Zepto is an Indian quick delivery grocery player looking to change consumer habits to make the service a lifestyle enabler and chief marketing officer Amritansu Nanda speaks to WARC India Editor Biprorshee Das about how in the long term, customer satisfaction will be more important than delivery time.
This article is part of a Spotlight series on quick commerce in India. Read more
- Quick commerce can be a lifestyle enabler as many people do not want to be forced to go grocery shopping.
- If done properly, consumers do not need to pay a premium for quick delivery because of cost efficiencies and flawless execution.
- Grocery is a habitual category and the challenge is to educate customers on the many spaces for quick commerce to play a role.
WARC: Let’s begin with Zepto’s history. How did it start and what was the need gap you identified that Zepto could fulfill?
It is a very fresh concept that didn’t occupy any mind space with consumers a year ago. That’s also the time when we started. The genesis of Zepto came from the difficulties the founders faced while ordering groceries in Mumbai and they tried to identify what the current gap is in the services of the incumbents.
A key thing that came up is that most incumbents were trying to replicate the operational models of e-commerce. The idea was to start with what the consumers want.
Through our research and conversations with a lot of potential customers, we realised that it makes sense to be at the heart of the demand and deliver as quickly as possible, especially in the urban parts of the country where convenience is a highly valued aspect of daily life.
We started with trying it out with a few stores in Mumbai. In parallel, we built a team and expanded into multiple geographies, and one year down the line, here we are.
How many cities is Zepto present in?
We are present in the top 10 cities of the country – Mumbai, Delhi NCR, Kolkata, Pune, Bengaluru, Hyderabad and Chennai.
Our focus will be these cities for now. We will go deeper before we go wider. We have a business model that works for both the business as well as customers.
Is it easier for consumers in the metros to buy into a concept like this than in the Tier 2 or 3 cities who may still be using the kirana stores?
Yes. The win-win situation is more likely to happen in the metros because first of all, they are very dense. I come from a small town and I know for a fact that we will not do great business where I come from, as much as I would like to think otherwise. The density is very important.
The second bit is value. In metros, people travel for two, three or even four hours a day. That is unheard of in Tier 2 and smaller towns.
These are some nuances to keep in mind. The internet user base is rising phenomenally with the tremendous penetration of 4G. Tier 2 and 3 cities are a significant source of growth for a lot of national e-commerce businesses. As hyperlocal businesses, we must obviously take it step by step.
A quick delivery model might make sense for people living in metros, but do you think the 10-minute delivery model is really necessary?
Is a superfast quick commerce model really needed? Perhaps not. Hopefully, no one was sleeping hungry because quick commerce was not around. There were ample alternatives. The idea is to provide a better alternative, something that forces consumers to switch their habits so they realise that life is better with this particular service.
Latching on to another cliché, we want to be lifestyle enablers. We don’t want grocery to be a forced part of people’s lifestyles. When you say that you love going to the supermarket, I relate to it. I love doing that myself. We don’t want to kill that joy for sure. What we do realise is that a lot of people don’t want to be forced to do it. But as an option, it is fantastic.
The question then remains is that even though you might not need it but if you can get it, would you use it? There is 24-hour-delivery, there is going out and buying groceries from a physical store, and then there is quick commerce – what will you opt for? That choice is completely the customer’s. We are not saying we are better in any aspect, we leave that to the judgement of the consumer because it is very contextual.
In some areas, there is a higher density of physical stores; people might even have deep, personal relationships forged with the owners of such stores. In that case, we aren’t saying that a customer has to switch to a service like ours.
The grocery market is huge and all these models can thrive in parallel. It is not one against the other. The same consumer must have transacted across all formats. Hence, all these models can coexist, which is why I think grocery is slightly different as a category.
So, how do you make quick commerce sustainable in the long run?
We still have a long way to go in terms of how big this business can become. We want to build a generational company that defines the way the internet is shaped and how the entire ecosystem views startup businesses. Currently, there is a certain permutation; we want a fresh take on that.
When executed right, this model can be sustainable in the long run.
This is because our rental cost per order is less than five rupees. We can service way more orders and so the per order cost comes down significantly. Also, because we service very close distances, our last mile cost per order is significantly lower.
Given these, there are a lot of things that play to our advantage, contrary to popular belief that this is a premium service and hence, must be heavy on costs in the background. It is actually not true – it will be heavy on costs if not executed well.
Our focus is on execution. At the end of the day, we are an operations-heavy platform in a category like grocery, where margins are very fine. We have to be very, very frugal.
How can brands in this space differentiate themselves?
I don’t think it will be a battle between 10 or eight minutes and so on. Beyond a point, the delivery time does not matter. The whole idea is to deliver a safe and satisfying experience for everyone.
Our delivery partners are trained to service orders in a safe manner. The speed at which they will be driving is communicated on the app as soon as the order is placed. The average speed is less than 50 km/h for us. This means that our delivery partners are driving at an average speed lower than speed limits in parking lots. The entire model by design is very safe.
The idea is not to keep pushing the time aspect. It is to overperform on every other count, be it quality, reliability, the kind of service offered, the brand story being built and if the consumers now believe in the vision of the brand. The evolution of the brand and the company is now slightly different but yes, it started with something more quantifiable like delivery in 10 minutes.
