Zepto is a quick commerce grocery startup that has grown to $100 Million ARR+ in a matter of less than 2 years. In this blog, we breakdown the business model & growth strategy that has allowed them to scale their business.
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It’s 7 AM in the morning
You are hungry and open the fridge
You’ve run out of cornflakes (sad!)
Your breakfast options are limited now.
→ Run to a nearby shop ~ lose 15 mins
→ Skip the breakfast ~ not ideal
→ Cook something else ~ lose 30 mins
But there’s the “Zepto” option.
Order cornflakes on it & get them in < 10 mins.
And that’s the story of 10 min grocery delivery.
Meet Zepto the champion of online grocery deliveries. We’ll break down Zepto’s whole business model in next 7 minutes and you could really get deep understanding into how this full stack internet business is run & could make money.
If you’re interested to learn a structure approach to startup growth & business, do checkout the GrowthX Experience 🚀
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1. What is Zepto’s Business Model?
There’s both a simple and a complex way of introducing Zepto’s Business Model.
In simple words - You order groceries from Zepto and they deliver it to your location. They make money out of this process.
Let’s say that you have some visitors home. You want some sweets and a packet of chips to serve your guests. So you would go to Zepto, choose all the items you want to order, pay for it and get it in under 10 minutes.
But here’s everything Zepto has to do to get those product to your home in under 10 mins ⏬
Rent a warehouse and assemble their dark store
Hire delivery executives to deliver your order
Hire folks to handle all the packing, arranging & all other operational tasks inside the warehouse
Hire folks to handle support when things don’t go as planned
Speak to local suppliers to get the groceries and other supplies to their dark store
Build an app to display all the items for the customers
Speak to UPI aggregators, banks & other financial institutions to setup seamless payment systems for you
Build in-house systems to communicate your order to the operational staff
Build in-house systems to help the delivery executive pickup orders and deliver them safely
& so much more….
Whatever you see on your smartphone is only possible because of a ton of moving parts that seem to be seamlessly fixed with each other. This is the very simple answer to Zepto’s Business Model 🤟🏼
To understand the complex version of Zepto’s business model, you can jump to the relevant section using the quick links below
To breakdown this craziness behind the 10 min delivery, our team downloaded Zepto and made a quick order. We made sure that the order contained a mix of meat, fruits & milk (their highest margin items). Zepto delivered this order in less than 13 minutes!
We also looked at a ton of user interviews and founder interviews on YouTube to understand the Zepto business model in depth.
Everything you see here is a result of mix of original research gathered from the internet and the users of Zepto. Here are the 5 key pieces that allow Zepto to deliver your order in 10 minutes or less!
1. Darkstores & Microwarehouses:
Darkstores are physical warehouses where all the items you see on the Zepto app are placed in. When you order anything, a Zepto delivery executive picks up all your items from one of these dark stores and brings it to you.
Unlike traditional retail stores, you cannot go to a dark store and buy your grocery items. Dark stores can only be accessed by Zepto’s team members and their vendors.
Dark stores are the sole reason why Zepto is able to deliver some orders in under 10 minutes. By being in close proximity to a dense urban are, they are able to deliver your order quickly.
For example, let’s consider Indiranagar in Bangalore.
By placing a warehouse in this location, Zepto will be able to service all these neighbourhoods in under 10 minutes.
If the order frequency and retention is good, the dark stores will max out almost instantly. Then they could either add more deliver partners to the same dark store or simplu open up one more dark store nearby!
What happens if that dark store also reaches a bottleneck?
In that case, Zepto opens up another dark store to meet demands.
But thanks to their experienced leadership team, all these expansion decisions are backed by data. They take into account geography, future growth potential, traffic, weather, driver availability & much more before they even think about opening a new dark store.
2. Super Quick Packaging
The founding principles of Zepto has always been impeccable operations backed by custom built software. That’s how they scaled their first store and that’s the same principle they’re using for all their stores across India.
Once you place an order, an operations executive inside their warehouse will get two things
A list of all the items in your orders
A map to navigate themselves inside the warehouse to pickup all the items in the least amount of time
The second point is what truly allows Zepto to become a kingpin on operational efficiency 🚀. As their CTO Kaivalya Arora says, ‘We have designed the process to make sure the entire order is dispacted in 60 - 90 seconds’
This means that the rest of the time is entirely spent on the last mile delivery, thereby easing some pressure on the delivery partner.
This brings us onto our third point
3. Internal Structure of the warehouses
Operational efficiency is the name of the game when it comes to any operations heavy business. And Zepto achieves operational efficiency in a class of its own 🧗🏼♀️.
The operations have streamlined the entire warehouse with a data led approach. They’ve looked at the items which move the quickest and have placed it closer to the entrance. Groceries which are not frequenlty ordered are de-prioritised and placed at the back.
The creative below will give you an idea of how a darkstore might be structured based on the order frequency of different items. Although this structure is just an example and is subject to change based on several other factors.
But Multiply this structural formula with item size, refrigeration needs, fragility & you will get a repeatable model of how to design all your warehouses at scale 🚀
For example, fruits & vegetables are one of their most important and highest margin categories. Hence they have decided to place them in shelves closer to the entrance, where they’re very easy grab and place into delivery bags.
To draw parallels, this is very similar to how the founders of McDonalds designed their Kitchen to complete customer orders in less than two minutes 🤯
If you haven’t seen ‘The Founder’ on Netflix, this is an open call to see it ASAP. If you’re working in an operations heavy business or interested in building one, please remember that operational efficiency is crucial for your long term success.
But, how do you design superfast systems even when human decisions are part of the system?
A human operator has to look at the order and decide the chronological order of items in the delivery bag. This takes time and there is also the risk of human errors. Items might be missed or fragile items might end up getting placed at the bottom of the bag (No one likes to have their eggs & tomatoes crushed under a watermelon ☹️)
So the team came up with a pretty simple solution - Give a tablet like device to each operations executive in the darkstore. It works like a Google map, guiding the executive to pickup the items placed in the warehouse.
Once the operator is assigned an order, they are told where and how to pick each item in a chronological order.
Their CTO Kaivalya says “We wanted to remove human decisions as much as possible. So each of our executives have a handheld software device driving them through the most optimal pathway”
This system works like a charm and has allowed them to exponentially open new dark stores across India 🚀, while maintaining quality control.
4. Incredibly short distances to delivery:
BigBasket took anywhere between 3 hours to a day to deliver a bag of groceries, while Zepto does it in 10 minutes. A lot of this speed is heavily owed to a warehouse that is present in close proximity to an urban location. This is just simple physics bringing down the time of the last mile delivery.
Since the distances are closer, the delivery executives are also able to fulfill their orders quicker. Moreover with customers who order frequently, Zepto can assign the same set of delivery partners to fullfil their orders. Since they are well acquainted with the location of the customers, this brings the Time To Deliver even lower 👍🏼.
5. Driver’s Familiarity with their locality:
The operations team at Swiggy use incredibly sophisticated Machine Learning models to bring down the total deliver time. Right from choosing which partner gets which order to how many order each partner picks up.
This allows the delivery partner to
Pickup multiple order and deliver them on the way
Deliver one order and pickup an order from a nearby hotel
To even give you a rough estimation, Swiggy has to calculate four things before assigning a delivery partner to your order.
