Zepto: Two Entrepreneurs created an Ultra-Fast Delivery company in India that today is worth more than $1.4 billion Dollars

Zepto emerged in 2021 as a visionary startup in Mumbai, India, with the promise of transforming the supermarket and home delivery market. Founded by two young entrepreneurs who left Stanford, Kaivalya Vohra and Aadit Palicha; and the youth of its co-founder Aadit Palicha is striking, they founded the company when he was only 19 years old and is the one who directed the company and took on the challenge of delivering markets in just 10 minutes, a proposal that quickly distinguishes it in the market.

Zepto ‘s growth has been notable. In a short time, the startup has positioned itself as one of the most promising in India. Recently, it managed to raise $200 million in a financing round, which boosted its valuation to $1.4 billion, crowning it the first unicorn of 2023 in the Asian country. This notable round was led by entities such as StepStone Group and Goodwater Capital and had the confidence of investors already established in the company, such as Nexus Venture Partners and GladeBrook Capital.

With this capital, Zepto has set ambitious goals. The company not only aspires to expand its presence throughout the Indian territory, but also seeks to diversify its offer with new products and services, and is currently doing so with its cafeteria offer and will continue to expand in territory and product diversification.

During an interview with the BBC‘s Business Daily radio program, Palicha expressed his amazement at the company’s dizzying trajectory:

“We launched Zepto in July 2021 and, in about 16-17 months, we went from having no revenue to having annual sales of $200 million. We project that this trend will allow us to reach annual sales of $1 billion by the third or fourth quarter of 2023. “

What is the origin of Zepto?

Now, let’s see what problem they identified and how they saw an opportunity to solve it through an innovative business model.

Zepto ‘s story begins with a series of coincidences and fortuitous circumstances. The two young entrepreneurs, Kaivalya Vohra and Aadit Palicha, who had previously collaborated on creating a ride-hailing app for school children, had returned to India for a break. Their return, however, coincided with the onset of the coronavirus pandemic, leaving them trapped in their homes in Mumbai.

Amid the first lockdown, getting groceries became a real nightmare. Physical stores were closed, and online delivery options were taking up to 6 to 7 days, even though the government had classified food deliveries as essential. This situation led them to reflect on the challenges they faced and the even greater problems their neighbors were going through, especially those who were older.

That’s when the idea arose: “Why don’t we distribute food for them?”. Thus, what started as an improvised solution to help the local community, quickly evolved into Zepto, with the vision of providing a faster, more convenient, and more reliable way to access food in India.

Since nothing has been left to chance in this startup, let’s see what Zepto means. It is a prefix of the International System of Units that is equivalent to 10^-21. It is usually used in physics and engineering to denote very small magnitudes. For example, a zeptosecond (zs) is one trillionth of a second. In this way, the entire DNA of the company is related to speed, alluding to its name.

Let’s see what the problems and/or needs of users are when buying groceries online:

• Delivery Time: Long waits are a significant hassle. Users want their purchases to arrive quickly, especially when it comes to urgent needs.
• Quality and Condition of Products: Products, especially perishable ones, sometimes arrive in poor condition. Additionally, there is the practice of mixing poor-quality products with good-quality ones to avoid losses, which affects the customer experience.
• Packaging and Cold Chain: Packaging can deteriorate the quality of the products. Deliveries at predetermined times can break the cold chain, affecting freshness and food safety.
• Inventory and Availability: It is frustrating for customers to select and pay for a product, only to discover later that it is out of stock or unavailable.
• Usability of the Platforms: Complicated applications or websites make the purchasing process difficult, especially for older people.
• Urgent Needs: In situations where an ingredient is suddenly out of stock, getting a quick replenishment through conventional online services is nearly impossible.
• Shipping Cost: Shipping rates can be high, especially for small or urgent orders.
• Geographic Limitations: Some services only deliver to specific areas, excluding potential customers outside of those areas.
• Lack of Personalization: The inability of platforms to remember preferences or make recommendations based on previous purchases.
• Communication Issues: Lack of real-time updates on order status or delivery delays.
• Limited Offer of Basic Products: Not having enough options to choose from, leads users to buy in multiple stores due to the limited supply of basic products for the family basket or everyday use.

What is Zepto’s business model?

Now, let’s look at their business model and how they approached each potential problem, need, or opportunity that Zepto identified.

First, let’s look at their unique value proposition: It is none other than “Deliver groceries in 10 minutes”.