How challenging is the idea of customer loyalty when consumers can easily move to the next service provider if you don’t have a product they want?
We want to minimise such instances. For example, if we don’t have a certain product, the idea is to take feedback and have a conversation with the customer. On the app, customers can suggest products if they can’t find something and they can request to be notified if something is out of stock. What is key is to make the platform do a lot of talking and make it interactive.
Consumers are smart. They are fully aware of what is happening around them. They are the best ones to judge based on their experience. At the end of it, if in spite of our best efforts, a customer prefers another service, then fair play. The idea is to win more often.
Is quick commerce changing consumer behaviour? Like how a pizza brand first promised to deliver in 30 minutes and now, we don’t have the patience to wait longer?
I am not in a position to comment on how customers react to situations wherein they don’t get their orders delivered instantly. But we are definitely trying to bring about a change. The idea is to give back to consumers some amount of time that everyone seems to be asking for.
We don’t want consumers to spend a lot of time on our app. We want to ensure checkouts are quick and everything is streamlined without a lot of fancy schemes. The idea is to give them back some of the attention span. We are against-the-flow in that manner when it comes to most platforms.
Consumers in the West are reportedly not willing to pay a premium for quick delivery, but what about Indian consumers? Do they believe in the sustainability of this concept?
In the West, for a bill of say $10 or $15, a delivery fee of $2 might still need to be charged. That is not true for us. Depending on consumers to pay a premium in order for the business model to be sustainable is a bit overstated in some media articles. The business model is not about relying on the consumers to pay a fee.
We are banking on the fact that our last mile costs, fulfilment costs, the cost efficiencies across the entire P&L have to be as efficient as possible. Like I said, it’s more about execution. The worst thing that can happen is that we make the consumers pay because of flaws in our execution.
If done properly, consumers do not need to pay a premium; this can be a regular thing.
How challenging is it for you from a logistical perspective?
When one tries to comprehend the entire logistics from outside, it might seem overwhelming. It took us time to get to where we are. We built, we optimised and we are where we are today after some amazing folks have built certain processes and the technical team that has enabled and is backing them. When we put all of that together, it is actually quite a regular day for us.
It can seem daunting because there is no margin for error. When you say 10 minutes, you promise it upfront. It could sometimes be six, seven or even 12 or 13. The margin of error is probably a minute here and there. That is nothing; compare that with next day delivery.
There is no time to speculate, to take decisions. This means the operations have to be extremely streamlined. There must be minimum ambiguity and confusion. No real-time decision making can be done. Everything must be supported through the tech platforms that we have. Through this, we have a very well-oiled machine.
Our platform cancellation rates are very low, lower than any consumer internet platforms I have seen.
On other platforms, you probably have seen three out of 10 things you order not being available. In our case, two out of 10,000 are not. Our fulfilment rate is 99.9% plus.
This is because of the operations we have built. Thousands of orders are fulfilled every day.
How can a quick commerce brand stay empathetic to delivery partners who are literally racing against time?
The onus of delivering within the promised delivery time is on the head office team and not on the delivery partners. The delivery partners are not shown the promised delivery time – they don’t have any incentives for delivering on time and no penalties are levied for not delivering on time either.
Not only are we empathetic towards the already physically strenuous job our delivery partners take up, we also believe that customers are knowledgeable, educated and exposed enough about what is going on around them to appreciate that.
For example, if it is raining, we let the customers know that the orders can be delayed by a few minutes. The customers themselves are quite empathetic. Between the delivery partners, customers and ourselves, we communicate. And like most issues in life, communication solves most constraints.
If there are no incentives or penalties for your delivery partners, what motivates them?
They actually prefer doing this over other jobs. They get to work in a smaller radius in a fixed area. Compared to other models, where in Mumbai, one may start in Mira Road in the morning and end up in Panvel.
Our partners are constantly driving one to two-and-a-half kilometres, and then coming back to the same location. They have a platform to get their grievances sorted, they have dedicated washrooms and seating areas. During the summer months, we ensured they stayed hydrated, for instance.
We cannot be building a business wherein the eventual face of the business for the end customer is an unhappy one.
How can quick commerce brands ensure they stay environmentally friendly?
We are very focused on being environmentally friendly. Our delivery bags are paper and we don’t use plastic or nylon. Our packaging is environmentally friendly. A significant part of our delivery fleet is bicycles or e-bikes. When I say significant, it’s a growing chunk. We will keep increasing that.
We have just started. The ecosystem is not that mature to facilitate a lot of these things. We want to fortify our position as a sustainable brand and it will continue to remain a key focus area for us.
What are the immediate opportunities and challenges in the category as you grow?
The challenge will be to educate customers that there are more spaces where quick commerce can play a significant role. A lot of that will happen organically too.
The opportunities, of course, are to hang in there and to wait for consumers to be more ready for these kinds of services.
At the end of the day, grocery is a habitual category. It is not as experimental for most people, so people will take time to switch their habits. We have to be a bit more patient, allow the business and consumers time. This will mean that some of the households with habits over the years, if not decades, will eventually give us a try too and maybe even switch permanently.