This gets more complex when the delivery executive has to pickup one more order or has to deliver one more order on the way to your house.
If you thought that was complex, think about assigning a delivery partner at random. Sometimes they might be familiar with your area. Sometimes they might not be familiar with your locality. Now combine this with traffic and other humane errors!
With Zepto, some of these problems like Prep Time are naturally removed due to the nature of the business. Since the drivers are also operating in a familiar locality, the first mile & last mile times are brought down significantly.
Here’s how the Zepto would calculate time for a delivery partner who’s already at the darkstore
The human factor is definitely one of the bigger advantages of Zepto. In a matter of weeks, the delivery partners become familiar with each road and each shortcut. Familiarity breeds speed and the delivery partners get quick with time.
If you’re interested about how Swiggy does their driver routing, please do give this and this a read 👍🏼
2. How does Zepto make money 💸?
We’ve seen how Zepto operates from a micro and a macro view. They store groceries in a darkstore and deliver them with the help of their delivery partners. But all this seems like a costly affair to run. They have to pay rent for each darkstore, salaries for darkstore operators & payments for delivery partners. These are fixed operating costs to Zepto.
Add this on top of the tech, product & marketing costs, it’ll give you a fair idea of the amount of money required to keep Zepto alive. So how does Zepto earn money selling groceries?
Here are the five ways they are currently earning money 🤑, along with one potential way Zepto they can earn money in the future 🚀
1. Margins on each individual product:
The most common way grocery delivery startups earn money is on the margins of each individual product. This model is similar to the retailers who buy goods at a lower cost from distributors and sell it at a higher price ✅
For example, let’s assume that Zepto sells a kg of onion for a price of 24 rupees. They earn margins on this by buying a large quantity from a distributor at a lower price.
We went to the internet and checked for prices of onions from distributors. The prices range from anywhere between 10 rupees/ kg to 20 rupees/ kg.
If they are able to tie up with a buyer at the lowest price, this is definitely a win win for both of them. Because Zepto gets onion at a lower price and the distributor also gets his order fulfilled almost frequently leading to repeatable revenue numbers.
For starters we did some calculations as to how much revenue Zepto could earn from just one warehouse and from onion 🧠
Let’s assume that Zepto orders 100 kg of onion for one of its warehouses in Bandra every day.
The price of one kilogram of onion comes around to 10 rupees.
So let’s assume that the total cost to Zepto along with transportation is 1200 rupees.
Let’s also assume an ideal state where they are able to sell the entire 100 kg over the same day.
We know that zepto currently sells onion at a price of 24 rupees/ kg.
Now that’s 2400 rupees before taxes & other charges.
Not bad for 100 kgs of onion sold in just one darkstore.
According to their CTO, Kaivalya -”Potatoes, Onion, Tomatoes are some of our highest selling items on Zepto. Fruits & vegetables also happen to be one of the highest margin items on our platform”
Onion is just one category here. One look into Zepto and you’ll see hundreds of vegetables, fruits, and quick perishable items, all of which are high margin items on Zepto!
2. Handling Charges
Handling charge is the fee collected by Zepto to organise, pack and dispatch the items on your list. We clicked on the ‘information’ button to understand more about this handling charge and we were thrown the following message - “Handling charge is levied to ensure the products are handled, packed & dispatched safely”
We tried to see if a handling charge is levied by all grocery delivery platforms in India
Swiggy Instamart - Yes, they had a handling charge
BigBasket NOW - They had something called a delivery token, but it seemed very similar to this handling charge
Blinkit - Surprisingly, they did not have a handling charge
We figured that the handling charge was not a set standard across all grocery delivery platforms. So this is something that is levied by platforms in different ways.
3. Delivery Charges
This is the second bigger piece of solving the profitability equation for most delivery grocery startups. Delivery charge is a big incredibly important for solving profitability because
No matter the size of the order, Zepto has to pay the same delivery fee to their delivery partner
But high delivery charges can also be a reason why users stop buying from Zepto
The key here is to find the balance between waiving delivery charges and growing profitably 💪🏼. Zepto has solved this problem by choosing to charge customers for orders with a low value basket size. However if you break a certain threshold, you’ll unlock the option to get a ‘Free Delivery’
Increasing the threshold to unlock free delivery does two things
Increases the AOV of each order by encouraging customer to order more
Improve revenue by charging delivery fee on orders with low AOV
The net benefit is aimed at increasing overall revenue from the ‘delivery fee’ lever. But it might also reduce the overall order frequency for certain ICPs who are Power users. High delivery fees might discourage users who use Zepto to order everything at the last minute.
Hence this a profit lever the ‘Growth Team’ must constantly tweak and experiment with data!
But the fact is that people are tier 1 cities are increasingly favouring CONVENIENCE >>> MONEY. Our hypothesis is that most folks won’t mind paying a delivery fee of 25 - 50 get their order delivered.
Let’s assume that Sheila orders from Zepto 6 times a week
→ Even if she gets 3 free deliveries a week, we still have 3 deliveries where Zepto earns a revenue
→ If she’s paying 35/ delivery, that’s 105 rupees for a week.
→ Extrapolate that across a month and Zepto has earned a revenue of 420 rupees.
→ Assuming there are 100 customers like her in one dark store, Zepto has just earned 42,000 rupees just from deliveries.
You should note that these these numbers are highly speculative and can vary a lot. But you get the gist. Done right, Zepto can find a balance between earning from delivery charges while also maintaining the user frequency 🫂
One interesting fact to note that if your order is less than 50 rupees, Zepto levies a fee of ‘Small Cart Fee’ of Rupees 35. This will incentivise the user to add more to their cart quite naturally!
4. Product Customisations:
User Research is something we push actively in the GrowthX experience. Before you hypothesize any solution, you should always seek to understand your users and their problems.
In Zepto’s case, it’s safe to say that they’ve identified their customers and their problems incredibly well. One good example is under their fruits and vegetables section
Right from peeled onion, to cut carrots & loose corn. They have identified ways to take existing vegetables, customize them and increase their prices 🚀
500 grams of carrot costs 45 rupees.
Bringing it down to 100 grams this costs just 9 rupees.
But 200 grams of peeled carrots costs 53 rupees on Zepto.
Bringing this down to 100 grams costs a whopping 26 rupees
By simply washing and cutting up the carrots, they have found ways to increase their margins on their products.
Simple economics shows a 300% increase in price 🤯 just by customising the product a bit.
Sure you’ll have to buy expensive machinery or employ people to help with these customisation. But if Zepto is able to achieve good volumes, this cost will also go down as it’s fixed!
Zepto definitely nailed ‘People don’t buy your product, they buy the solution that can be achieved with your product’ 🤘🏼
5. Product Ads:
Product Ads are a proven way to earn predictable revenue in most e-commerce and marketplace businesses. Zepto also pulls this off Product Ads in a flawless manner
Almost everyone in the grocery space uses product ads as a monetary lever.
The concept is simple: If you’re a retailer, you can give money to Zepto to feature your products at the top of certain searches & categories.
For example, Bru features their ‘Bru Instant Pure Coffee Jar’ at the first position for the keyword ‘coffee.