Does your value proposition seem crazy? Are you worried about how they built their strategy to develop an innovative business model that is breaking new ground and achieving its promise of value? I invite you to read and analyze each point that I am going to reveal to you:

1. Artificial Intelligence (AI) and Machine Learning: AI and Machine Learning are branches of computing that allow systems to learn and make decisions based on data. In the case of Zepto, the app uses AI to predict demand, analyzing purchasing patterns and historical trends to anticipate which products will be most in demand in a given area. This allows you to optimize the inventory of your micro warehouses and ensure that the most popular products are always available.
2. Advanced Geolocation Systems: These systems use GPS location to identify and track the exact position of an object or person. Zepto uses geolocation to determine the exact location of the customer and the nearest ghost store. Through route optimization and traffic prediction, they guarantee fast delivery, selecting the most efficient route for the delivery person.
3. Real-Time Data Analysis: It is the inspection and analysis of data as soon as it is available. Zepto makes use of these analytics to monitor delivery performance, inventory status, and other key metrics in real time, allowing them to quickly adapt to any changes or unforeseen events and keep the operation running smoothly.
4. Automation and Robotics Technologies: Equipment and software designed to perform tasks automatically without human intervention. In its micro warehouses, Zepto uses robotics to pick and pack products, maximizing efficiency and minimizing response time.
5. Real-Time Inventory Management Systems: Systems that provide an up-to-date view of inventory at any time. At Zepto they ensure that the products that customers see available in the application are actually in stock in the nearest micro-warehouse, thus avoiding selling products out of inventory.
6. Supply Chain Integration Solutions: Tools and systems designed to optimize every step of the supply chain, from supplier to customer. These tools help Zepto optimize the acquisition, storage, and replenishment of products in its micro warehouses, ensuring a constant flow of products.
7. Real-Time Analysis Platforms: Tools that provide analysis and insights based on real-time data. These platforms help Zepto monitor and adapt to market trends, customer preferences, and other factors in real-time, allowing them to make informed decisions quickly.
8. Friendly User Interface (FUI) Technology and User-Centered Design (UCD): User-Centered Design is a design process that focuses on users and their needs in each phase. A Friendly User Interface is easy to understand and operate, especially for people who are not tech-savvy. Zepto employs User-Centered Design principles to develop an app that is intuitive and easy to use for all users, including older users. This includes creating large buttons, simple navigation, and clear options for selecting and reviewing products.
9. Personalization and Recommendation Technology based on Machine Learning: Description: Recommendation systems use Machine Learning algorithms to analyze users’ purchasing and browsing data, and make personalized suggestions based on their preferences and past behaviors. Zepto may be using recommendation technologies to suggest products to users based on their past purchases, searches, and overall purchasing trends. If a specific product is out of stock, the recommendation system could suggest similar alternatives or allow users to pre-order when the product is available again.
10. Order Management and Purchase History Technology: Description: Order management technologies allow users to easily view, modify, and repeat orders. Purchase history saves users’ previous orders for future reference and quick reordering. Zepto could be offering order management functionality in its app that allows users to review their previous orders, repeat orders with a single click, and modify current orders. This makes it easier to repeat regular purchases and allows users to manage their orders efficiently.

In addition to the aforementioned technology, several operational and strategic components at Zepto are not necessarily technological in themselves but are essential to its business model and value proposition. Here are some of those components, classified by type and application:

1. Microwarehouse Model or “Ghost Stores”: These are small distribution centers strategically located to be close to consumers and optimize delivery. In the case of Zepto, the concept of “ghost stores” is rooted in the idea of ​​“dark kitchens” or “ghost restaurants,” which are establishments that prepare food exclusively for delivery, without a dining area for customers. Like dark kitchens, Zepto micro warehouses eliminate the need for physical retail spaces, allowing them to focus on delivery efficiency and reducing operating costs. This innovative model has found its application not only in the food industry but has jumped into the retail sector with companies like Zepto, thus revolutionizing the way supermarkets operate and meet consumer demands. in the digital age.
2. Last Mile Logistics with Light Vehicles: Use of small vehicles, such as scooters and bicycles, to easily navigate the city and deliver quickly. Zepto delivery drivers use light vehicles to move quickly and overcome obstacles such as traffic, narrow streets, or pedestrian areas; so the routes can be shorter, the maintenance costs are lower than those of large gasoline vehicles and they are also friendly to the environment by not polluting the air.
3. Own Delivery Driver Management: Have your network of delivery drivers instead of depending on third parties. This allows Zepto to have greater control over the quality of service, delivery times, and route optimization by having its fleet of delivery drivers who can manage and move them according to the needs of each point, in days or hours of operation. Greater demand.
4. Prediction of Demand Peaks: Analyze historical patterns and current data to predict when and where there will be high demand. This is supported by artificial intelligence and machine learning, analyzing the data they collect in real-time. This allows Zepto to be prepared, adjusting inventories, negotiating with suppliers and even moving delivery drivers to handle projected demand.
5. Warehouse Layout Optimization: Organize shelves and products logically and efficiently. Strategically organizing the most in-demand products on accessible, easy-to-reach shelves based on demand for each product reduces the time needed to pick and pack an order. In addition, by predicting demand, it is possible to anticipate and have certain products prepackaged, which further speeds up the order preparation process. This strategy not only improves operational efficiency but also allows Zepto to respond quickly to customer orders, improving customer satisfaction.
6. Spacious Spaces in Cold Rooms: Design cold rooms so that employees can move around and find products quickly. In the case of Zepto, this helps maintain product quality and speeds up the pickup and delivery process.
7. Integrated Barcode Packaging System: A system that uses barcodes to ensure that the correct products have been selected and packed for an order. Zepto uses these systems to increase order fulfillment accuracy and reduce errors in customer deliveries.

