Teardown | Zepto

Founded in 2021, Zepto is an Indian instant grocery delivery service that raised $160M within 6 months of launch.

Jul 05, 2022

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Snapshot

Founded in 2021, Mumbai-headquartered Zepto is an instant grocery delivery service. The company promises to deliver groceries in 10 minutes through a network of dark stores and micro warehouses.

Rather than relying on discounts or offers to attract customers, Zepto focuses on getting customers through its speed, reliability, and efficiency.

Within only 6 months of inception, the company raised $160M from notable investors in Silicon Valley and India. Zepto’s last funding round was in December 2021 when it raised $100M in a Series C round, bringing its total valuation to $570M.

With 100 dark stores and a presence in 10 major metro cities, Zepto reportedly has multiple of India’s delivery players interested in purchasing the company including Zomato and Swiggy. According to reports, Zomato made a payout offer of $1B for the company.

On the Web: Website, Linkedin

Business Overview & Products

Zepto’s grocery platform offers to deliver over 2500 products to its customers in under 10 minutes. These include farm-fresh vegetables and fruits, groceries, snacks and beverages, personal care items, and home cleaning products.

The company delivers across 10 major cities in India including Bangalore, Chennai, Delhi, Ghaziabad, Gurgaon, Hyderabad, Kolkata, Mumbai, Noida, and Pune.

How It Works

Zepto’s leverages a network of micro-warehouses, known as dark stores, to fulfil orders in under 10 minutes. These dark stores or micro warehouses are spread across high-demand neighborhoods in the cities the company operates in.

The entire process from placing an order, to packing and dispatching, takes 60 seconds or less, according to co-founder Palicha. This is because the dark stores have been custom-designed to specifically meet the requirements for quick delivery. For starters, there is the ease of navigation so that packers can swiftly move and pack items. Moreover, packers are also provided tablets so they can easily locate where each item is stored and pick an optimal route accordingly.

While the company claims to deliver all orders in 10 minutes with a median delivery time of 8:47 minutes, 1% of orders are reportedly prone to a longer delivery time of 15-16 minutes. Customers are shown an ETA at the time of purchase.

The company claims that the average distance of a Zepto delivery is 1.8km. This is possible because of the micro-markets Zepto sets up in every city in its coverage area. Each micro-market has 1-2 dark stores which help delivery executives focus on specific areas and improve their delivery timing. As a result, Zepto riders commonly drive at a speed of <15kmph, since they only have to cover a distance of 1.8km in 10 minutes. The company claims this leads to 3.1x fewer accidents on average when compared to a regular biker on the road.

Business Model & Pricing

The company operates as a retailer, making money on the markup of items on its app. In addition, they charge INR 15-20 ($0.20-$0.26) in delivery fees from customers.

Traction

While the company has not disclosed exact financial details yet, it has spoken in detail about the growth it has witnessed since its inception. For starters, Zepto claims to be growing 200% every month. Moreover, the company is also adding 100,000 new users to its customer base every week, out of which 60% are women.

Ever since the company pivoted to its current 10-minute delivery model, its NPS (net promoter score) has witnessed a massive boost and remained constant at around 88.

According to co-founder Palicha, their largest city in terms of revenue generation and customer base in Mumbai. However, he also believes that there is ample untapped potential in small cities like Chandigarh, Ahmedabad, Jaipur, Goa, etc.

Founder(s)

Aadit Palicha – CEO and Co-Founder at Zepto. A Stanford dropout previously co-founded KiranaKart and GoPool. He also worked as a Project Lead at PryvaSee.

Kaivalya Vohra – CTO and Co-Founder at Zepto. Kaivalya, also a Stanford dropout, previously co-founded KiranaKart with Aadit Palicha.

History & Evolution

Aadit Palicha and Kaivalya Vohra were living in Dubai when they were admitted to Stanford’s computer science engineering program. However, after attending their online orientation, the duo dropped out and returned to Mumbai to try their hand at entrepreneurship. After having worked on several projects together, the two founders were confined at home during the coronavirus pandemic. It was during this time in 2020, that the two discovered a significant mess of execution in the online grocery delivery space. Even though grocery deliveries were categorized as essentials during the lockdown, Aadit and Kaiyavlya still struggled with getting their groceries on time. That’s when they realized the need for an online player for the grocery delivery sector in India.
The duo started off with KiranaKart which was a 45-minute delivery service. They later played with different models before finally coming up with Zepto, which was to be a 10-minute online grocery delivery service. Initially, the duo picked out 2,000 unique items for delivery, which included everyday items like paan, an Indian mouth freshener, flowers for worship rituals, snacks, and fresh food. Stores were arranged in a specific manner so that orders could be packed and dispatched within 90 seconds. For instance, the top 100 most purchased items were placed near the entrance for ease of packers.
In November 2021, after 6 months of operating in stealth mode, the company announced an early-stage round of $60M. As soon as Zepto switched to its current 10-minute delivery model, the company witnessed a spike in usage as well as a huge boost in retention.
In 2022, Zepto partnered with LazyPay, a Buy Now Pay Later (BNPL) solution, to offer customers the option of paying later for high-frequency orders. This collaboration will lead to a seamless and time-efficient checkout experience for customers and eliminate cart abandonment by a large percentage.
In April 2022, the company launched a 10-minute delivery service for snacks and beverages in Mumbai. The service is called Cafe and offers quick delivery of food items such as tea, coffee, samosa, and croissants. For this purpose, Zepto has partnered with companies like Blue Tokai Coffee, Chaayos, Gurukripa Snacks, and Sassy Teaspoon. However, according to co-founder Palicha, this is just a pilot whose model will be tweaked frequently until they are able to perfect the service. He also shared that the company has no plans of foraying into the food delivery space and this is merely a cafe format providing ready-to-eat snacks and beverages.

From archive.org

Additional Learnings

Zepto’s name comes from a mathematical term, Zeptosecond, which is the smallest time unit ever measured.

The company prides itself on creating a team of experienced individuals who previously worked at successful companies like Flipkart, Uber, Dream11, Pharmeasy, and Pepperfry. The founders believe that they were mainly able to bring these senior executives on board because it gave individuals a chance to move from Mumbai, back to their hometown Bangalore.

Zepto ensures rider safety by not offering any incentives for completing deliveries in under 10 minutes. Moreover, it also does not charge any penalty for breaching the 10 minutes bracket, which is why riders are not anxious to break traffic rules nor do they indulge in any unnecessary speeding.

The company’s founders have been struggling with a legal crisis, ever since an FIR was filed against them by Ansh Nanda. Ansh claims that back when the company was called KiranaKart, he was promised enough equity to be counted as a co-founder. The story covered by Inc42 talks about the allegations, alleged threats involving the underworld, and more information not just regarding the trio but also Indian investors such as Suvir Sujan, Nexus’s managing director, and Y Combinator.

Market Snapshot

India’s e-grocery market was estimated at $3.95B in 2021 and is expected to increase to $26.63B growing at a CAGR of 33% by 2027.
Major players in the Indian online grocery market that lead the market growth include Grofers, BigBasket, Amazon, Flipkart, Nature’s Basket, Spencer’s, and 24SEVEN.
E-grocery delivery is gathering traction in India due to evolving customer habits, growing urbanizations, and a tech-savvy generation that prefers online shopping. Moreover, pandemic-induced lockdown is also a major reason why consumers are shifting towards online purchases as it is not only convenient but also safer.