Zepto’s 50:50 Bet: Can It Balance The Quick Commerce Scale?

It is not unreasonable to say that quick commerce has changed the face of ecommerce in India. From Swiggy moving in first to Zepto’s rapid rise to Blinkit’s improving profitability and now to just about everyone trying their hands on quick deliveries.

Just four years after becoming a viable business model in India, the dynamics of quick commerce in India seem to be changing at a faster pace than the deliveries themselves. 

And from online grocers for the Indians in metros and Tier 1 cities, quick commerce platforms now want to do it all, and all over India. Zepto cofounder and CEO Aadit Palicha believes the time is not far when the grocery and non-grocery revenue mix becomes a 50-50 split. 

“Right now, around 70% of our demand centres on fruits and vegetables. We’re recognised as a top platform for quality produce, but we see this evolving into a more balanced 50-50 split between grocery and other emerging categories like beauty, personal care, home appliances, apparel, and electronics in the near future,” Palicha told Inc42.

The Zepto CEO wouldn’t put a timeline on it. He said that currently grocery contributes up to 70% to the GMV, but quick commerce consumer behaviour is rapidly changing since they want delivery of beauty personal care products, home appliances, consumer electronics and all instantly. 

It’s not just Zepto of course. The entire industry is bulking up the SKU count and the recent launch of iPhone16 deliveries in 10 minutes across all quick commerce platforms shows that everyone is watching everyone.

So how exactly will companies set themselves apart as they look to push beyond groceries and essentials? 

Zepto Goes From Grocery To Everything

The quick commerce creep into ecommerce marketplace territory began last year, but that was just a hypothesis or a dip in the pool for Blinkit, Zepto and Swiggy Instamart. 

That changed late last year when some experiments seemed to pay off for Blinkit, Zepto and the likes — particularly related to home decor and lifestyle products. This broadened in the summer of 2024 when large items such as air coolers and today, one can find everything to stock an entire kitchen at Zepto, Blinkit and Swiggy Instamart. 

Last year, Zepto invested in a farmer engagement app to streamline fresh produce supply, but now the quick commerce tune has changed. All platforms are eyeing bigger targets, higher order values and more revenue per user. 

It’s not like this was an easy transition. In some ways, the push for higher order value is linked to the fact that scaling up quick commerce in new cities or even new stores in existing cities is cost-intensive and requires patience. 

Instead, Zepto, Blinkit and others want to cover the most active user base first and widen themselves horizontally to become a lightweight version of Amazon India or Flipkart. 

A Mint report earlier stated that Zepto is planning to set up separate storage facilities for non-grocery items in addition to its existing 400 dark stores that primarily cater to grocery and FMCG products. Palicha said that the startup plans to take the dark store count to more than 700 by FY25.

Multiple industry analysts have underlined the fact that although grocery makes up for a significant portion of quick commerce GMV currently, the vertical runs on thin margins and the quick commerce platforms need to crack categories with higher margins including fast fashion, smaller home appliances to increase average order value.

It’s not just Zepto that will have to strategise non-grocery deliveries to match what marketplaces offer. Industry watchers say that speed is one thing, but managing returns, refunds and enabling EMIs and more payments related features is essential. 

Some like Blinkit have enabled EMIs, but this is rather limited right now. Zepto is reportedly piloting 72-hour returns in the fashion segment, which is matched by Blinkit. But the product selection on the fashion and apparel side is rather limited right now. Enabling exchanges or even trials, which are common in fashion, at scale will be a challenge. 

It took the likes of Myntra years to execute and build the service base needed for such features. Quick commerce platforms certainly don’t have this luxury, but they have momentum on their side

Zepto, on its part, has already announced tie-ups with sports and apparel brands including Decathlon, US Polo Assn; beauty brand Mila Beauté, luggage brand Wildcraft among others signalling serious moves to enter the non-grocery categories. 

Bullish On Private Labels

The other big move for Zepto is the private label push. This is another measure to maximise its take rates and reduce procurement costs for sales. 

Currently, Zepto has two private labels — Relish for eggs, seafood and meat, which was launched in October 2023 and Daily Good for kitchen and household staples which was launched six months ago. 

Palicha is bullish on growing both and is also optimistic about the revenue targets set for Relish earlier this year. He claimed that Relish is already an INR 500 Cr business aiming to reach INR 1,000 Cr in the next 18-24 months. 

Nearly half of this is from sales of eggs, as per an earlier clarification provided by Palicha to Moneycontrol. 

“We launched Daily Good about six months back which complements our goal to offer high-quality essentials at great value. As for Relish, we remain optimistic about the targets we set earlier this year and are focused on its growth,” he added.

Relish is up against dominant players like Licious which has seen its growth plateau in FY24, but last reported more than INR 800 Cr in revenue. 

Licious is present on Blinkit, Swiggy Instamart, Tata-owned BigBasket and other quick commerce players, but Zepto could potentially undercut competitors on its own platform, and could even become a brand on other platforms in the future. 