This is a model Zepto hasn’t experimented yet, but proves to a very solid model for predictable revenue growth. Swiggy has already rolled out this membership model in the name of ‘Swiggy One’.
By subscribing to their membership, you can get
Free deliveries on all orders
No surge fees
Other ecommerce startups also have similar models like
Amazon’s ‘Amazon Prime’,
Flipkart’s ‘Flipkart Plus’ &
Meesho’s upcoming membership model.
The membership will model will allow Zepto to predict how their revenue will grow with certainty. It can also be beneficial since it increase customer retention and serves as a good moat!
We will have to wait and see if Zepto also rolls out this feature in the future!
If you’re interested about learning a structure approach to startup growth & business, do checkout the GrowthX Experience 🚀
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How does Zepto’s Growth Model look like?
Zepto has grown from one darkstore in Mumbai to 100+ darkstores & millions of users in a matter of two years. This growth is possible because they had a structured approach to growth in the first place. Be it creating marketing copies or opening up new darkstores, everything has a structure in place.
In this section we will create a structured Growth strategy for Zepto to reach a business goal in a specific period of time.
1. Who is Zepto’s Ideal customer?
Before we nail down on Zepto’s ICP, let’s look at a couple of practical use cases of Zepto
You have a few visitors at home and you need to serve them snacks. Maybe you order some fruits and snack items on Zepto for your visitors
You are prepping for breakfast when you realise the batter you have has expired. So you go to Zepto and order for some fresh ID dosa batter
You are preparing lunch when you realise that you don’t have any onions left for dinner. Maybe you order some onions along with a fresh set of groceries for the next three days
You feel the need to snack and want some biscuits and chips. So you go to Zepto to order some snacks along with essential groceries for the week
You step into the washroom to brush your teeth, only to realise you are out of paste. You quickly open Zepto and get some paste delivered in the next 10 minutes
These are just a tiny subset of the use cases of Zepto. Also most of these examples were just around groceries. Zepto also has a ton of other sub categories like
Bath & Body care
Electricals & Accessories
& much more
A simple probability check will show you that the use cases are in the thousands (and growing as Zepto plans to add new categories 🤘🏼). Before you build any growth strategy, you need to find a way to bucket these millions of users & use cases into something consumable.
This look into Zepto’s ideal customer is nothing perfect. But it will give you a solid foundation into Zepto’s primary users.
We have borrowed these insights from the assignment submitted by one of our members - Aadeesh Deshpande (GX12). He is currently working as Associate Director - Business Development and Key Accounts at MX Player. You can reach him through his LinkedIn here.
Potential ICP 1
Potential ICP 2
Potential ICP 3
Potential ICP 4
21 - 26
26 - 35
35 - 44
18 - 21
8 lakhs/ annum+
20 lakhs/ annum+
30 lakhs/ annum+
→ Sometimes in a relationship
→ Mostly Married
→ Sometimes Unmarried
→ If Married, mostly has children
→ Mostly has children
Employment Status/ Work Experience
→ Freshly Employed
→ Has a solid work experience
→ Already in a second job or been promoted in the first
→ Mature work experience
→ Mostly in Leadership roles
→ Mostly Unemployed
→ Sometimes working part time or in an Internship
More trust, improved experience with Online platforms.
The overall MACRO needs to change to enable this population
More Disposable Income.
Right now, most folks in this segment are not earning or earning very low
This table gives you a small peek into the ICPs of Zepto and their buying habits. This table is nowhere close to perfect. We’re sure that the growth team inside Zepto will have more data points on this.
But this table gives you a basic overview into
Who are buying from Zepto?
Why are they buying from Zepto?
What are they buying from Zepto?
And their major blockers to spend more on Zepto
With these characteristics in mind, let’s take a peek into the market sizing of Zepto 👇🏼
2. Understanding the market (TAM, SAM, SOM)
In an interview with Master’s Union, their CTO Kaivalya Arora says “we went from 5 to 77+ dark stores from Sep to Dec, 2022”
This massive growth is backed by some of the top investors in the market like Nexus, Glade Brook & YCombinator. This is even after there are tons of grocery startups in the market like Instamart, Blinkit and let’s not forget Tata’s BigBasket!
This is possible because of the nature & scale of the grocery business in India 🇮🇳
Their CEO points the scale of the grocery & essential industry in a beautiful way - “Dmart has built a $40 Billion dollar business in a matter of 20 years. If we can even capture a portion of that volume, we can build a profitable business effectively”
So the question is
How big is the grocery market and how much market share is available for Zepto?
India is a massive country with a total population of 1.5 billion people 🤯
But Zepto cannot cater to this entire base as most of them are located in Tier 2+ cities & rural areas. Maybe Zepto will tap everyone in India (in the future) or maybe we’ll have a Tier 2+ focused startup like Meesho focusing on just that market!
But for the foreseeable future, Zepto will only be focusing on the folks living in Tier1+ cities with Annual salaries greater than 10 lakh/ annum
Kartik Narang (GX10), a fellow GrowthX member and Capabilities & Insights Analyst McKinsey laid out this TAM calculation in an incredible manner in one of his acquisition assignments🚀
Total Population in Tier 1 Cities in India
Percentage of People between 20 & 40 years of age
Total Population in Tier 1 cities between the age of 20 - 40
Percentage of Annual Income greater than 10 lakhs
Total Population in Tier 1 cities between the age 20 - 40 with Annual Income greater than 10 lakhs
Average number of people per household
Total Number of houses that can be reached
11.2/ 4 ⇒ 3 Million households
The total TAM in terms of the number of households can be assumed anywhere between 3 to 7 million based on the variations in the following categories
Swati Poddar (GX9), another fellow GrowthX member and PM at Walmart has smartly converted this into revenue numbers by multiplying the TAM with the average spend on groceries for each household. This was also an acquisition assignment as part of the GrowthX learning experience.
You can unlock this and hundreds of other assignment on global products by signing upto the GrowthX Experience 🚀
Here are some other benefits you’ll unlock with access to 500+ assignments
→ Access to a community of thriving growth operators, leaders & enthusiats
→ Access to the GrowthX Experience
Back to our TAM calculation now 👇🏼
By Swati’s calculation with a TAM of 7 Million and an average household grocery spend of 10,000 rupees/ month, the revenue TAM comes down to 704 crores/ month
We can say that Swati’s TAM is way different from Kartik’s TAM Calculations. But this doesn’t mean that one of their calculations are wrong.
TAM calculation is all about making informed assumptions with the data we have in mind
In Swati’s case, she considered the average number of people/ household as 2.5. Hence the major difference in the overall TAM number. In essence, TAM is just to give you an idea about the potential size of the market. It is always changing and is never a number set in stone 🚀
Here’s how the TAM Range will look based on same average household grocery spend of 10,000 rupees/ month ⏬
TAM (In Terms of number of households)
Avg Household Spend On Groceries
TAM (In Terms of Total Achievable Revenue)
300 Crores/ month
400 Crores/ month
500 Crores/ month
600 Crores/ month
700 Crores/ month
When you start gathering more data points, you can also do TAM Calculations based on different ICPs and customer segments. This can help you decide everything from Growth strategies to overall product positioning and key business decisions 🤙🏼
3. Zepto’s Growth Strategy
Based on this market & ICP research, we can create a Growth Strategy for Zepto. The growth strategy contains five main levers which are
Engagement & Retention
Building a Growth Team
But all of these levers don’t mean anything when you don’t understand the core goal.
