Ever had surprise guests at home and nothing to serve? Have you ever rushed to the market at the 11th hour?

Or have you recently started using ‘Let’s Zepto it’ often. Whether you are just an acquaintance or a retained customer of Zepto, you must be curious to know how is 10 minute delivery even possible?

Zepto is one of the fastest growing startup in India which quickly became a house-hold name. It is giving a neck-to-neck competition to Dunzo and Swiggy Instamart by promising ‘10 minute delivery’.

Under our Indian Startup Case Study Series, We already covered Business Models of Nykaa, CRED and Meesho.

This time we bring to you a comprehensive Case Study of Zepto.

By the end of this you will have a good understanding of:

• Zepto Cofounders
• Zepto Business Model - How does 10 minute delivery happen?
• Zepto Marketing Strategy
• How Zepto makes Money?
• Zepto Funding & Valuation
• Zepto Future Plans

Let's dive into it!

What Is Zepto

The promises of instant food delivery started with Dominoes. They slowed down with Zomato and Swiggy, as fresh-food is hard to deliver under a certain period.

Zepto being the first grocery-application to promise the 10-minute delivery revives older promises.

A new in the marketplace application, Zepto promises the delivery of groceries in just 10 minutes.

From Packed foods to fresh vegetables, delivering everything to the doorstep of the consumer.

Currently Zepto has 2M+ downloads and a rating of 4.2 on the app store. It is commendable when it comes to a grocery delivery application. Zepto has recently gained attention after its $200 M funding by Y-Combinator.

Zepto Founders

Zepto was co-founded by two 19-year-olds - Aadit Palicha and Kavailya Vohra.

The co-founders dropped out of Stanford soon after their Start-Up idea was up and running.

While Kaivalya Vohra took on the role being the CTO and Aadit managed the responsibilities of a CEO. They both were the age of 19 when they started Zepto.

Kaivalya and Aadit dropped out from Stanford when Zepto took off.

When Covid hit, and two friends stuck in an apartment wanted some groceries and couldn’t find an existing way.

They tried developing one - which then was accepted by the people around. This was observed by creating micro-markets.

• Through this, they experimented and grew the value proposition of 10 minute grocery delivery. It is now the USP of the app and sets it apart from the crowd.
• The application has been giving an average of 60% retention rate, which assured the PMF.
• The average NPS is 81 for freshness of products - which was the most difficult part to acquire. To convince indians to buy tomatoes and onions online was a challenge while keeping an eye on the retention of the customer.
• Seamless delivery experience and getting exactly what they order - instantly.

Both the young entrepreneurs are also the youngest start-up founders in the Hurun India Future Unicorn Index 2022. They have made it to the list of Forbes ‘30 under 30’.

Zepto Business Model

We have all heard of cloud-kitchens but have you heard of cloud stores/dark stores?

Dark Store is a large retail facility which resembles a conventional supermarket. It is not open to the public.

These dark stores are established/rented where the operations will be easier to take place in. Thus, it reduces the time of delivery when delivering within a particular area.

For Zepto, Initiating the operations from Bandra, Mumbai where the co-founders were getting their hands dirty. They managed the tech. operations and made the deliveries themselves.

The idea of creating ‘micro-markets’ within a city worked for them, resulting in higher NPS and happy customers.

Initially the operations were run in these small micro-markets from Bandra to Andheri East. It has now expanded its operations in Mumbai, Delhi, Bangalore, Gurugram and Chennai.

Today, Zepto has almost 40 dark stores in various locations. While dark stores are designed for instant deliveries, they can’t always handle high sales volume.

To prevent quality compromise, they developed an AI-powered system that helps with the picking, packing, and delivery process.

The system ensures a smooth transition from picking, packing to delivering. This makes it possible for Zepto to offer a wide range of products at the best possible price.

Zepto’s business strategy is all about providing quick service to customers.  This makes up for an effective customer centric business.

Yet, Zepto offers several marketing elements that differentiate it from its competitors. Still, the model also takes these into arrangement.

What does the Business Model Canvas really tell?

