Instant delivery startup Dunzo has raised $240 million in fresh funding led by Reliance Retail Ventures as it looks to bolster its quick commerce play, a concept that is fast gaining traction in India, at least in the metros.

With an investment of $200 million, Reliance Retail will own a 25.8% stake in the Bengaluru-based startup on a fully diluted basis, the two companies said in a joint statement on Thursday.

Dunzo’s existing investors Lightbox, Lightrock, 3L Capital and Alteria Capital also participated in the funding round.

As more Indians moved online amid the pandemic and took to navigating a spate of apps to order a range of items ranging from daily groceries to apparel, companies are leveraging the opportunity to create more use cases and grab market share.

Swiggy (via Instamart) and Blinkit (formerly Grofers) are aggressively investing in the quick commerce space. New entrant Zepto has also managed to raise about $160 million from investors since its launch in June last year. Quick commerce or instant delivery is basically the delivery of everyday essentials to consumers under 30 minutes.

In a market where the share of the earning population is led by the millennials who are always looking for convenience, quick commerce is gaining ground.

Dunzo’s quick commerce service Dunzo Daily claims to deliver daily and weekly essentials within 15-20 minutes. Currently, Dunzo Daily is available across seven metro cities in India and the fresh capital will be used to expand the quick commerce business to 15 more cities.

The company claims that Dunzo Daily is already seeing more than 20% week-on-week growth in Bengaluru, the city where the service was first launched last year. “….over the next three years, we aim to establish ourselves as one of the most reliable quick commerce providers in the country,” said Kabeer Biswas, CEO and co-founder, Dunzo. The firm estimates that the local quick commerce category has an addressable market opportunity of more than $50 billion.

The startup will also deploy a portion of the funds to expand its business-to-business vertical to enable logistics for local merchants in cities.

The latest funding by Dunzo comes close on the heels of Swiggy’s announcement to earmark investments worth $700 million for its express grocery delivery service Instamart, underscoring the stiff competition in the space.

Through the partnership with Dunzo, Reliance Retail will leverage the startup’s logistics and delivery capabilities to power its retail businesses. Dunzo will enable hyperlocal logistics for the retail stores operated by Reliance Retail, adding onto the retailer’s omni-channel capabilities. It will also facilitate last mile deliveries for JioMart’s merchant network. “Through our partnership with Dunzo, we will be able to provide increased convenience to Reliance Retail’s consumers and differentiated customer experience through rapid delivery of products from Reliance Retail stores. Our merchants will get access to the hyperlocal delivery network of Dunzo to support their growth as they move their business online through Jio Mart,” said Isha Ambani, director, Reliance Retail Ventures.

Analysts say that Reliance’s investment in Dunzo does not necessarily mean that the firm has ambitions in quick commerce. Reliance primarily wants to use Dunzo’s logistics capabilities to power swift same-day deliveries of groceries and perishables. “Dunzo arguably is the best third party logistics provider in that domain. Reliance has plans to look into groceries in a big way to compete with BigBasket. Partnering with Dunzo may also potentially allow Reliance to not let its direct competitors use the startup’s service,” said an analyst.

Reliance Retail has been making aggressive bets on new-age businesses through a mix of investments and acquisitions as it aims to diversify its portfolio to take on rivals Amazon, Flipkart and the Tata Group.

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