House-hunting can be a tedious process, especially if you are a bachelor. Kaivalya Vohra, co-founder and chief technology officer (CTO) of Zepto, considers himself incredibly lucky to have found one within two days of arriving in Bengaluru last November. What helped was the landlord’s familiarity with the quick commerce e-grocery delivery company, Vohra guesses.
Also Read: Why Masaba Gupta likes to own it all
Zepto, which promises to deliver groceries in under 10 minutes, was set up just over a year ago by Vohra and Aadit Palicha, classmates and friends who grew up in Dubai. Both are just 19.
The company, which started operations from Mumbai in April 2021, has witnessed meteoric growth. Today, it has a presence in 10 cities in the form of dark stores or micro warehouses—Mumbai, Pune, Bengaluru, Delhi, Noida, Gurugram, Ghaziabad, Chennai, Hyderabad and Kolkata. Their 1,300-strong team is split between Mumbai and Bengaluru, where the tech team, headed by Vohra, sits. They also have gig workers in the form of riders and packers.
In May, Zepto raised $200 million (around ₹1,590 crore), led by an existing investor, taking their valuation to $900 million and pushing them closer to unicorn (valuations of over $1 billion) status. Their marquee investors include Nexus Venture Partners (their first investor in June 2021), YC Continuity Fund, Glade Brook Capital, Lachy Groom, Neeraj Arora, Manik Gupta, Breyer Capital, Global Founders Capital, Contrary Capital and Kaiser Permanente.
Vohra and Palicha, unwilling to talk about their market share in a growing segment, claim to be one of the largest players in the quick commerce delivery industry, which, according to market reports, is expected to reach $5.5 billion by 2025. Palicha believes it won’t take that long; that figure will be crossed by the end of 2023 itself.
When I meet the duo at their office at a co-working space in Powai, Mumbai, the corridors and cabin glass doors are decorated with balloons. Zepto had marked its first anniversary with a townhall.
Unicorn status doesn’t inspire them. “It doesn’t mean anything,” says Palicha. For them, what matters is how much value a company creates for shareholders when it goes public. “At that point, you can say, ‘Okay, this is the value that I have created and now it’s enduring.’ It’s not like some crazy IPO (initial public offering) and then it tanks. (One should be) Like Delhivery, right? Great company that created shareholder value and which they continue to do,” says Palicha, sitting in a simple cabin overlooking traffic-heavy JVLR Road. The only personal touch is an air purifier.
Certainly, investors have shown faith in the youngsters—and advised caution. “A billion-dollar company can come crashing to zero within three months. That’s what Suvir (Sujan, co-founder and managing director at Nexus Venture Partners) keeps saying, as he has seen it happen before,” says Palicha.
Palicha and Vohra, who had got admission to Stanford University’s computer science engineering programme, took a leap of faith, deciding to drop out to build Zepto. Learning from other young founders, they guarded against any subconscious ageism bias when hiring. Today they have an experienced nine-member leadership team from companies such as Flipkart, Infosys and Amazon.
“This is a very complex business. And for us to scale it in a rapid fashion we couldn’t afford to go through steep learning curves ourselves. So if we needed to build a best-in-class supply chain, we said let’s hire a best-in-class leader in supply chain in India instead of us going through the learning curve. It took us about a month to set up the leadership team. The first month-and-a-half was full of back-to-back interviews; we spent 12-13 hours a day without exaggeration. And it was awesome,” Palicha recalls.
Also Read: Anu Acharya: The gene reader
Having experienced people from different domains has not only helped them achieve capital efficiency and unit economics, it has also ensured that they remain cash-flow positive early on in their journey, says Palicha. “We have the strongest management team in the Indian ecosystem today. The kind of results they have pulled off in the last 12 months is unprecedented,” he says.
“Yeah…most people have a fully decked up management team in year 3 or year 5 of the company, we did it in month 6, that’s where we hired very rapidly,” Vohra adds. This was when they hired 300-400 people, including field managers and customer support executives. Delivery personnel who do full day shifts get the minimum wage of ₹20,000 and can earn more if they deliver more. Some do up to 12 deliveries a day.
Considering everyone in the company is older than the co-founders — the average age is 28-35 — do they sometimes find it hard to assert themselves? “Honestly, our age doesn’t really come up internally or with investors. It’s mostly the media which brings it up,” says Vohra.
