SUMMARY
As opposed to the 15-20 minute grocery delivery promise, the startup aims to incentivise 60-minute delivery
Dunzo has reduced its growth targets internally and plans on fulfilling only 5.7 Mn by December 2022
Dunzo is in talks to raise $200 Mn-$300 Mn in funding amid a market slowdown
Bengaluru-based hyperlocal delivery platform Dunzo is reportedly looking to shift gears from Dunzo Daily’s quick commerce. As opposed to the 15-20 minute grocery delivery promise, the startup aims to incentivise 60-minute delivery, where multiple orders will be clubbed together as a cost-cutting measure.
The quick commerce startup has a monthly burn rate of around $15 Mn. But as funding winter looms, Dunzo has reportedly briefed its team to pause geographical expansion, reduce long-distance deliveries and focus on unit economics.
According to an ET report, Dunzo’s hypergrowth era rests in the past. The report quoted a source who said that Dunzo went aggressive with IPL at a time when all quick commerce platforms were going crazy on acquiring consumers. “They are now cutting back on spending and aiming to bring it back to first-quarter levels.”
As a result, Dunzo has reduced its growth targets internally and plans on fulfilling only 5.7 Mn by December 2022. The startup has told a select group of people about its renewed focus on cutting expenses amid a slowdown in late stage funding.
To note, Dunzo is in talks to raise funds, but the details of the potential funding round are not final. In April 2022, Dunzo founder Kabir Biswas hinted at the possibility of raising $200 Mn-$300 Mn in funding, diluting a 10-15% stake in the company (at a potential valuation of $2 Bn). Meanwhile, the company is looking at a slower growth rate for the rest of the year.
The news comes six months after the startup raised $240 Mn, led by Mukesh Ambani’s Reliance Retail. At the time, Reliance Retail picked up a 25.8% stake on a fully diluted basis in Dunzo for $200 Mn, valuing the company at nearly $775 Mn.
Besides cutting down on its quick delivery format, Dunzo’s B2B logistics arm, Dunzo for Business (D4B), has partnered with ONDC to provide last-mile delivery services to local enterprises on the ONDC network. D4B claims to have a fleet of over 75K delivery partners and connects more than 20K merchants to customers.
It had also announced plans to use robotics in its city warehouses to cut the time taken for processing orders to 30 seconds. With the current slowdown in place, the impact on automation hangs in the balance.
The Quick Commerce Battle & Its Aftermath
The quick commerce segment currently features the likes of Swiggy Instamart, Zomato-backed Blinkit, Reliance-backed Dunzo and soonicorn Zepto. From about 30-45 minutes of Instamart to around half an hour of Dunzo to 10 minutes of Blinkit and Zepto, the race for delivering as fast as possible has been a subject of intense debate.
But convenience shopping is at the helm of consumer internet and thus, the funding inflow had been at its highest in 2021 within the segment. These startups were spoilt on funding and focussed on aggressive expansion, high customer acquisition costs and intensive incentivisation. That all came to a sudden halt as the funding inflow in such late stage startups turned stagnant.
Consumer internet startups raised a mere $9.9 Mn in the first six months of 2022, whereas consumer services such as quick commerce and service aggregators raised a mere $1.2 Bn across 19 deals. Swiggy’s $700 Mn round, Dunzo’s $240 Mn round, Livspace’s $180 Mn and Blinkit’s $100 Mn rounds were the highlights of the said funding. [Source: Inc42 Data]
While the overall funding reduced by 50% from the previous half of 2021, three of the top four quick commerce startups raised funds, in an otherwise cold ecosystem. These startups are thus cautiously using their funds. Not just that, some of these bigger players have been pressured by VCs to focus on profitability and revenue growth, forcing them to pivot away from quick commerce.
Swiggy shut down its Supr Daily business in five cities in India, allowed employees to take side gigs and started a permanent work-from-anywhere policy. Blinkit, on the other hand, has finally merged with Zomato and is looking to break even by 2025.
