Zepto Business Model

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Zepto was born out of the pandemic’s unforeseen demand for grocery delivery. Their core insight is that customers who receive their orders within 15 minutes retain them better than those who get them later.

However, their model might not be sustainable if they continue to charge delivery fees. This will decrease order frequency and could cause users to switch to competing products!

It is based on the “dark store model.”

Zepto is able to achieve its goal of a 10-minute delivery time through the “dark store model.” The dark stores are small warehouses that are located in close proximity to urban locations. This makes it easier for delivery executives to fulfill orders. The company has streamlined its warehouse operations with a data-driven approach. They prioritize items that are frequently ordered and put them closer to the entrance. They also de-prioritize the items that are not in high demand and leave them farther back. This reduces the total number of deliveries needed to meet the demand and increases delivery efficiency.

The company currently has around 40 dark stores in tier 1 cities. Its revenue numbers are soaring, with buyer retention near 80% and an average order value of $100+. However, they are focusing on minimizing costs and increasing profitability as quickly as possible.

One way to do this is by opening new dark stores in densely populated cities and expanding their delivery network. Another way is by producing their line of commonly ordered grocery products like rice, oil, and bread. This can help them earn a higher margin than selling other brand products, and it can also create advertising revenues on their app. However, these investments are expensive and require a long-term commitment. If they fail, it will be difficult for them to survive in the competitive quick-delivery market.

It offers a variety of products.

The commerce platform allows customers to order anything from a wide range of products, including food, groceries, personal care items, and household cleaning supplies. The company also offers a variety of discounts and coupons to encourage consumers to use their service.

One of the most significant growth levers for Zepto is its advertising business. The company can offer advertisers the opportunity to pay for top placement on specific searches and categories. This is a standard model in the grocery space and can help increase revenue. For example, Bru can pay to have their product appear first for the keyword “coffee.”

Another growth lever for Zepto is its brand of products. By creating its line of commonly ordered items, the company can offer lower prices and higher margins. It can also add a layer of branding and marketing that can boost customer retention. This is a risky strategy, however, because it can be challenging to manage brand quality and inventory.

Despite these challenges, Zepto is proliferating. The company is gaining customers at a rate of 100K per week and has buyer retention of 80 percent. As a result, the company is able to generate a lot of revenue. A combination of a small delivery commission fee from the consumer and a percentage of the order value from grocery stores causes this revenue.

It has a mobile app.

Zepto’s mobile app allows users to place orders and track their deliveries. It also allows them to schedule delivery times that fit their busy lifestyles. The app is easy to use and has a clean design. It features a simple onboarding process and supports multiple devices. It is available on iOS and Android.

The Mumbai-based startup’s streamlined operations allow it to deliver a product in under 60 seconds from order time. This is thanks to an intelligent combination of technology and operational efficiency. Packers use tablets to know where each item is stored and to determine the shortest route for delivering them to customers. This model is not only efficient, but it is also cost-effective.

In addition to reducing operational costs, the company is also increasing revenue through the sale of its products. The company has begun producing its line of commonly ordered items, which allows it to achieve higher margins than products from third parties. This strategy could become a crucial growth factor in the future.

However, sustaining profitability could prove challenging. For example, Zepto offers free delivery for most orders, which could lead to lower order frequency and push users to competitors that provide a better service. To combat this, the company may need to cut back on ‘Free Delivery’ and include a small delivery fee in some markets.

It charges a delivery fee.

Zepto charges a delivery fee on orders delivered by its partners, such as Swiggy and Zomato. Its business model is based on the dark store concept, which allows it to offer low prices and speedy deliveries. However, it is also dependent on investors’ money. If the company can’t maintain its current pace of growth, it could be in trouble.

The startup’s success in India is attributed to its ultra-fast delivery model, which promises to deliver groceries in under ten minutes. Its marketing strategy focuses on this unique selling point, attracting customers seeking instant gratification and time-saving solutions. Top investors, including Nexus Venture Partners and Glade Brook Capital, are backing it.

While the ten-minute promise is appealing to consumers, it may not be feasible for all customers. In addition to the logistics challenges of fulfilling this promise, Zepto must compete with established grocery startups that have already invested in hyperlocal delivery networks and are enjoying high retention rates.

The startup’s reliance on dark stores for storing inventory has increased its operating costs, but the company says it will lower them as it scales. It will also expand its offerings by providing more tools for farmers and optimizing delivery routes based on geography, population density, traffic dynamics, weather, last-mile supply availability, and real estate values. This will reduce the risk of stockouts and lower product quality, as well as increase the number of delivery drivers.