Quick commerce will grow 10 times in metros in 1-2 years: Zepto's Vohra

From two 19-year-old Stanford University dropouts’ ambition to deliver groceries to people in minutes which eventually took shape in the form of quick commerce platform Zepto to Grofers’ much-hyped rebranding to Blinkit keeping in line with the firm’s transition to high-speed delivery of groceries and other convenience items—quick commerce has been the talk of the town in the past year or so. Indian consumers are slowly taking to the idea as well. New Delhi-based professional Ishmeet Singh now uses quick commerce apps to get everyday groceries.

"The wide range of choices and superfast delivery help me get the items at the last minute. The option of no minimum order helps me get one to two items without any stress," says Singh. "If I am given the option of getting everything at home, I will choose that over a visit to a supermarket," argues Singh. Noida resident Apoorva Sharma echoes a similar sentiment: "as a working professional who works late nights and is too tired to move a finger on a Sunday, quick commerce apps are a lifesaver. I order every two days or so basis what my mood is." 

The concept of quick commerce or delivery of groceries and convenience items to customers in under 30 minutes may have seemed bizarre to many initially but the service is clearly gaining traction. Zepto co-founder & CTO (chief technology officer) Kaivalya Vohra says that the platform is not just popular among Gen Z and millennials but it is being adopted by a wide range of customer cohorts. "The (user) segments are pretty broad in terms of age and gender. Our largest customer segment would be 26-35 years but 18-25 years is pretty big. Again, 36-45 years is also pretty big. When we were launching a year back, the question was do people need stuff this quickly? I can wait, I don’t need stuff that quickly..that was the conversation. That is no longer the question. I think it is pretty clear that as a value proposition, it is exciting and valuable enough," Vohra told Fortune India.

The early adopters of quick commerce have typically been those consumers who are already well accustomed to the idea of shopping online. "Now through word of mouth what has happened is people who never bought groceries online have also started to come. The first order is usually a small order. Over time, customers transition their entire basket to quick commerce and at that stage, AOVs (average order value) and frequency is not an issue," says Vohra. As far as the growth of the segment is concerned, the scope is immense given that quick commerce is heavily underpenetrated. 

"If you take all of quick commerce combined and locate what the daily or monthly GMV (gross merchandise value) might be and you divide that by the target segment and how much they are spending on groceries, quick commerce might just be 5%-6% of it. On the whole, most customers are yet to adopt. Quick commerce will grow another ten times just in the metro cities over the next year or two. So, there’s a lot of headroom left for growth," says Vohra.

With consumers clearly showing an affinity for quick commerce, the question now is whether the business model will sustain in the long term, says Vohra. The economics of quick commerce is usually dependent on a mix of two metrics: getting the customers to eventually transition their entire basket to quick commerce and scaling up dark stores to reach a certain number of orders per day wherein the rent and other fixed costs start getting covered. 

"It’s a function of these two things. Once that happens, AOVs and etc start to make sense," explains Vohra who claims that many of Zepto’s dark stores have started generating cash. "Our cash burn is reducing every month. We have several years of runway," says Vohra at a time when tech startups are increasingly laying off employees to rein in costs amid a deepening funding winter. Zepto last raised $200 million in funding led by Y Combinator Continuity at a valuation of about $900 million in May.