Closing 2023: Spotlight on this year’s India’s First Unicorn – Zepto

Aadit Palicha and Kaivalya Vohra, childhood friends aged 19, founded Zepto, which specializes in ultra-fast grocery delivery, collaborating with 86+ dark store owners in 13 areas in 2021, facilitating over a million deliveries. The company utilizes a network of ‘cloud shops’ or micro-warehouses for prompt order fulfillment.

Zepto’s success is attributed to its ability to consistently deliver a wide range of products within ten minutes, fostering rapid growth and strong customer loyalty. Operating in multiple cities with a 1000+ workforce, Zepto offers 5000+ products, including fresh produce and daily essentials. Leveraging advanced technology and optimized delivery centers, Zepto leads the Indian grocery delivery sector, capitalizing on the surging demand for swift delivery services.

The Indian online grocery market attained a value of $6.8 billion in 2022. Looking ahead, the market is anticipated to experience substantial growth and is projected to reach $37.0 billion by 2028. This growth trajectory indicates a remarkable compound annual growth rate (CAGR) of 31.3% during the period from 2023 to 2028.

Despite Zepto’s impressive 200% month-over-month growth rate and a 78% monthly retention rate, the startup faced challenges in its inaugural fiscal year (FY22). While achieving commendable operational success with a total revenue of Rs 142.3 crore, Zepto also grappled with significant losses, totaling Rs 390.3 crore during the same period FY22, starting operations in April 2021, saw overall expenses reach Rs 532.7 crore.

However, in the subsequent fiscal year ending on March 31, 2023, Zepto’s net loss surged 3.35 times to Rs 1,272.4 crore—a substantial 226% increase from the previous fiscal year’s loss of Rs 390.3 crore. Despite these heightened losses, Zepto experienced an extraordinary 14.3-fold expansion in operational revenue, soaring from Rs 142.3 crore in FY22 to an impressive Rs 2,024.3 crore in FY23. This position highlights the dynamic trajectory and early operational challenges faced by Zepto.

Zepto has secured a total of $597.8 million in funding across seven rounds thus far. The most recent funding, a Series E round completed on November 8, 2023, contributed $31.3 million to Zepto’s. With a valuation of $900 million as of June 2023, the company achieved unicorn status in August 2023 by raising $200 million in the Series E round, elevating its valuation to $1.4 billion. Zepto’s initial seed funding in September 2020 was led by Contrary.

Quick-commerce faces challenges due to the high operational complexity and costs associated with maintaining multiple fulfillment centers and a vast inventory. Market acceptance in India is hindered by price sensitivity, with consumers preferring lower prices over super-fast deliveries. Regulatory hurdles, including issues with FDI norms and data privacy, add to operational difficulties for companies like Zepto, while intense competition from well-established e-commerce giants with significant resources poses a notable threat in the quick-commerce space.

Zepto faces competition from Swiggy Instamart, Big Basket, and Blinkit in the fast-paced grocery delivery market. Another contender is Dunzo, utilizing its Xpress Mart dark shop network for 19-minute grocery deliveries in Bengaluru, directly competing with Zepto.

Operating in major Indian cities like Bengaluru, Mumbai, Delhi, Gurugram, Noida, Ghaziabad, Hyderabad, Chennai, Pune, and Kolkata, Zepto aims for profitability by 2024. To achieve this, the company plans an extensive expansion of its dark stores and delivery network. Zepto aspires to go public with an IPO targeted within the next two to three years. Positioned for sustained growth and led by key executives, the company aims to solidify its standing in the quick-commerce industry. Having been named the first unicorn of 2023, Zepto aims to surpass Rs 10,000 crore in total sales in the coming months, as stated by founders and CEO Aadit Palicha during a panel discussion at The Economic Times Startup Awards.

Startup Funding Summary

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