We have built this growth strategy using the same foundations we teach our members as part of the GrowthX Learning Experience. If you also want to create structured and outcome driven growth model like this for your startup, check out our experience here 💪🏼
What is Zepto’s goal for the next 2 - 5 years?
If you ask us, we definitely have no clue. So that’s why we are going to hypothesize their goals based on two things
Their current growth numbers
Founder Interviews on YouTube
Looking at both, one things becomes very clear. One of their current goals is to grow as quickly as possible. But that doesn’t mean that they don’t have profitability in mind. They are looking to grow their revenue numbers with the goal of achieving optimal profitability in the next two to five years.
They also understand that anyone can copy their business model and quickly overtake them. So their core goal is to also open new dark stores across various markets, establish their presence, gain users & use that as their MOAT!
In simple words, you could hypothesise their goal as
→ Expand to all Tier 1 cities in India and achieve a revenue of XXXX in YYYY number of years
Since we don’t have any insider information about Zepto, we’re just going to assume the revenue number as $500 Million ARR and year as 3. We assume this because Their CEO mentions in one the interviews that they had easily crossed $100 Million ARR a while back.
Since acquiring new users is going to play a key role, we are going to prioritise Acquisition as our first lever
Since retaining these users and getting them back is also key to revenue growth & profitabilty, we’re going to prioritise Engagement & Retention as our second lever
Since it’s a mobile app, we need to make sure any user who’s downloading it, actually ends up using Zepto. We’re focusing on our Onboarding lever as the third priority
Finally, we cannot let profitability be an afterthought. It also needs a bit of focus fro the get go. So we’re going with our Monetisation lever as the fourth priority
Once we break down all these levers, we’ll get a very clear idea on how to build our Growth team. Some common questions like
Who To Hire?
When To Hire?
Budgets For Hiring?
Which are must have roles and good to have roles?
NOTE: Your growth strategy is not set in stone. Based on the business goals, the market conditions and tons of other factors, your growth strategy will always be evolving. The best growth minds are always aware of this and are willing to tweak their strategies based on the macro and micro changes 🚀.
We have defined 4 different ICPs in the ideal customer section. Each ICP has a different set of needs and different marketing strategies that work for them.
A really good growth team understand this and will tweak their marketing strategies based on the ICP they’re trying to reach.
For this case, we’re just going to look at ICP 1 - The ‘Young Guns’. These are folks in the age range of 20 - 25 and purchase everything from online grocery platforms like Instamart, Zepto & BigBasket.
We will only create a Growth Model for this ICP. Since they have a lot of unplanned purchases, their usage frequency is also very high. Also because they are young and have a lot of disposable income, their ability & willingness to spend is also high.
The most common acquisition channels to reach our ‘Young Guns’ are
You can use the quick links below to jump to any specific section in our Acquisition Lever
Now let’s break down all the acquisition levers for Zepto’s growth model
Zepto’s organic strategy for the ‘Young Guns’ has three splits. This is based on how they discover new products and where they usually spend their time on.
Search Engine Optimisation (SEO):
SEO is the art of ranking your business when your ideal customer searches for it. Since SEO is a pull channel, you need to identify the different ways in which your customers might search for your product
Here are some common themes we were able to identify with Search Engine Optimisation.
Here’s the breakdown with some common examples
Most of the keywords here were occupied by market leaders like Amazon & BigBasket. Currently Zepto doesn’t seem to have an SEO strategy in place. It’s website is also pretty basic, displaying just information information only about their organisation.
For starters, their main competitor BigBasket brings around 6.4 million website visitors from smartphone traffic alone. It’s the ideal time for Zepto to think about organic SEO strategies if they’re certain about building this for the long term 🚀
To start with SEO, they need to invest in a website strategy that ties in with their app usage. Most of their users will use Zepto on their app. But the website is primarily to build pages and capture the SEO traffic.
Eventually Zepto will also have to build a full scale website like BigBasket if they want to tap into the fullscale SEO potential.
App Store Optimisation(ASO):
Since Zepto is a mobile app first business, App Store & Play Store discovery is a high priority. App Store Optimisation is the art of ranking your app for relevant searches and in the relevant categories.
ASO can also be broken down into the three types of searches, which we have broken down in the Whimsical below
Apart from search, you also need to ensure your app is free from technical glitches and bugs. Pair this with a healthy number of positive reviews, your app will also be displayed in top positions under
Top Free Apps
Your best bet is to make sure your app
Is free from technical glitches
Has an incredible user experience
Tons of Positive Reviews (Possibly 4+ stars)
Social Media is yet another untapped opportunity for Zepto. One of the reasons we suggest social media is because
Swiggy, Zomato and a lot of D2C, FMCg brands have been doubling down on Organic social for the same reasons. While it requires constant effort and a lot of experimentation to stay relevant on social, the efforts gradually pay off.
Since the ‘Young Gun’ ICPs are extremely young and spend a lot of time on social media applications, it makes perfect sense 🤘🏼
The Social Media strategy would be a mix of long form content (For YouTube etc) and Short form content (for YouTube Shorts & Reels)
Long Form Content →
The general theme of long form content is to provide value first. We can start with things ‘Young Guns’ might already be searching for. Since some of them might be living alone, some ideas could be
Home Cleaning Tips
Healthy Eating Tips
Short Form Content →
Short form content should focus on funny anecdotes and things these folks might find relatable.
Quick Informational Videos
However considering the entire macro, social media needs to be inclusive of all ICPs. It should not just be relatable to our ‘Young Guns’. The overall brand persona and positioning should also be in mind when creating these strategies.
These are advertisements that will be displayed on search engines like Google, Bing and other platforms. The targeting here is based on individual keywords, rather than just interests or demographic data 🚀
Product based ads which focus on specific products can be extremely useful for Zepto. They have two strategies for product base search ads
Products that are low AOV, but high margins (fruits, vegetables etc..)
Products that are high AOV, but low margin (Oil, Atta etc..)
Products that have a high purchase frequency, but low AOV & ROI (Snacks, Quick Munchies)
Which products they want to go after is entirely dependant on a strategy backed by data 💽
Brand Ads can be used for keywords where someone is searching for your product, but you don’t have the sub pages ready for it.
Or you can also use it to capitalise on the Inbound search terms until SEO kicks in.
Brand Ads can also be used to kick out competitors for products which Zepto thinks will give them good retention.
These ads can be run over competitor pages or also be run over products which Zepto’s competitor’s are ranking for. Yet again, this can be used to capture a new market, a new product if you think they might help with your retention rates.
Social ads come in really handy when you’re trying to target based on location, interests or both.
If Zepto is trying to scale up each individual dark store chronologically, this is a great way to reach customers. You can target based on age, interests, gender & more based on the data platforms given by advertising platforms 🤘🏼
We need to be mindful of two things when running social ads
What’s the key value proposition for this ICP?
How do we convert that into our messaging?
Which social platforms are they most active in?
