Why Zepto CEO Sees 10-Minute Delivery As Serious Business, Not A Gimmick
Zepto's 20-year-old CEO says profitability is not a question of changing strategy, but is dependent on when expansion stops.
The quick delivery businesses, a boon for millions of people during the Covid-19 lockdowns, are continuing to witness tremendous traction. Zepto, a quick-commerce startup, is riding the wave of demand that originated during the pandemic.
The company, which had revenue from operations at just over Rs 140 crore in the financial year ending March 2022, is set to clock annualised gross revenue of $1 billion in the quarter ending December, according to a company spokesperson.
“We didn’t have a large macro viewpoint when we started the company,” said Aadit Palicha, the company’s 20-year-old co-founder and chief executive officer. “What we were more focused on was that we have 100 customers around us that have this serious pain point of getting their groceries and those 100 customers were not happy. We felt that there was an opportunity to solve that problem for them.”
Palicha and his classmate, Kaivalya Vohra, set up the company in July last year and it is now present in seven of India’s largest cities.
Zepto focuses on setting up pick-up points and facilities that are dedicated towards delivery in specific locations in a city. Each of these pick-up points services a predetermined radius, with a focus on quick delivery, Palicha explained, saying the company didn’t have large-scale facilities on the outskirts of cities.
And while some have questioned the 10-minute delivery promises made by hyperlocal delivery platforms, Palicha said Zepto is doubling down on it, saying it is a win-win for both the customer and the company.
Based on data the company has analysed, there isn’t a significant difference in the order size of a 10-minute and 30-minute delivery. And, simply put, if a customer gets delivery in 10 minutes, that customer will likely order more on the platform, resulting in higher revenue, Palicha said.
Zepto focuses on smaller radiuses and quicker delivery, with delivery partners doing more trips per hour. This, Palicha said, improves the company’s efficiency and allows the company to compensate riders better. Zepto’s delivery rider retention, he claims, is 7% better than most hyperlocal delivery companies.
The Path To Profitability
Zepto is starting to generate profits in its oldest markets, according to Palicha. However, the new markets start out with a negative contribution, making it difficult for the company to generate a profit.
“Profitability, for us, is not a function of what needs to change to get this done. Today, if we stop launching new markets, within two-three years we’ll start generating cash,” Palicha said. But, he doesn’t anticipate that the company will stop expanding in the foreseeable future.
Already, Zepto is scoping out new geographies, though it intends to consolidate in the larger cities before it expands further.
When asked about funding, Palicha said the company doesn’t need to raise capital in the short-to-medium term, having recently raised $200 million at a $900 million valuation. In fact, the company is able to funnel the cash that it has started generating in its older markets to help expand into new ones.
(Corrects an earlier version that misstated Palicha's age in the text of the story)