In the 10 cities it has expanded to, the company claims to have been able to cater to 80% of neighbourhoods. To ensure they meet their promise on delivery times, each neighbourhood has delivery partners who live in and around that area and make deliveries within a 1.7km radius.
Once a customer places an order through the app, it shows up on the order screen in the nearest dark store. Each item has its designated place: Products like milk, eggs, bread, for instance, are kept on racks close to the pickup counter. The package is assigned to delivery partners on a first-come, first-served basis.
The company says it doesn’t incentivise under 10-minute delivery or penalise for delay. For it’s not always possible to keep the 10-minute promise. Around the time of this interview, for instance, Mumbai was in the midst of the monsoon. This stretched delivery times to 25 minutes.
The company is also working on the pilot phase of Zepto Café, which will deliver coffee and chai from specific brands like Blue Tokai Coffee and Chaayos; these will be kept in dedicated areas in warehouses. Similarly, they plan to keep dry snack items from Mumbai’s Guru Kripa restaurant, known for its samosas, and the bakery Sassy Teaspoon.
The seeds of this initiative lie in one of the monthly “catch-up” sessions they do with founders across geographies. A Russian quick commerce player “said that cappuccinos, just this one product, is 2% of their business in Russia. It made us realised how big the café business could get”, says Palicha. If it works, they plan to expand this service to other cities.
Zepto’s data shows that its customers are young, single people or families in the 25-45 age group, with Mumbai, Bengaluru and Delhi-NCR accounting for most orders. They do have a fair number of older customers, too, though. Vohra’s grandmother is one of them. In fact, she would give them a lot of feedback before Zepto was formally conceptualised. “My grandmother calls and says, ‘I had a bad experience. Solve it,” says Vohra with a chuckle.
'Staircase of credibility'
The idea of Zepto took root during the first covid-19 lockdown in 2020, when Palicha and Vohra found themselves struggling with grocery supplies in their rented apartments in Mumbai. A year later, in July 2021, they set up their first dark store in Bandra, making deliveries themselves for the first couple of weeks. Once orders started picking up, the idea took formal shape and they began the process of identifying their leadership team. “I think the first priority was hiring and then the second priority was getting the model right,” says Palicha.
Interestingly, Zepto, which means the shortest unit of measurable time in physics, started life as KiranaKart. “It was a bad name. We didn’t spend enough time. I was just, like, whatever,” says Vohra. “We had an Excel sheet with some 50 options...our investor would call at 1am to suggest names. Finally, we went with Zepto. It’s short, memorable, sounds good,” says Palicha.
Hiring the first few people was not easy. “Back then a 10-minute delivery, it was crazy, you know, in March 2021. So everybody thought we were nuts, we were extremely young, we had no scale,” says Palicha. They had to build what Palicha calls a “staircase of credibility”, demonstrating the viability of their business model.
Zepto has two kinds of revenue streams—one is through collaboration with brands/companies where a certain profit margin is negotiated based on the number of product units they stock. The other is monetisation of products on its platform in terms of ad space, which products get priority, easy discoverability of a brand.
Quick commerce is the fastest growing segment in the e-commerce market, according to management consulting firm RedSeer. In fact, the consulting firm says that in India the segment is accelerating at 15 times its current size of $0.3 billion and is ahead of markets like China in terms of customer acquisition. Zepto’s value proposition, Palicha emphasises, goes beyond its delivery time, to the quality and variety of products on offer.
Before the launch, they kept experimenting with delivery times—60 minutes, 45 minutes—to figure out how long people were willing to wait. “We got repeated customer feedback on faster deliveries but it wasn’t just about 10 minutes. It was about expanding assortment, focusing on fresh products, and having a 99% reliability rate,” the co-founders say.
While the business idea may not be unique—its competitors include BlinkIt, Dunzo, Swiggy Instamart—Palicha likes to believe their customer experience is the best. He bases this belief on two things: Zepto has an 88-point NPS (Net Promoter Score, a customer loyalty metric), “higher than any of our competitors, higher than any consumer internet platform in India today”, says Palicha. Its rider retention hovers around 14%, which is 5-7% higher than food delivery retention month-on-month, while overall customer retention is 65% month-on-month, he claims.
“Even with significantly less marketing, we are growing at a rate that some of the established, high growth companies are growing at,” says Palicha. “And the majority of it is organic growth; our customer acquisition has been through word-of-mouth.”