As we’re just focusing on the ‘Young Gun’ ICP, we also need to make sure the messaging is on point for them. Their messaging can be derived from their Key Value Propositions such as
10 Min Delivery
Fresh Groceries At Your Doorstep
Here’s how a static ad might look for them on a social media platform
Here’s an example of a dynamic ad for Zepto.
It’s both quirky and conveys the Key Value Proposition under 15 seconds. Perfect for social media platforms
While running social ads, we also need to mindful of the platforms each ICP is active on. Our ICP is active on Instagram, Snapchat & Facebook which are all good platforms to start with 🎢
App Store Ads:
Since they’re an app first platform, it makes a lot of sense to prioritise App Store Ads when you’re starting with the paid channel. The grocery market is a bit mature thanks to old players like BgBasket, Blinkit and other incumbents
So it’s Zepto’s best bet to capitalise on the existing search volume on these platforms 🚀
App Store Ads can also be of two types as shown below
These ad formats are a different beast in themselves. For the sake of keeping this short we are skipping the technicalities in this section for now.
There’s an universal truth we need to understand before we get into Product Integrations. No app, product or business exists out there in Unison. While your customer is using your product, they are also simultaneously using multiple other products at the same time.
Product Integration is the concept of seeking a natural fit with the products used by your users and integrating with them.
But some ground rules before we seek Product Integrations
The Product should not be a direct competitor to Zepto
The Product Integration pitch should feel natural and personalised
The product should also have good trust (as trust can be destroyed by partnering with a wrong brand)
The product should preferably have the same or higher usage frequency than Zepto
From user interviews conducted by GrowthX members, we have discovered that Zepto users also use some products like UrbanClap, Netflix, Hotstar, EatFit etc…
Here are some interesting product integrations we can work out with the following products
These are just some examples from the top of our head. Once you do more intense customer research, you will be able to find better products that have a better fit with your offerings.
Partnerships are lesser known ways to get your brand in front of tons of new customers. Zepto can approach partnerships in two different ways
Each has their merit and difference in their payback periods!
Influencer Led Partnerships
This essentially focuses on partnering with influencers whom your audience are also hooked into. Most of these partnerships are based on behavioural insights which can be derived from customer calls, surveys etc.
Since we’re trying to reach the ‘Young Guns’, we will start with the platforms they’re most active on - IG & YouTube. Step 2 is understanding the themes or which channels/ pages they follow.
We know that this persona is focused on improving their career. So a good place to start is with channels that focus on ‘Career specific advice’. Some of them could also be interested in cooking channels 🕺🏼.
The main idea is to identify a theme and then double on those specific channels with a solid pitch.
Web series & movies are a great way to place your products in a subtle manner. The actor sipping on a cold coffee he ordered from Zepto. Or maybe the family member ordering something on Zepto.
These are all subtle pitches to place your products in mainstream movies as well as smaller films & web series.
Unacademy pulled this off incredibly well with their product placements in tv series like Kota Factory, Operation MBBS etc. Product Placements should feel like natural and in sync with the plot. The core idea is to solidify Zepto as a product everyone uses casually in their life.
Offline ads probably have one of the best product-channel fits for Zepto because of their hyperlocal nature. When done right, this channel can solve for discovery for a very specific set of ICPs in one location. The best ICP to start with is our ‘Young Guns’
Here are a couple of offline channel ideas to target ‘Young Guns’ in their daily life
They mostly take an Ola or Uber to reach their workplace
We can place ads in autos & cabs behind the driver’s seat
They might take a bus or the use the metro train
We can also place banners in specially designated boards at these stops
They will use the lift atleast twice a day in their office space
We can place an ad inside the lift walls
They will walk past the lobby in their office space (preferably an IT park)
We can place custom booths that encourage people to download and try Zepto
Offline channels come in a variety of ways and help us target folks in a very specific locality!
For most consumer led applications, referrals can be an incredible acquisition tool. Since our ‘Young Guns’ are highly social and tech savvy, referral can have a good product market fit for them.
All good referral programs will nail 4 things in depth
The reward for both the referrer and the referee
Why will someone refer?
When will someone refer?
How easy it is to refer?
Each section can use a separate page in reality. But for this guide, we’re going to focus on Zepto and our target ICP - ‘Young Guns’.
Why will someone refer Zepto?
At the heart of every successful referral program lies an incredible customer experience. The best reason someone will refer Zepto is when they have a great experience with it. A great experience is delivered when
They get their order in under 15 minutes
The items are fresh and undamaged
The packaging is good
They get exactly what they ordered for (not something different - happens frequently in grocery delivery apps)
Their AOV of each order is high (Depth)
They keep ordering multiple times a week (frequency)
The idea here is to identify when someone has a good experience and then take them to the referral loop
When will someone refer Zepto?
The discovery of the referral loop should always be placed in the ‘Happy Flow’ of the customer.
Some examples of happy flows are
After a customer receives their order in under 15 minutes
After a customer has submitted a review
The goal is to identify screens where the user is in a ‘Happy Flow’ yet it still won’t hinder the primary goal (complete an order)
What is the reward?
A good reward does two things
Enables the customer to keep referring
Enables the new customers to & old customers to keep using the app
In that frame of mind, rewards should be app specific and increase the usage of the app. Monetary rewards are good, but they prevent the users from investing the reward back into the app.
App specific coins, coupons and dicsounts are always good currencies for a referral system. One such reward is Zepto’s ‘Zepto cash’. It provides both the referrer and the referee with credits they can only use in Zepto.
How easy is it to refer?
Ease of a referral system depends on two things
Discovery of the referral system
Ability to Track your referrals
Discovery can be solved by showing the referral link in all the ‘Happy Flows’ and also on the sidebar.
Ability to track referrals is important because it allows the referrer to understand where his referees are
Have they clicked on the link
Have the downloaded the app
Have they made their first transaction
But building a referral program like this is resource intensive and takes up a lot of development effort (even with the use of tools!)
A good idea is to run a test to a small population before deploying it to tons of users. Some things that can be tested are
Rewards for referee
Rewards for referrer
Placement of the referral link
Tracking of the referral link
Different ways to share the referral link
Here are some metrics Zepto can track to ensure the success of it’s referral program
Number of active users sending invites
Number of invites per referrer
Conversion rate to link clicks
Conversion rate to app downloads
Conversion rate to first purchase
Conversion rate to first review
So that’s all about the acquisiton strategies for Zepto 🤘🏼. Now let’s take a look into the next most important lever for Zepto’s success - E&R.
Engagement & Retention are the holy grail of building a successful product in any market. We could even go further and say, Engagement & Retention are the pillars of any successful business.
Good engagement leads to better retention.
Better retention leads to revenue and word of mouth.
Good revenue means you can invest in the best talent, improve the product even more and rule the market
Word of mouth means that you can now acquire customers at costs that keep getting lower
All these combine into a vicious cycle which make any product/ business successful.
Where does retention come here?
Some of the best product teams think about retention right from the Onboarding. It’s all about helping the user become powerful with the product. Retention is never an afterthought in any successful product. When done right, retention can drive product & even business decisions.
How does Engagement & Retention apply to our ‘Young Guns’?
