Zepto Pivots To Marketplace Model Ahead Of IPO

SUMMARY

Zepto has set up a new entity, Zepto Marketplace Private Limited, as part of its restructuring plans ahead of its planned IPO

The move would potentially allow Zepto to pivot from its current B2B2C operational structure to a marketplace model

The potential shift in Zepto’s operational model comes at a time when quick commerce companies in the country are facing allegations of misusing FDI norms

Quick commerce unicorn Zepto has set up a new entity, Zepto Marketplace Private Limited, as part of its restructuring plans ahead of its much-anticipated initial public offering (IPO), sources close to the company told Inc42.

The new entity, registered in October last year, would potentially allow the company to pivot from its current B2B2C structure to a marketplace model, mimicking the approach taken by its rivals Zomato-owned Blinkit and Swiggy Instamart.

Founded in 2021 by Aadit Palicha and Kaivalya Vohra, Zepto currently operates under a B2B model. Its parent, Kiranakart Technologies, procures goods directly from brands and sells them exclusively to its licensee companies, including the likes of Geddit Convenience, Drogheria Sellers and Commodum Groceries.

The quick commerce firm earns revenue by levying a fee on these companies for using its brand and platform.

Zepto grabbed headlines last year after raising a whopping $1.3 Bn in funding and outpacing Blinkit and Swiggy Instamart in terms of revenue.

Amid the rising competition in the quick commerce space, the Palicha-led company is also doubling down on its presence in India. While Zepto was operational in seven cities in 2023, this number rose to 35 last year and its dark store count doubled to 650 from 300 earlier.

To keep up with its competitors and shore up its revenue, Zepto has also been expanding its cafe business. In line with this, the company recently announced the spin-off of Zepto Cafe into a separate app.

Zepto is among the growing list of Indian startups looking to shift their domiciles back to India from overseas. The reverse flip is part of the quick commerce giant’s plans to go public as soon as next year.

The potential shift in Zepto’s operational model comes at a time when quick commerce companies in the country are facing allegations of misusing foreign direct investment (FDI) norms and offering deep discounts to cover their operational losses.

At present, foreign direct investment is prohibited in the inventory-based model of ecommerce. It’s allowed only in firms that have taken a marketplace approach.

However, several industry bodies have accused quick commerce firms of exploiting loopholes in the existing FDI norms in their alleged bid to push through multi-brand retail. This has also triggered concerns of traditional Kirana store owners going out of business.