densely populated areas and the increasing demand for quick commerce. This expansion narrative may attract investors and customers alike.
  • Unit Economics: Zepto emphasizes its rigorous focus on unit economics, showcasing its ability to turn micro-markets profitable while managing expenses. This financial stability and efficient operation contribute to its marketing message of sustainable growth.

Zepto growth and scalability

Zepto is currently available in ten Indian cities.

The company plans to use its latest round of investment funding to expand and compete with established competitors such as Dunzo, Zomato, Amazon, and Flipkart.

Zepto also plans to recruit across various functions such as HR, finance, and operations and extend its team which already numbers over 1,000.

While the company’s founders are reticent to share financial data, Zepto recently posted 800% quarter-over-quarter growth with an impressive net promoter score (NPS) of 88.

In a May 2022 interview with Business Standard, Palicha explained that

Our rigorous focus on unit economics is the main reason why we’ve had such an amazing trajectory as a company. We’ve turned micro-markets profitable and brought down burn significantly while growing to a scale of hundreds of thousands of orders per day.

Moving forward, Zepto has plans to rapidly scale its business model across India to take advantage of densely populated areas and a COVID-accelerated trend toward quick commerce.

This will allow the company to secure a slice of the $570 billion grocery retail industry in India.

Key takeaways:

  • Zepto’s ultra-fast delivery service operates under the quick commerce business model which itself is underpinned by dark store distribution outlets. These facilities allow the company to fulfill its ten-minute promise on up to 90% of orders.
  • Zepto’s business model is also supplemented by technology that decides where a new dark store should be built the delivery routes that minimize traffic congestion and connectivity issues.
  • Zepto’s business model is extremely scalable with the company experiencing rapid growth since it was founded in 2021. This scalability will allow the company to establish additional operations in large cities across India.

Connected Last-Mile Delivery Business Models

Deliveroo Business Model

Deliveroo is a British online food delivery company founded by Greg Orlowski and Will Shu in 2013. Shu developed the platform in response to a lack of high-quality food delivery in London. Deliveroo makes money by collecting 25-45% of every order it facilitates. It also charges delivery fees and onboarding fees for restaurants that wish to be featured on the platform. Deliveroo for Business is a service designed for corporate clients needing to order food in bulk. The company also charges a higher commission to businesses that utilize a network of digital kitchens to process orders.

DoorDash Business Model

DoorDash is a platform business model that enables restaurants to set up at-no-cost delivery operations. At the same time, customers get their food at home, and dashers (delivery people) earn some extra money. DoorDash makes money by markup prices through delivery fees, memberships, and advertising for restaurants on the marketplace.

Glovo Business Model

Glovo is a Spanish on-demand courier service that purchases and delivers products ordered through a mobile app. Founded in 2015 by Oscar Pierre and Sacha Michaud as a way to “uberize” local services. Glovo makes money via delivery fees, mini-supermarkets (fulfillment centers that Glovo operates in partnership with grocery store chains), and dark kitchens (enabling restaurants to increase their capacity).

GrubHub Business Model

Grubhub is an online and mobile platform for restaurant pick-up and delivery orders. In 2018 the company connected 95,000 takeout restaurants in over 1,700 U.S. cities and London. The Grubhub portfolio of brands like Seamless, LevelUp, Eat24, AllMenus, MenuPages, and Tapingo. The company makes money primarily by charging restaurants a pre-order commission, and it generates revenues when diners place an order on its platform. Also, it charges restaurants that use Grubhub delivery services when diners pay for them. 

Lyft Business Model

Lyft is a transportation-as-a-service marketplace allowing riders to find a driver for a ride. Lyft has also expanded with a multimodal platform that gives more options like bike-sharing or electric scooters. Lyft primarily makes money by collecting fees from drivers that complete rides on the platform.

OpenTable Business Model

OpenTable is an American online restaurant reservation system founded by Chuck Templeton. During the late 90s, it provided one of the first automated, real-time reservation systems. The company was acquired by Booking Holding back in 2014 for $2.6 billion. Today OpenTable makes money via subscription plans, referral fees, and in-dining with its first restaurant, as an experiment in Miami, Florida.

Postmates Business Model

Postmates is a food delivery service built as a last-mile delivery service platform connecting locals with shops. Postmates makes money by collecting fees (commission, delivery, service, cart, and cancellation fees). It also makes money via its subscription service (called Unlimted – $9.99/month or $99.99 annually), giving free delivery on orders of more than $12.

Uber Eats Business Model

Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner, and a customer with Uber Eats platform at the center. The three-sided marketplace moves around three players: Restaurants pay commission on the orders to Uber Eats; Customers pay small delivery charges and, at times, cancellation fees; Drivers earn through making reliable deliveries on time.

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