Reimagining the dark stores in India- Zepto
Whenever we hear the term ‘dark stores’, the first thing that comes to our mind is it being something illegal or offensive- owing to its name. But unlike that, the term dark store refers to a retail outlet or small shop that caters exclusively to online shopping. In August 2020, the eCommerce giant Flipkart set up dark stores to expand its presence across food and groceries, and take on Reliance JioMart. And reinventing this idea, a startup in India has introduced a game-changing business model.
Zepto promises 10 minutes delivery services in India
The two 19 years old entrepreneurs have raised $60 million to disrupt India’s overcrowded and highly competitive grocery delivery market. Glade Brook Capital led Zepto’s first institutional financing round. Aadit Palicha and Kaivalya Vohra brainstorm the Zepto app to transform the dark store services in the country.
The duo had previously collaborated on several projects including a ride-hailing commute app for school kids and left Stanford last year to pursue their new dream of startup. Companies like Nexus, Y Combinator, Global Founders Capital, as well as investors Lachy Groom, Neeraj Arora, and Manik Gupta also participated in the round, which values Zepto at $225 million.
The app was launched seven months ago and offers 10-minute grocery delivery services beating up the giants like Flipkart and Big Basket. They have set up dark stores in the cities they are operating in including Mumbai, Bangalore, and Delhi. They are soon planning to spread their wings in Hyderabad, Pune, and Kolkata and also expand the dark stores they currently operate with. The startup as of now relies on regular grocery stores and works differently than many companies.
“The way we are growing right now, and the current penetration and frequency of usage we are seeing, the opportunity is just massive,” said Aadit Palicha in an interview.
The idea came to them while they were stuck in the lockdown in Mumbai. For independent teenagers, the major obstacle was to secure groceries and essentials. Thus, they created Zepto to shorten the delivery time and avail services in even remote areas. The coronavirus Lockdown has shown the need to expand the delivery space in India. According to Palicha, the online play of the Indian grocery delivery space, the world’s largest, was grappling with some gross execution errors and they needed to transform it.
To achieve this feat, their core team includes former executives from big firms like Flipkart, Uber, and Dream11. In order to compete with giants like Swiggy and Grofers who had recently provided options for fast grocery deliveries, Zepto chained up local dark stores and also created job opportunities for local businesses that were shut down during the lockdown. Thus, the team today is consistently growing 200% every single month with deep access to institutional capital. They currently have 100 dark stores. Each dark store can handle about 2,500 orders per day and their average delivery time is 8.47 minutes.
Today, almost half of the country’s population has started relying on online shopping. As a result, online retail shopping increased manifold during the pandemic. According to a report by Business Standard, retail sales in India in November 2021 grew by 9% as compared to pre-pandemic levels in the past few years. Large companies that are still unable to reach the corners of the big cities or tier-2, tier-3 cities are now using the dark store business model to further their operations.
Thus there is an opportunity to penetrate higher with an increase in conversion and retention. The dark store can effectively help them expand their business and bring together the population living in the gray zone.