By fusing well-known strategies and logistics with advanced technologies such as specialized software, artificial intelligence, and machine learning, Zepto has managed to design a business model that transcends the simple addition of its components. It is this amalgamation of cutting-edge technology and astute operational tactics that makes it possible to provide an exceptional customer experience, effectively solving the various problems and needs that customers face when shopping for groceries online.

Keys to zepto’s success

But let’s continue understanding this business and what’s coming for its future…

A crucial aspect is to understand, Why 10 minutes? And the benefits that ultra-fast deliveries bring :

“Zepto discovered that customers’ consumption frequency was much higher if they delivered within 10 minutes. There are many cases in which making a delivery in 30 or 40 minutes is fine, but there are some very urgent cases in which those times are not enough – when someone needs rice or shaving cream, but immediately. Then, you receive more orders from the same customer with delivery in 10 minutes.” -Palicha stated .

Acquiring high-level, experienced talent has been a crucial point: One of the main things that went in the right direction for the startup was the talent acquisition department. They were able to attract several high-profile executives from Amazon, Uber, Pharmeasy, Flipkart, and Dream 11 to join their organization. The main thing that led so many top executives to decide to join Zepto was that it allowed several people who moved to Bengaluru to return to Mumbai. However, the startup’s aggressive growth, ambition, and disciplined execution have led to several people being attracted to the company as well.

Competition is intense in the world’s most populous country: Several other players are trying to participate in the market and trying to grow quickly. But they can’t promise things like 10-minute delivery as consistently as Zepto. This period extends to 30, 4,0, and 45 minutes in most cases. Zepto is an intense company oriented to satisfying customer needs obsessively, taking care of the details with a solid technical and operational discipline that allows them to deliver in 10 minutes.

Concrete achievements and secure a future: Currently, Zepto operates in the main cities of India and has more than 1,000 people working in its offices and tens of thousands of delivery drivers. However, Palicha is cautious about declaring his venture a success.

“We don’t feel like we’re successful anymore. Only once we’re a publicly traded, highly profitable company will I put a flag in the ground and say we’re successful. I think we’ve only scratched the surface now. In fact, believing ourselves to be successful actually It’s a little dangerous because there’s so much more we can do.” –Says the businessman.

“You can feel good about it. My company is valued at US$1.4 trillion – which is a lot of money – and I’m 21 years old. But, the reality is that – as one of our main investors says – a US1,000 start-up million is three errors away from going to zero. So until you have completed your journey by making the company profitable and listed on the stock market] you can go to zero at any time,” he adds. “If we don’t screw up now and continue working as we have, we have a potentially game-changing opportunity in one of the biggest markets in this country.” -He concludes.

Zepto was founded in July 2021 and now has over 220 dark stores, or neighborhood warehouses, in cities such as Mumbai, Bengaluru, and New Delhi, with plans to expand. India‘s $1 trillion retail market has attracted global players such as Amazon Inc. and Walmart Inc. -owned Flipkart Online Services Pvt, but online sales still make up a minuscule portion of that total. Zepto ‘s sales in March grew approximately 300% from a year ago, and its annual revenue exceeded $600 million.

“There is a lot of skepticism around fast trading. If we do it right, we are in a position to build an Amazon.com-type business.” – Palicha stated .

With this analysis, I have broken down the process of building a unicorn, taking Zepto as an example. Zepto ‘s journey began with the identification of a significant problem, which was followed by the integration of technology and other creative solutions, culminating in the development of a highly competitive and innovative business model in the space of ultra-fast grocery and other products. This model has not only facilitated Zepto ‘s rapid growth and expansion but has also set an inspiring precedent in the entrepreneurial ecosystem. Through this analysis, I hope to have provided valuable insights that can inspire other entrepreneurs and companies to design and execute equally competitive and innovative business models. Zepto is certainly a company we’ll be hearing a lot more about in the future, and its story serves as a stimulating testament to the power of innovative entrepreneurship. I leave you with this question. What lessons can be learned from the way Zepto built its business model and the strategies it employed to achieve 10-minute deliveries?