Zepto: Redefining the Indian Online Grocery Market

Case Code: BSTR650 Case Length: 14 Pages Period: 1990- 2022 Pub Date: 2023 Teaching Note: Not Available

Price: Rs.300 Organization : Zepto Industry : Retailing Countries : India Themes: Business Models

Abstract Case Intro 1 Case Intro 2 Excerpts

Excerpts

Indian Online Grocery Market

Experts stated that Indians spent a major part of their monthly income on groceries. In the earlier days, the grocery market of India was operated by hypermarkets, supermarkets, discount stores, and malls. Over a period of time, use of the internet and the demand for online shopping increased. Also the lifestyle of customers changed. All these factors led to the growth of the online grocery market in India..

Start of Zepto

Zepto was not Palicha’s first venture. In September 2019, when he was just 17, he started a car pool mobile app in Dubai. The app got a grant of Dh 53,550 from Emirates NBD, Dubai’s government-owned bank, but the concept did not succeed. Then, with his childhood friend Kaivalya Vohra (Vohra), Palicha went to Stanford University, the US, to study computer science. However, after the outbreak of Covid-19, both of them came back to Mumbai during the lockdown months of 2020..

How It Works

To beat the battle prevailing in the q-commerce market in India, Zepto followed in the footsteps of companies like Getir, Gorillas, and GoPuff and launched a unique business model, i.e. the Dark Store Model. Dark stores were a type of micro warehouse, where the company stored its groceries. These stores were not accessible to the public and customers. Under this model, the company set up dark stores in different parts of the city, bearing different pin codes, where it planned to operate, so that products could be delivered quickly...

Disruption in Online Grocery Delivery Segment

The q-commerce market started growing with the rise of the pandemic. Smaller households, bachelors with their busy lifestyle, and elderly people were all factors that increased the need for quicker and more convenient shopping options. Many customers preferred to buy small amounts of groceries and household products when there was a need, instead of purchasing them in bulk. The quick deliveries market was expected to touch US$5.5 billion by 2025..

Challenges

Although there were enormous growth opportunities in the quick online grocery market in India for companies dealing with the quick online grocery delivery business, there were some challenges which these companies faced. One of the major challenges was low margins. In the quick online grocery delivery business, the average order volume was very low and the delivery cost was high, which led to low margins for the companies..

Analysts’ Views

Looking at the heavy competition in the quick online grocery market in India, some analysts suggested that companies with a huge customer base stood a better chance of winning this competition. For example, Swiggy had a huge customer base because of its food delivery business. It would, therefore, be easy for the company to motivate the same customers to purchase groceries from Swiggy InstaMart..

Way Forward

In April 2022, Zepto launched a 10-minute food delivery service in select areas of Mumbai, India, under the name ‘Zepto Café’ on the app. Under this Café format, the company offered ready-to-drink coffee, chai, and packaged snacks (like biscuits and sandwiches). The company sourced these products in bulk from different brands such as Mumbai-based catering company A1 Samosa; Delhi-based café chain Chaayos, Delhi-based coffee chain Blue Tokai, and Pune-based chain of patisseries and bakeries Rachel’s Sassy Teaspoon..

Exhibits

Exhibit I: Penetration level of Quick Commerce in Online Grocery Segment of India, China and Europe
Exhibit II: Online Grocery Market Share by Region in 2021
Exhibit III: Market Share of Online Grocery Stores in India in 2019
Exhibit IV: Evolution of Consumables Market of India
Exhibit V: Quick Online Commerce Market GMV and Forecast
Exhibit VI: Comparison of Delivery time of Zepto’s Competitors
Exhibit VII: Zepto’s Market Share in Online Grocery Market (on the basis of GMV as of January 2022)

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