Before we even dive into the engagement framework for our ‘Young Guns’, we need to understand some basic terms 👇🏼
Frequency of usage - Number of times someones orders from Zepto
Depth - No of items ordered in each category (Tomato, Onion, Potato under the vegetables section)
Breadth - No of categories ordered (1 Vegetable, 2 fruits, 1 Bread, 1 oil etc..)
These are the 3 pillars of good engagement.
Based on these pillars we can define users into 3 buckets 👇🏼
Casual - People who order from Zepto once a week - once every two weeks
Core - People who order from Zepto two to three times a week
Power - People who order from Zepto 4+ times a week
We are yet again going to pull excerpts from Aadeesh Deshpande’s (GX12) assignment on Zepto to deep dive into our framework.
There are three types of buying habits for Zepto’s users 👇🏼
Stock Up - Plan & buy groceries for the entire week
Top Up - Buying items that generally have a low shelf life (Vegetables, fruits, bread, milk etc.)
Unplanned Purchases - Items that might have run out without knowledge or items that have a sudden need (Oil, masala powders, Alcohol, Snacks etc..)
Here are some facts we know about our ‘Young Guns’ from the table we’ve added above
Potential ICP 1
21 - 26
8 lakhs/ annum+
→ Sometimes in a relationship
Employment Status/ Work Experience
→ Freshly Employed
Frequently Used Social Media Apps
LinkedIn, Twitter, Instagram
Entertainment Services Used
Disney+ Hostar, Zee5, Amazon Prime
Ecommerce services used
BookMyShow, Amazon, Myntra, Nykaa, Swiggy, Zomato, Zepto, Urban Company
Income Spent On
4. Health & Fitness
5. Pets (if any)
6. Food (Ordering/ Dining Out)
Main Priorities In Life
4. Education to get ahead in Career
Purchase Behaviour for Groceries
Prefers to order weekly/ daily groceries online
Cost or Convenience
Analysis Of Grocery Purchase Behaviour
Stock up - 5%
Top Up - 30%
Unplanned Impulse Purchases - 65%
Why Choose Zepto over other online Grocery Delivery Applications?
1. Quick Delivery
2. 24*7 Delivery
3. Can Discover products which they might not have planned ahead for
5. Home Delivery
Typical Products Categories Ordered from Zepto
2. Ready To Eat Items
3. Fruits, Vegetables, Milk, Bread & quick perishable items
4. Hygiene & Grooming
5. Sometimes Electronics & Home Cleaning
Order Frequency on Zepto
3 - 4 times a week
Time of Ordering from Zepto
1. Early Morning
2. Late Night
Ability To Spend
Shift Needed to Spend on Zepto
No Shift Needed
We know that they rarely stock up on their daily needs. Most of their purchases are last minute and unplanned. We also know that this segment has a ton of disposable income and has a very low barrier of entry to Zepto.
We also know that the majority of this segment live in a Tier 1 city which is where Zepto primarily operates. In his research, Aadeesh has quoted a research paper from Redseer which indicates that 70% of all grocery purchases are a mix of unplanned & top-up puchases.
So what’s the engagement campaign for ‘Young Guns’?
We know that a ton of Young Guns order from Zepto 2 - 3 times a week. But this is only fruits, vegetables & some quick perishables.
Type of user
At the moment they are core users
Goal of the campaign
Get them to order from other categories like Snacks, Juices, Cleaning Essentials, Electricals etc…
We want to eventually increase the breadth of the user and convert them into a power users
Experiments To Run
1. Quick Suggestions on the Checkout Screen
2. Placing other categories at the top of the Home Screen
3. Special Discounts for Items ordered from a New Category
4. Suggesting Item Combos based on the items you’ve added in the Cart
Aadeesh Deshpande had an incredible example to convert ‘Young Guns’ from Core to Power users.
Here’s an example of how this will play out
A user adds onions & tomatoes
Sambhar on your mind?
1. Sambhar Powder
2. Masala varieties
3. Ready to eat sides
4. Packet of chips
Here’s another example to increase breadth
A user adds paneer, onions & tomatoes on their cart
Paneer butter masala on your mind?
1. Garam Masala
3. Ready to eat Chapatti
4. Cashew nuts
5. Desserts (if it’s dinner)
This could be paired up with other experiments on the homepage as well. But all this experimentation needs to be tracked to understand if it’s a success or not.
Metrics To Track
1. No of new categories ordered
2. Cart Size
3. No of core users selecting new categories from homepage
4. No of core users selecting new categories from ‘Categories’ page
5. No of core users selecting new categories on the ‘Checkout’ page
6. % of casual users adding new categories to their cart
Paneer butter masala on your mind?
1. Garam Masala
3. Ready to eat Chapatti
4. Cashew nuts
5. Desserts (if it’s dinner)
What does Retention look like for ‘Young Guns’?
For Zepto, the best retention happens with both depth (more items in one category) and breadth (ordering from multiple categories). Once they start ordering different items, Zepto becomes the go to place for our ‘Young Guns’.
Increasing Depth and Breadth makes Zepto their Go-To product which naturally increases their frequency of usage.
Which channels drive the best retention for ‘Young Guns’?
Timely Push Notifications:
Push Notifications that are backed up data is a great option. Let’s say one person orders a packet of milk every two days at exactly 9 PM. If they haven’t ordered milk for the last two days, a push notification asking them to order milk can go out ✌🏼
WhatsApp notifications can also be triggered as reminders for them.
Let’s assume that their favourite milkshake brand was out of stock in their last order. We can run a WhatsApp notification to tell them it’s back in stock
Let’s assume the milk example. We can push a WhatsApp notification to remind them
Slack or Teams Notifications
This is a bit contradictory. But we know that ‘Young Guns’ are heavily career focused. So there’s a very high chance that they may be using an internal communication tool like Slack or Microsoft Teams.
A quick growth test can be to connect their Slack IDs and send them reminders through them. Although be wary as this is just an hypothesis and hasn’t been proven by any grocery delivery startup yet!
Which Products/ Categories drive the best retention?
Quick Perishable Items like Milk, Eggs, Bread, Fruits & Vegetables (High freq & high margin)
Flour, Oil, Rice items
Bathroom & home cleaning equipments
Bath, Body & Hygiene products
Indulgence items like Biscuits, Chips, Cold drinks, Ice cream etc..
Finally, why would ‘Young Guns’ churn?
Churn can be divided into two types at the very basic level - Voluntary & Involuntary. Once you understand the reasons someone might churn, your team can work on preventing them. An acute understanding of the reasons can also help you fix issues in your marketing & brand perception
Voluntary Reasons For Churn
Delivery Time is too long
Wrong Items were delivered
Items were delivered to the wrong address
Products were damaged during delivery
Expired products were delivered
High delivery fee
Products were out of stock
Involuntary Reasons For Churn
Shifted to a new location where Zepto is not available
Out of town for sometime
Issue with certain payment portals
As you start mapping out all the potential reasons someone might churn, you can trace it back to early signs of churn. For example, if delivery time for a certain user has increased and you see a drop in their frequency, there might be some level of causation at play.
Negative actions to keep an eye on
Drop in App Open Rate
A lot of customer support tickets
Drop in the frequency of orders
Drop in basket value
Drop in weekly/ monthly AOV
Increase in Cart Abandonment
A key concept you should keep in mind. There is a very good difference between causation and correlation.