1. Key Partners - The Key partners for Zepto are Local Stores and Financial Partners. The Local Stores through where the bulk pick of the groceries is done and transferred to the dark stores via Financial Partners the payments can be done digitally.
2. Key Activities - Creating Technological model on basis of which the whole network world - dark store, Delivery partners and Users. Customer Service is one of their major priorities as it increases the NPS and makes the running of such a volatile business a little easy.
3. Key Resources - As the whole model is enabled through technology, so that is the primary one. Delivery Partners are the second one and the partnerships with the people through whom the groceries and fresh fruits and vegetables can be procured.
4. Value Proposition - The main value prop is the 10 minute delivery, giving an easy and effective way out from the chores or forgetfulness of a human for users.
   
   For Stores - It increases its sales without actually having to deal with a lot of people.
5. Customer Relationship - In today's day and age, with unlimited resources, a customer can be retained with two key points - Making them feel heard and relatable. Both things are acquired by Customer services and Social media by Zepto.
6. Channels - The Channels through which they can be reached out are - Website and Mobile Application.
7. Customer Segment - The Customer Segment is divided as Users and Stores. Where their first value lies in making the user happy and the second one is providing more and effective sales to the store.
8. Cost Structure - The whole model is based on Commission based model and has to bear the cost of Tech enablement and Marketing costs at large.
9. Revenue Streams - The revenue streams are its premium model, surge on dark stores and the commission on the same.

Zepto’s free shipping makes it more appealing than companies like Instamart and Amazon Fresh, which charge a delivery fee.

Zepto is all about speedy delivery – according to their website, they have a median delivery time of 8 minutes and 47 seconds.

Once the operations are up and running, how does Zepto make money?

The revenue model is based on taking a small commission per order. The commission could be as less as 2% which helps in less fuss among customers and keeps up with the maintenance cost of the platform.

Zepto Marketing Strategy

Zepto utilizes its USP of keeping the delivery under 10 minutes which has helped it grow.

For its marketing strategy, it took on the market with its interesting and witty Online Ad campaigns.

The Ad Campaigns are made in resonance with the target group and thus has attracted people to use it.

This quirky ad speaks about how people don't keep their promises  about delivering as soon as possible and take so much time leading to bad customer experience.

Social Media Marketing:

Vibing with the Millenials and Gen-Z, Zepto has opted for the meme based feed which makes it an effective source for gaining attention.

Since Zepto realizes its marketplace has a target group which likes to live in a fast paced culture and opts for what is trending and trustworthy.

The marketing campaigns make perfect sense with quirky ideas and relevant notions. Zepto marketing strategy has been quite an influencer for it to become a brand and gain traction in very early stages.

Zepto Funding and Valuation

The co-founders of Zepto are humble and bold enough to find executives with richer experiences.

This led to meteoric success of the app within a small period of time.

Among the bigger Venture Capital firms in India, Y-Combinator is funding Zepto, making it one of the promising start-ups in India.

Here's how Zepto Funding timeline looks like:

• Series A - $60,000,000
• Series C - $100,000,000
• Series D - $200,000,000

Zepto raised a total funding of $361M over 5 rounds.

Conclusion: The Way Ahead

The way ahead for Zepto now consists of expansion. The challenge is to expand geographically.

With the operations that happen at the backend with Cloud stores and maintaining quality and freshness of products. The NPS will always remain a priority.

In Addition, in the books further on could be a Zepto Cafe making snacks instantly available. The Pharma could be there as well, but that is long down the road.

As the CEO says '' Let's keep our eye on the ball as the ball is massive.'' As of Today, Zepto is growing at 200 per cent every single month.

Frequently asked questions (FAQs)

1. Who is Zepto’s owner?

Zepto is co-founded by Kaivalya Vohra and Aadit Palicha. After funding the biggest shareholder for Zepto is Y-Combinator.

2. How does Zepto delivery work?

The products are bought from wholesalers and kept in dark stores. Upon an order notification, Order is picked up from cloud stores. The average time of delivery is 8 mins. This is pretty quick and gives a hard competition.

3. How does Zepto make money?

Since Zepto doesn’t charge any delivery fee. Then how does it make money? It charges a small amount to the distributors, thus making it extremely customer-centric.