Quick Commerce! A Boon or a Blessing ?

 

The Challenges of Sustaining as a Quick Commerce Brand in India ft. Zepto

The last few years, post-COVID-19, have witnessed a significant shift in customer trends and preferences. The role of convenience in product selection has become more crucial than ever, and many brands have recognized this as a prime opportunity to assert their presence in the market. One direct result of this is the rapid growth of the quick-commerce sector. The concept of receiving essentials in the blink of an eye has taken the Indian market by storm, and rightly so. According to a survey, the Indian quick-commerce market is currently valued at $2.8 billion and is expected to grow 14-fold, reaching $40 billion by 2030. These are staggering numbers when viewed from a broader perspective, but the reality on the ground is far from simple. Many companies are generating significant revenue without achieving profitability for years, which limits the overall profitability potential of this sector.

Let’s take Zepto as an example — a brand that has become nothing short of a phenomenon in the Indian quick-commerce market. Despite facing stiff competition from giants like Instamart and BlinkIt, Zepto has managed to carve out a niche for itself. This niche is defined by its dark-store model and strategic hiring approach. Zepto started its operations at a time when quick-commerce was just beginning to gain traction in India. So, what sets Zepto apart? In my view, it is its innovative micro-warehousing strategy (the dark-store model) that complements its vision of becoming a market leader. Their dark stores are strategically located within a 3-km radius, ensuring geographical accessibility. Moreover, their hiring process is equally unique, with a preference for hiring locals as delivery partners. This not only helps them strengthen their presence in a particular area but also significantly reduces delivery times.

Zepto also employs an innovative packing approach in its warehouses. Each employee is equipped with a GPS tracker on their device, allowing them to quickly navigate the warehouse and identify which goods are nearby and should be picked first. This process helps speed up packing and enables Zepto to deliver goods within 10 minutes.

However, despite all these advantages, Zepto continues to face significant challenges in establishing itself as a sustainable and profitable quick-commerce brand. Zepto operates in only 10 cities, compared to over 20 cities for both Instamart and BlinkIt(acquired by Zomato) Additionally, competition in the sector is intensifying every day, with BlinkIt and Instamart showing dynamic adaptation to the changing market landscape. Now, Zomato and Grofers (rebranded as BlinkIt) have been in the market for almost a decade and have scaled up significantly. In fact, BlinkIt has not only gained more customers but has also been profitable since the last quarter of FY24, accounting for nearly 50% of Zomato’s business. On the other hand, Zepto, despite generating over ₹10,000 crore in revenue, has reported losses exceeding ₹1,500 crore. While it’s not unusual for a startup in India to incur losses in its early years, Zepto’s burn rate has been notably high. The concept of offering free credits through the Zepto wallet to acquire customers, along with experimental ventures like Zepto Café (which delivers food and beverages), shows the company’s efforts to push toward its goal of becoming the next D-Mart of India. They have had some success though with stores taking more than a year to become profitable initially, but now, on average, it takes just six months for a store to reach profitability. In fact, they’ve managed to make 75% of their stores profitable. However, the remaining 25% continue to drain financial resources. This is where Zepto faces its biggest challenge, particularly in light of the current startup funding winter . Moreover, with stiff competition coming in from Companies like Blinkit and Instamart which also aim to booster a similar dark store model approach to set them up in a 3km radius , life becomes even tougher for Zepto. Infact both BlinkIt and Instamart possess offer 450 Dark stores across the country as opposed to Zepto's 330 . Hence with the ongoing challenges in place and with Zepto’s aim to go public in 2026, it will be interesting to see how the company tackles these challenges in their path to glory.