Journey of teenager duo raising $60 Mn with their Grocery delivery app, Zepto

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Last year, there was a big push for online grocery delivery, and this year, it's taking off. Almost every company is focusing on delivery speed, and Mumbai-based Zepto, the newest child on the online grocery block, is no exception.
Aadit Palicha and Kaivalya Vohra, 19-year-olds who withdrew from their computer science degree programs at Stanford University to concentrate on Zepto, started the company earlier this year (formerly Kiranakart). Throughout a network of underground stores and mini-warehouses, Zepto offers groceries deliveries in 10 minutes (on up to 90% of orders).

According to Palicha, the duo was dismayed by the chaos of execution in the online grocery delivery sector during the 2020 lockout. They believe that much of the competition in the market is either inaccurately grocery delivery or is concentrating on several models, that's where they have seen the opportunity.Zepto recently announced a $60 million 'early-stage investment headed by Glade Brook Capital, Nexus, and Y Combinator, with involvement from angel investors including Lachy Groom, Neeraj Arora, and Manik Gupta, among others. According to the company, the round was raised at a valuation of $200 million to $300 million.However the firm is only now disclosing the financing, it has been operating with the funds raised for some time, enabling it to establish services in key cities such as Mumbai, Delhi, Gurugram, Bengaluru, and Chennai, with Hyderabad, Kolkata, and other cities on the horizon.Of course, dark markets are nothing new in the Indian setting, even though the idea has yet to be completely explored. In reality, most delivery services extended to dark store-enabled food delivery this year. Simply described, a dark store is a small community store that customers cannot enter and must order online for delivery service.In this aspect, Zepto faces stiff competition from some of India's largest delivery companies, who are all competing for a piece of the action.
Swiggy says that their InstaMart service can complete deliveries in 15-30 minutes

Grofers has also revealed ambitions to begin 10-minute grocery delivery in ten cities, while Dunzo promises deliveries in less than 20 minutes via its dark store network. BigBasket, which is not far behind, provides BB Express, which promises 60-minute deliveries of basics.Even online marketplace behemoths have jumped on the dark store bandwagon. Amazon India has promised two-hour deliveries under Amazon Fresh since 2019, and the service would be expanded to more cities in 2021. Flipkart, a Walmart-owned eCommerce powerhouse, is also claiming a comparable delivery time for groceries through its Flipkart Quick service, which it debuted last year amid the lockdowns.According to Palicha, Zepto's network is effectively managed through the use of location intelligence and geospatial, which covers everything from geography and demography to road patterns, traffic dynamics, weather, last-mile supply availability, real estate values, and more.

Aside from that, Zepto's dark stores and cool rooms have been custom-designed to satisfy specific criteria such as ease of navigation, allowing packers to move as swiftly as possible to pack the items in an order. The packers utilise tablets to determine where each item is housed and to determine the best approach to gather them all up.The entire procedure takes 60 seconds or less, from the time you check out on the smartphone to the time your items are packaged and shipped.Of course, while the headline is 10-minute deliveries, actual delivery times may vary from client to customer. He also stated that each customer receives a personalised ETA, which is how the organisation manages to keep expectations in control while still meeting the delivery deadline.The average delivery time is 8:47 minutes. The vast majority of orders are fulfilled in under 10 minutes, while a small percentage of orders may take 15-16 minutes or longer.
The next phase is to prepare delivery riders; the company hires contractors or gig worker partners for deliveries, similar to Zomato or Swiggy. However, riders are assigned before orders are received, depending on predictive research and data trends. The company says that its AI-powered solutions assist keep inventory levels as high as possible and properly allocating drivers.

Palicha went on to say that the grocery delivery curve is almost flat during the day, with no peaks and valleys such as in food delivery, which sees a rush at the regular meal periods of breakfast, lunch, and supper.This enables the firm to track the patterns and assign riders accordingly.While Zepto would not share the precise number of monthly active users or orders fulfilled to date, the company claims to be growing at a rate of 200 per cent every month. It intends to open 100 dark stores around the country by early 2022.According to previous interactions with logistics and retail tech providers, the cost of speedy two-hour or four-hour delivery through dark storefronts is over 40% higher than the typical warehouse model in India.

This helps to explain the rapid growth of dark store-led platforms. These hidden stores not only help delivery firms to monitor inventory but also provide deeper insights into which product categories or specific brands have the highest adoption, something that Zepto also examines to determine which products and brands to get on board.Dark stores are challenging to expand in the Indian environment, but the pandemic has produced a positive momentum for change and shifted consumers to online groceries.There's no denying the magnitude of the opportunity, but Zepto is competing with companies that have 100x the financing and 10x the scale. Given how much the market has changed and the millions invested in the category, companies like Zomato-backed Grofers, Swiggy, Dunzo, Tata-owned BigBasket, and others are unlikely to abandon the grocery delivery struggle anytime soon.The incumbents are also doubling down on technology to improve their operations in ways similar to Zepto, so the true test for the company is just getting started.

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