Legacy e-commerce companies that have not yet generated significant PAT (profit after tax) do not have the authority to comment on the sustainability of quick commerce, according to Zepto co-founder Aadit Palicha in response to a question about BigBasket CEO Hari Menon’s earlier comments on the segment.
“We have sustainable economics, equivalent or better than offline. Most of the offline retailers also have not done as well,” Palicha said during a session at the Sharrp Summit in Mumbai on April 12. The revenues and expenses of a certain business model in respect to an individual unit are referred to as unit economics.
Earlier in the day, BigBasket CEO Menon said at another Sharrp Summit event that the unit economics of rapid commerce enterprises that claim to deliver things in 10 to 15 minutes do not work.
Menon further said that since BBNow, the company’s rapid commerce service, is connected with the current e-commerce site BigBasket, both verticals share expenses, while isolated quick commerce enterprises struggle to thrive.
“When you look at our economics today, we have the lowest hyperlocal last mile delivery cost in the world, it’s less than 50 cents. It’s easy to look at something with 140 character approach and say this is how it works versus some of the best supply chain minds in the country working into a huge amount of depth and solving these problems,” said Palicha.
According to Zepto’s creator, around 80–100 of their dark shops have reached positive cash flow in 12–14 months. Palicha credits this to a mix of cost reduction and increased revenue, which are inextricably linked.
“There are no silver bullets. It’s all about basis point-to-basis-point execution across dozens of line items,” he added.
According to Zepto’s FY22 financials, the company lost Rs 390.3 crore on a stand-alone basis. While its entire income in FY22 was Rs 142.3 Cr, its total costs in FY22, its first year of operations, were Rs 532.7 Cr. In a few months, companies will begin reporting their FY23 financials.
During his presentation, Menon also said that e-commerce customers did not want speedy delivery; rather, it was imposed upon them, and they replied, “Why not?” Palicha, citing Zepto statistics, suggested that customers now prefer speedy deliveries over minute ones.
“When you look at the revenue retention data, hundreds of thousands of customers getting consistent eight to 12-minute deliveries has better revenue retention versus customers getting 20-25 minutes delivery. So do customers want quick deliveries – absolutely, if you’re giving them 10-minute delivery, versus 25 minutes, they will pick the former,” said Palicha.
Zepto, founded in 2021 by two 19-year-old Stanford University dropouts, Palicha and Kaivalya Vohra, provides clients with rapid grocery delivery through micro-warehouses.
Families with a business background raised Palicha and Vohra in Dubai, where they dabbled in projects as youngsters. They started their first business while still in school, GoPool, a ride-sharing app that a Dubai-based company eventually bought.
Earlier in May 2022, we secured $200 million in Series D fundraising with a value of $900 million, four months after raising $100 million, led by YC Continuity, at a valuation of $570 million.