If order frequency is going down while delivery time increases, there is a high chance of relation between the two. But there is also a good chance that there’s no relation between the two.
Maybe they had a roommate who just moved out. Hence their order frequency is low
Maybe they started buying their fruits and vegetables from a street vendor because that was easy
As a growth person, before you jump into any conclusions, you need to do the due diligence to understand the reason. You can do this by
Sending a survey,
Looking at their support tickets
Looking at the change in items orders before & after change of freq
Scheduling a 1:1 calls with your users
As a growth person, your goal should be to seek the truth before you confirm your hypotheses.
What are some retention campaigns we can run for our ‘Young Guns’?
This is an example we’ve pulled out from Aadeesh Deshpande’s assignment on Zepto. We’re just tweaking a bunch of the ideas for better presentation.
Core & Power Users
Purchase Behaviour For Core Users
→ Top Ups and last minute unplanned purchases
→ Mostly fruits, vegetables, groceries & household items
→ 5+ products in cart
→ 3 times a week minimum
Purchase Behaviour For Power Users
→ All Categories
→ 2 to 10 products in cart
→ 5+ times a week minimum
Resurrect Core & Power Users
Frequency of orders has reduced.
Reason: Increase in Delivery Time
Apologise for the delayed delivery time and compensate with Zepto coins!
Push Notification on app/ WhatsApp Notification
We understand that your time is money.
3 out of your last 5 deliveries were delayed by more than 15 minutes. Please do accept our apologies in the form on 150 Zepto coins!
Frequency & Timing of Campaign
The notification should be sent one week after the last order. A reminder needs to be sent 15 days after if the user is still not resurrected!
→ % of users displaying old purchase frequency after 8 weeks
→ WOW Retention curve
Other Micro Metrics To Track
→ App Notification to Click Ratio
→ Click to ‘Add to cart’ ratio
Reasons this campaign will work
→ By accepting the honest mistake and offering a reward, the core & power users will be happy to come back
→ The Zepto coins will further incentivise them to give another chance to Zepto!
→ If the order is delayed again, user may lose trust in the brand & may never come back again
→ They may be further offended that we are trying to bring them back with cash incentives
You can use the same framework to create multiple resurrection campaigns for all types of users. This level of depth will help you prioritise segments in a massive product like Zepto.
The same framework can be used for all other voluntary and involuntary churn. As a growth person, your first priority is to understand the reasons and prioritise the solutions on the cohorts which will have the maximum impact.
Since we’ve prioritised acquisition and engagement & Retention, we’re not going to focus on the other two levers on this guide. The superpower every growth person must have is the ability to say ‘NO’ and prioritise with laser focus.
Even if you have infinite resources to handle, you need to have focus. Focus will help you solve the most important problems effectively. Moreover focus will help you reach your revenue goals effectively!
But if you were to work on the Onboarding lever, here are some metrics you could track
Add to basket metrics
→ Channel wise download metrics:
Ads to Downloads
Facebook ads to app download
IG Ads to app download
Organic to download
Google search to download
Google play store search to download
App store search to download
→ Add to basket metrics:
Number of download to registration
Number of registrations to ‘Visited Homepage’
Number of ‘Visited Homepage’ to ‘Add Items to cart’
Number of ‘Add Items to cart’ to ‘Visited Checkout Page’
→ Checkout Metrics:
Number of items added to cart
Number of categories added to cart
Average order value
Number of users checked out out with COD
Number of users checked out with Credit Cards
Number of users checked out with UPI
→ All these metrics can also be further divided into
This is a very broad list of metrics you can track to understand your users. As always the metrics you choose will be dependant on your current revenue goals and business priorities.
Finally, the most important, yet looked upon growth lever is the monetisation lever. Revenue should never be an afterthought for any business. Since this lever is also not a priority at the moment, we are not going to deep dive into it.
Even before you work on your monetisation lever, you have to run the ‘Litmus Test’ to understand your retention. Monetisation only works if atleast a certain subset of your users retain after a certain period of time.
Once the litmus test is cleared, the monetisation lever has four categories
Who to charge?
When to charge?
What to charge?
How much to charge?
and that’s all about the Growth levers for Zepto.
If you also want to create a Growth Strategy like this for your product, feel free to checkout the GrowthX Experience.
You can learn the A to Z of Growth with top 1% talent including Product Managers, Founders, Leaders, Marketers & Growth Enthusiasts.
Alternatively, if you’re a Founder Or Leader looking to hire the Top 1% Talent, do register to our Hiring Waiting List. We have helped top startups like Flipkart, CRED, Zomato & others find the Top 1% Growth Talent in the Market.
4. Why is Zepto well positioned to win?
Zepto has grown at breakneck speeds and we truly believe that can win in the long term. Here are some reasons why
1. Huge market that’s growing exponentially:
The Indian economy is growing at an exponential pace. What happened in the west 20 years back is happening in India currently. As more capital is being poured into the country, new businesses are being formed every day. This leads to a surplus of capital in the economy.
Capital that can be used to deploy to make you life easier, like buy groceries from Zepto, instead of going to a shop nearby.
The picture below shows an estimate of how the Indian economy will grow in the next 25 years.
This is the macro shift that BigBasket definitely missed in its formative years.
2. Customer trust with internet products is growing exponentially:
The Indian consumer segment are slowly starting to understand and trust internet products. Before Ola, Flipkart, Myntra and other startups came into play, spending money on the internet was a challenge. And it was not because of the lack of money
People still had disposable income, but the trust levels were quite low. No one were accustomed to spending money on these consumer apps.
The advent of internet apps, paired with JIO and UPI changed this game.
Spending money on the internet became an everyday thing and this naturally improved the trust levels of consumers. Zepto is well positioned at a time where consumer trust on these internet startups is growing exponentially.
3. Backed by an experienced leadership team:
There’s a reason why Zepto went from zero to 2000+ employees in a matter of two years. Right from the get go, the founders were keen on hiring experienced leader for their management team.
They hired folks who had already done that startup journey in the same or a related field. Some of their most senior hires were
Their People function is headed by Roma Bindroo handled the people function at Johnson & Johnson for multiple years
The founders understood that Zepto is still an operations heavy business with some software at the front. Even if they make the software 100x better, the operations cannot be avoided.
They understood the game and started hiring folks who understood operations heavy businesses in the first place. This allowed them to reduce mistakes and scale faster than ever!
If you’re a leader or a founder, keen to hire the Top 1% Growth Talent in India, do register to our waiting list here. We have helped 100+ top startups like CRED, PayTm, Swiggy & Dunzo hire their Growth talent.
Please do fill out the form and one of our Talent Team superstars will reach back to you 💪🏼
4. Changing customer behaviour:
With the boom of the economy, customer behaviour is also changing constantly. More customers are now starting to value Convenience >> Money.
Startups like Swiggy, Uber, Urban Company are a true testament to this!
5. High driver retention rate:
Zepto has a 7% higher delivery driver retention rate than all hyperlocal delivery startups in India. This is because of a couple of reasons
Zero long distance deliveries - Drivers hate nothing more than long distance deliveries
A centralised hub for all drivers - Since Zepto operates only out of dark stores, this gives them a chance to provide a designated waiting area for delivery partners. The founder mentioned that they also provide their partners with water, snacks & otehr condiments to make their life easier.
