Thursday, February 22, 2024

Zepto raises $100 million at $570 million valuation


The company offers 10-minute grocery delivery in India via its app Zepto, which has raised $100 million. As it expands its services into new cities, Zepto, a Mumbai-based start-up that provides 10-minute grocery delivery, has more than doubled its market capitalization to $570 million from $225 million.  An entrepreneur start-up founded by two 19-year-olds who left Stanford last year emerged from stealth mode in November. However, long before discussing the business, Zepto had captured the interest of the local start-up community, with a variety of people voicing their opinions.

It offers a 10-minute grocery delivery service, a category that has surged in popularity in several parts of the world in recent quarters. Zepto, whose name plays on a mathematical term, delivers groceries to customers within ten minutes. A few heavyweights have also entered the instant grocery delivery market, such as Swiggy and BlinkIt (formerly known as Grofers).

It was a coincidence that Zepto also showed up on the scene. Aadit Palicha and Kaivalya Vohra were in India for a short break shortly before the epidemic broke out. They used to collaborate on a number of projects together, including a ride-sharing commute app for school children, but suddenly found themselves locked in their houses because of the pandemic. In the midst of the outbreak, the two struggled to buy groceries. While many of the nation’s municipalities still permitted grocery delivery, which was classified as essential, despite this ban. As Palicha stated in an earlier interview, there were some gross execution errors in the online grocery delivery space in India, which is one of the largest in the world.

An interview with Palicha last week revealed the startup has been overwhelmed by the support and excitement it has received from customers, but it doesn’t want to be complacent. “We tend to be overly critical of ourselves and have exceptionally high standards for ourselves. Customers are delighted with the speed at which their deliveries arrive. Is it possible to continue to focus on scaling Stock Keeping Units and improving the efficiency of our units?” Zepto, however, is cautious about ensuring its staff and partners are happy, he said, noting the retention rate and internal feedback.

Each of Vohra’s micro-warehouses has a capacity to handle over 2,500 orders a day and has a buyer retention rate of 65% month-to-month, according to Vohra. An analyst note from Sanford C. Bernstein predicts that Indian e-grocery sales will reach $25 billion by 2025. The online grocery market is expected to grow from today’s less than 1% penetration to approximately 3-5% by 2025. Growing income and wealth, low-tier consumption, e-commerce penetration (30% CAGR), and the aging population (50% below 25) provide strong long-term drivers. Its analysts wrote that grocery expenditures remain high at around 30% of income.

The talent Zepto has been able to attract recently is another thing moving the company in the right direction. There are many high-profile executives from Flipkart, Amazon, Uber, Dream 11, and Pharmeasy among those that have joined the startup. According to Palicha, one of the reasons so many executives have joined Zepto is because it has enabled them to return to their home cities after moving from Mumbai to Bangalore. Although the startup has grown quickly, executed with discipline, and been ambitious, these factors have made it appealing to people of similar tastes, he explained.

Having launched with a different model originally, the company switched to quick commerce in August 2021 and is now adding 100,000 new customers every week, 60% of whom are women. Having such a detailed understanding of the logistics experience has allowed them to expand to most major metros within just 5 months. The long-term future of Zepto looks bright.

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