If you visit the website of Zepto https://www.zeptonow.com/ what strikes you initially is the “SPEED” at which they are promising grocery delivery. They stick their neck out and claim that “Order” & “Don’t blink” & it will be delivered to you within 10 minutes. And “It” includes – Grocery, Vegetables and Milk.
Image Credits: Zepto
Now this seems magical and impossible to believe if you realize that this is a start – up by two 19-year young hopefuls. And they are poised to become the David of this market while rubbing shoulders with giants like Big Basket, Grofers, Swiggy, Danzo and Amazon Pantry.
Aditya Palicha and Kaivalya Vohra, dropouts of computer science degree at Stanford are the brain behind Zepto and they have crafted their strategy after carefully studying the consumers and their expectations.
Now all the big boys in grocery delivery business face one common challenge – Customers with switching loyalties.
Customers look at 3 key deliverables of quality, service & price (QSP). What Zepto founders realized that while quality and prices are important their lies a latent need of getting grocery delivered with lesser lead time. So, if they can pull this off, they might outshine the big boys with deep pockets.
This is precisely what they did. Extreme focus on bringing down the lead time helped them in swinging customer emotions to their favor.
As it turns out, most of the customers have all the grocery delivery apps downloaded and compare the prices on apps before placing orders. Although, customers are getting good bargain in this but it’s a cash guzzling propositions for delivery apps. On top of that, this comes with no guarantee that customer will not switch to other app for her very next purchase. This leaves little scope for loyalty and burns a hole in the pocket of delivery apps with every purchase.
Aditya and Kaivalya started “Kirana Kart” in Sep 2020 to deliver the groceries at doorstep. They gained a valuable insight while operating the “Kirana Kart”. They observed that there were 20% repeat orders from customers whose grocery was delivered them within 45 to 60 minutes while the same stats of repeat order shot up to 40% when the grocery was delivered with 20 minutes.
Now this gave clarity to founders about where to focus upon? When these patterns were regular for over a month, they did unimaginable. They closed “Kirana Kart” and started “Zepto” with new user insights.
They did exhaustive catchment analysis based on customer insights, average spending and population density to arrive at a business viability. In this step they studied the routes and traffic snarls among lot many other variables to understand the fulfillment feasibility of 10 minutes promise.
Finally, founders came up with “Dark Stores”. This is quite like trojan horse to iron out possible logistic nightmares. In a 3 km. radius with help of these dark stores which are centrally located acts as mini warehouse and are good to fulfill the demand in this circle.
A dark store operated by Zepto Image Credits: Zepto
Interestingly, the time for delivery boy of Zepto to deliver the grocery from these dark stores to customer’s door step is almost similar to other grocery delivery apps but still Zepto carries an edge. How?
Well if we break down the entire process of customer order to delivery process the 3 key components will be:
- Order Placing
- Packing
- Bagging
Post bagging it is level playing field for all delivery apps.
This is where Zepto offers you differentiation by relying heavily on technology and hyper focused on “Speed”. They game in which Zepto plays is “Speed” and not the “Price’. Essentially they have bend the rules of the game in their favor by delivering order to customer within 10 minutes giving more fir to his/her impulse purchase. Favored app for impulse purchase gets a favor with regular orders as well.
But is it this easy for “Zepto” and difficult for big boys with real deep pockets?
Bigger delivery apps command economies of scale in terms of ordering and thus obtaining the discounts. Furthermore, these established apps have a wider range of products (Big basket has a catalogue of more than 50,000 SKUs and 12,000 farmer tie ups for their farm-to-fork model and has Tata Group as a majority stakeholder).
Jio Mart, Grofers and others in the fray are not lagging behind in terms of scale and funds.
In the times to come it will be interesting to see how this clash unfolds and who emerges out as the winner.
As of now these young entrepreneurs have raised $60 million in a funding round led by Glade Brook Capital at a post-money valuation of $225 million. Others in this round were Y combinator and Neeraj Arora, former Chief Business Officer of WhatsApp.
References:
https://entrackr.com/2021/11/exclusive-zepto-in-talks-to-raise-100-mn-at-500-mn-valuation/
https://www.vccircle.com/edelweiss-group-to-raise-200-mn-for-new-fund-series-iiia-to-close-by-nov
Write-up By :
Prof. Devesh Awasthi
Assistant Professor
Thanks for sharing this great article! It was really informative and provided some helpful insights.