While 7% maybe a marginal amount, it can eventually add up. Driver experience is a key piece in winning this hyperlocal war. Since there is no penalty or drivers when they jump ships, the player who retains the most, eventually wins in the long term.
6. High NPS:
Zepto was founded on the core insight of high NPS from the days of Kiranakart (their old startup). Basically customers who received their orders in less than 15 minutes had a higher NPS compared to customers who got it later.
Since Zepto is built on this core insight, their NPS is close to 80% (which is spectacular)
7. High Customer Retention rate:
Yet again, during the days of Kiranakart, the founders realised that customers who recieved orders in less than 15 minutes retained better. The 15 min delivery is a WOW factor, around which Zepto is entirely built out of.
This helps them own a retention rate of 60% even with 2 million+ customers & growing!
8. Wave 2 startups FTW:
Wave 1 startups are the BigBaskets and Flipkarts of India. They faced a lot of challenges in terms of the MACRO
Consumer Sentiment etc
In the last 10 years however, the entire Macro of India has shifted in favour of startups 👇🏼
The talent pool has become denser (lots of people who have been there and done that)
The economy has grown and is growing by leaps and bounds
The people have more trust on Internet startups
Paying for something has become incredibly easier (thanks to UPI and all the Fintech startups)
Consumer have started spending more money rather than just saving it
9. They have solved for delivery accuracy:
A big challenge with old age grocery delivery startups is order accuracy. Issues like missing some items or even delivering the wrong items is terrible customer experience. The customer on the other end orders grocieries for convenience. Missed or wrong deliveries is probably the most inconvenient thing for them.
The founding team developed Zepto with a razer focus of delivering the right order on time. The pay close attention to the dispatch process and fill any leaks to prevent wrong deliveries.
Other incumbents like Swiggy Instamart, BigBasket have also fixed this in the recent days. Should be interesting to see how they fare against Zepto in the future.
10. Expanding to new locations:
Zepto’s founder mentioned in an interview is doubling in business every three months. This is possible because of their rapid expansion to new locations with a ton of darkstores. Since their inception, Zepto has grown from one store in Mumbai to 75+ locations across Bangalore, Chennai, Mumbai, Kolkata and other tier 1 metro cities.
This has been possible because of an experienced management team and high focus on creating formalised processes for everything!
11. Expanding to different categories:
Zepto started with just groceries, but now they’ve expanded to beauty accessories, baby products and even electronics. As they slowly figure out the supply chain and formulate the entire process, they can add more categories to this. An example could be umbrellas & raincoats during monsoon.
The sky is the limit when they have the supply chain figured out for everything.
12. Execution On Point:
Grocery delivery is not a huge innovation. BigBasket and many other incumbents have already done it and grown massively. Even the 15 min delivery can be figured out by other players in a matter of time.
The biggest strength of team Zepto is their ability to execute. Momentum is a very sneaky element that exponentially increases your success.
While other players are changing their business model to fit the 10 min delivery, Zepto is already acing it. The first mover advantage alone will carry them far above the finish line. By providing an incredible service, they can retain to all their customers while other incumbents are still building for the market.
5. What are the reasons Zepto might also lose in the hyper competitive grocery space?
There are always two sides to any coin. If there are a couple of reasons why Zepto will win, there are even more reasons as to why it might lose. We wouldn’t do justice to this guide without looking at those points too!
1. Expanding to Tier 2 cities will be a challenge:
Tier 1 cities currently contribute to almost the entire revenue of Zepto. Last time we checked, there were no Zepto owned darkstores in tier 2+ cities. Zepto will reach a plateau as they expand across all tier 1 cities.
They can only unlock even more growth when they reach tier 2 cities. However tier 2+ cities are built different in terms of
Building Zepto for tier 2+ cities will require a whole different mindset that the current model. They will have to rethink everything which will require time & a lot of money.
2. Not all dark stores will be profitable:
The cold truth is that not all darkstores will be profitable. Power laws can be crazy in business and a small percentage of the dark stores may end up generating the most amount of revenue.
The hard part about this is each darkstore, irrespective of revenue will have a fixed operating cost. This will be split between
So at some point Zepto will have to decide between closing low revenue locations or keeping them alive for just overall brand visibility.
3. White-labelling products is an operational challenge:
There is only so much you can earn from selling other brands. That’s exactly why so many supermarkets end up creating their own products like rice, oil, bread etc..
It allows them to control the supply chain and take a bigger share of the revenue pie.
However producing your own products is also investment heavy. While production is the first challenge, Quality Control & Branding is an even bigger challenge. Acquisitions can come in handy for this play.
We’ll just have to wait and see how Zepto play this card out!
4. Free Delivery might hit on the margins:
While ‘Free Delivery’ is great for the growth stage, it is not sustainable for overall sustenance. At some point, Zepto will have to cut down on ‘Free Delivery’. Or they might also need to increase the minimum threshold for ‘Free Delivery’.
This might lead to a drop in order frequency and users jumping to competitor products who do offer ‘ Free Delivery’.
5. Zero Cost Of Switching:
The biggest problem with hyperlocal startups like this is the switching cost. Or should we say that there isn’t say.
What is a switching cost?
It is the cost a customer has to pay when they decide to use another application. For example, when someone decided to use another SaaS app, the switching cost is loss of data. If they decide to play another game, they will end up losing all their progress and having to start from scratch.
Essentially, switching cost is a hidden cost that prevents a customer from using another app.
Since there is ‘Zero Switching Costs’ customer can have all of their competeitors on the phone and order from anyone of required. If they get one or two bad experiences, they might immediately jump to a competeitor.
If BigBasket can also consistently deliver in under 15 minutes, Zepto is no longer a ‘must-have’ but a ‘Good to have’.
6. 10 min model is replicable:
One big IP risk is that their min model is incredible 10 in delivery can be implemented by anyone. All they need is some capital to frontload their darkstore and they’re good to go. To Retain customers in the long run, Zepto will have to keep providing on their promise of quick delivery.
7. Change in government regulations:
A lot of things need to go right for internet startups to succeed in India. Once such thing are the government regulations. As of now, Zepto can classify their drivers as partners and not employees. This allows them to pay their drivers like a consultant rather than an employee.
This also includes all drivers who operate with Swiggy, Zomato and other delivery partners.
If one day, the government mandates that they should also be treated as employees, it will mess with their entire P&L and might even sink the business.
8. Lose out on the waiting game
The team behind is executing well, but can they maintain it for the long term. Old players like BigBasket are flush with an instream of capital from the TATA group. While Zepto is dependant on investor money to stay afloat. Sure, most of their darkstores eventually ramp up and start earning revenue.
But what if players like BigBasket decide to cut Zepto on delivery costs & margins?
This will be a long game where Zepto can only win if they are fiscally discipline and provide a stellar experience.
These are some of the reasons we think Zepto might fail in the next 2 - 5 years.
However no one can predict the future and these are all just speculations up to this point. But as a growth and business person, it is your job to constantly speculate, hypothesise and play the devil’s advocate to future proof your business.
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