Having a catalogue brimming with private labels allows Zepto to adhere to ecommerce norms more closely, including disclosures around manufacturing date, expiry date and other compliance requirements. Currently, quick commerce platforms lack these for a number of products, and regulators are not happy about this. 

Quick Commerce Vs Kirana Stores

The growing buzz around quick commerce platforms has dealt a blow to the kirana store landscape, which had just emerged from the pandemic disruption. 

Palicha categorically stated that Zepto will always be a digital-first company and does not have plans to launch convenience stores like 24-Seven or 7-Eleven in the near future.

“I firmly stand by what I said a few years back that we want to build a world-class Internet Company out of India that compounds cash flows over the long-term, benchmarked to Amazon, Mercado Libre, Meituan, Coupang etc. We stand behind that ambition today and we intend to build towards it for the next few decades to come”.

As of 2024, India’s metro cities have contributed to more than 90% of sales on quick commerce platforms according to Redseer. But now as instant delivery companies swiftly move to penetrate deeper into Tier II and II towns, analysts are predicting a bigger hit on kirana stores which still dominate the retail landscape in these markets. 

Zepto recently launched its services in Nashik and Ahmedabad, while Swiggy Instamart, the first mover in the quick commerce space, introduced its service in smaller cities including Udaipur, Warangal, Salem, Amritsar, and Kanpur.

Palicha claimed stores in new cities hit 1,000 daily orders faster than many of the stores in metros such as Mumbai and Bangalore, where it took a few months to reach similar numbers. 

“This shows there’s significant demand in tier 2 cities and we are looking to end this FY with an overall presence in 20+ cities, where users are underserved. Our model scales well because our sellers bring together selection, quality, and convenience. We tailor our approach to meet local needs, which helps us resonate with a broader audience,” the 21-year-old added.

Satish Meena, partner at research firm Datum Intelligence, believes that quick commerce platforms penetrating deeper into the heartland of India could be a potential inflexion point and could disrupt the $600 Bn retail industry housed in these markets.

 “However, if the government decides to put brakes on quick commerce expansion since this may hit more than 13 million kirana stores, it could also play a spoilsport to the quick commerce party,” he added.

Building Up To The IPO

But even outside of these smaller towns, the quick commerce opportunity is massive. Zepto founders Palicha and Kaivalya Vohra are akin to the poster boys for this space, where the company has definitely caught the attention of investors. 

Quick commerce’s explosion and the company’s single-minded execution in this space is why Zepto was able to raise more than $1 Bn in 2024 so far — to put things in context, this is roughly a tenth of what all startups have managed this year. 

Palicha claimed the company is aiming to touch $3.5 Bn in sales by December 2025, which would be close to its current valuation of $5 Bn. “We’ve had an exciting journey, and while there’s a lot of speculation, we’re focused on keeping a healthy balance sheet. We have ambitious targets, and we’re optimistic about reaching them,” the Zepto CEO added.

Zepto saw its operating revenue surge 14.3X to INR 2,024.3 Cr in FY23 from INR 140.7 Cr in FY22.However the  startup reported a net loss of INR 1,272.4 Cr in the financial year 2022-23 (FY23), an increase of 226% from INR 390.3 Cr in the last financial year. 

The Zepto CEO claimed earlier this year that 75% of its stores had achieved full EBITDA positivity as of May 2024.  The company also claimed new stores are achieving profitability in an average of six months up from 23 months until last year. 

“We plan to continue operating with fiscal discipline as we scale from 350 stores to 700 stores by reinvesting the capital generated from mature stores back into the business. If we are able to achieve this while continuing to delight customers, I believe we will be ready to go public relatively soon,” he added.

Zepto is reportedly in talks with the high profile Indian family offices to get them on the cap table before an IPO likely to happen in 2026. Palicha declined to comment on the timeline set for the IPO. 

But the IPO, when it comes, will be a test for quick commerce itself. Indeed, there are no precedents in the Indian market or globally for this business.

Earlier this year, investment bank Goldman Sachs said that quick commerce contributes more than 50% to the $11 Bn online grocery market in India. And so far all platforms have indexed more heavily towards the grocery segment — the transition to a wider ecommerce play is likely to boost this opportunity significantly. 

By contrast, quick commerce has barely made a dent in the US and Western markets, where a handful of players continue to bank on this model. 

According to Palicha, quick commerce has found a unique fit in India.

“First, the density of urban areas here makes it feasible to set up hyper-local fulfilment centres that allow us to deliver within minutes. In India, there’s also a high demand for convenience, and many customers rely on quick commerce for daily essentials due to the lack of large, easily accessible grocery chains in some areas,” he added. 

It’s hard to fault this logic, but now quick commerce platforms want to extend this to all products and all needs. There is some scepticism and some feel this might be a bridge too far, even for a startup like Zepto which has so far shown no intent to curb its ambitions.

[Edited By Nikhil Subramaniam]