“Quick commerce is all about short distances over fast speed. Zepto has made 10-minute deliveries a reality by strategically placing delivery hubs that cover a radius of 1.7 kilometres lower than any other hyper-local player in the country. To break it down – it takes under two minutes to pack the order and give it to the delivery partner and eight minutes to complete the delivery. To travel 1.7 kms within 8 minutes, the rider’s speed has to be 21-22 kmph, which is also much lower than an average biker on the road. While we’re ambitious and driven to disrupt, we are taking a People-First approach and the safety of our riders will always be our top priority,” highlights Vikas Sharma, Senior Vice President – Operations, Zepto, in this exclusive interview…
You have been a part of the transformative e-commerce domain in the past few years. Kindly highlight some of the biggest pathbreaking and defining moments in this journey.
The e-commerce industry has been on a roller coaster with its fair share of ups and downs. Scepticism prevailed in the industry for a long time, especially in 2011 with investors exploring the space more cautiously. However, as experts understood the potential of the industry, investments began to roll in millions for several e-commerce companies that are doing supremely well in the market today. The category has evolved into one of the most successful, high-value business categories today, still there are several potential areas yet to be tapped within the segment. And that will continue to evolve as increasingly more consumers fall in love with the convenience of e-commerce. Consumers all over the country are shopping online today. Their preferences are changing, behaviours evolving, and they are more regularly engaging with online stores as compared to shopping in-person. That’s not just limited to tier I cities or metros. The nooks of the country are potential markets for e-commerce businesses. That also means more scope for diversification, and greater responsibility to serve the consumer right.
Quick commerce landscape has been shaping up faster than one can even imagine. What are the factors that led to this growth?
The advent of quick commerce, especially for groceries, offered consumers the convenience to have their needs delivered at their doorsteps within minutes. Zepto started in the midst of the pandemic to make it easier for people to acquire groceries without having to step out or wait for hours and days. But people got used to the convenience, and our customer base continued to expand even as physical stores reopened. Products like fresh fruits and vegetables, milk, bread, and similar items, which were traditionally bought offline, were some of the highest searched products on Zepto in 2022. The ease of quick deliveries has seeped into people’s behaviour, and they’re increasingly leaning on our services for almost all their essentials.
While groceries continue to lead the way, we have diversified our categories and are making a greater range of products available for 10-minute delivery. That has led to order values going higher, and Zepto is gradually becoming a part of people’s every-day lives.
What sets Zepto apart from its competitors?
At Zepto, we take a lot of learnings from data to improve customer experience. We’ve noticed that 10-minute delivery is a strong point of gratification for our customers. And this makes it important for us to double down on this core proposition of ours while making improvements that allow greater delivery accuracy. From the business perspective, we have been determined to enhance our capital efficiency and unit economics since day one. We are seeing our mature markets turn cash flow positive, which has been because of the efficient supply chain and solid focus on unit economics.
How is Zepto disrupting the last mile delivery?
Maintaining the highest levels of customer satisfaction and yet keeping up with the speed of last-mile delivery is complex, and our riders play the most critical role in ensuring that we do it right. That is why, we take special care of our riders and delivery teams, who are efficiently acquired through our inhouse sourcing teams. We offer 100% support through our Support Centre for our riders. Our centers and warehouses/ stores also have allocated washrooms and spaces for riders to sit and rest. The safety of our riders is paramount, and we extend insurance policies along with training on traffic rules, communication, as well as professional development to encourage a better learning curve.
Moreover, we also implement wisely formulated planning techniques to predict demand patterns, accurately forecast day-hour supply requirements, and cut down costs while ensuring a highly efficient execution system that can quickly adapt to changing demands.
While 10-minute delivery sounds quite promising for consumers. We are interested to know the science and mechanics behind achieving the arduous task.
Quick commerce is all about short distances over fast speed. Zepto has made 10-minute deliveries a reality by strategically placing delivery hubs that cover a radius of 1.7 kilometres, lower than any other hyper-local player in the country. To break it down – it takes under two minutes to pack the order and give it to the delivery partner and eight minutes to complete the delivery. To travel 1.7 kilometres within eight minutes, the rider's speed has to be 21- 22 kmph, which is also much lower than an average biker on the road. While we're ambitious and driven to disrupt, we are taking a people-first approach and the safety of our riders will always be our priority.
What are the challenges that you encounter in managing the supply chain? How do you circumvent them?
Erratic demand patterns, unforeseen situations and upkeeping perishable products can sometimes be a challenge in managing the supply chain. At Zepto, we overcome them with targeted solutions for each of our key challenges. To manage seamless deliveries during festive seasons and weekends, we host an in-house proprietary tool to better forecast the demand and be ready with supply in the back end. We also ensure perks like higher incentives, flexible shifts, and food arrangements for our riders during peak festive seasons. Unforeseen situations such as heavy rain causing floods and traffic are also addressed by additional incentives and surges to motivate riders and manage delivery time expectations with the customers. Finally, we directly procure perishable products like fruits and vegetables from the farmers to ensure freshness. Our cold storage supply chain takes care of the upkeep of temperature sensitive products.
Supply Chain Network Design is a critical pillar in ensuring quick deliveries. How does Zepto manage this?
Network design for Q-commerce is an intricate component and we rely heavily on processing location data to strategically position our stores. From identifying dense residential concentration to determining optimized polygon size, a lot goes behind discovering the perfect location for a dark store to ensure a pleasant delivery experience for both our stakeholders (i.e., quicker deliveries for the customer & shorter deliveries for the delivery partner).
We use complex machine learning algorithms to predict demand clusters and utilize multiple platforms to visualize geospatial data. After gathering intelligence on geographical conditions (such as Railway tracks, highways, road obstructions), access routes (such as U-turns, internal roads) and traffic conditions, geo boundaries are established. The ideal store location is then determined after mathematically and geographically processing the most efficient way of serving the demand in the polygon which essentially means serving the maximum customers within shortest possible delivery times. As and when we introduce more stores in the ecosystem, we re-evaluate the network geo boundaries for more optimal delivery time solutions.
Technology will be a crucial enabler in achieving the mean feat. Kindly enlighten us on this and what are the tech tools you have deployed at Zepto?
One of the biggest factors that helped us bring the quick delivery of online groceries to life has been our attention to detail. Right from setting up the foundation of the app, geo-fencing, and the back-end support tech at the start, to now looking at micro-optimisation of the customer journey on the app, our focus has always been to enrich customer experience. Our tech solutions have led us to predict ETA more accurately, set efficient route navigation systems for our riders on the road, stabilise supply chain and fulfilment at mother hubs, track real-time trends and predict demand, improve inventory management, as well as reduce wastage. Overall, improving the TAT (turnaround time) across all functions has been the key to Zepto’s 10-minute delivery success.
We would like to know more about Zepto’s ‘return and recycle’ initiative. What’s your take and stance on sustainability in the supply chain?
Our Return and Recycle initiative was born out of our understanding of our customers’ behaviour. An increasing number of customers had reached out to us at Zepto wanting to understand if they could return bags that weren’t of use to them. Leaning into our conscious customers’ ask, we implemented this insight into our last mile. Customers could opt to return bags to our delivery partners while receiving their orders – making a positive impact by encouraging reuse and cutting down wastage. The response to this initiative inspired us to take it further, and we’ve extended the model to plastic collection. Partnering with Coca Cola, we led a successful 45-day pilot at select stores and now plan to expand the scale of this initiative across the country. Our strong last mile delivery network has been instrumental in the success of these efforts, and we will continue to invest in unique initiatives like these to contribute towards building a more sustainable world.
How upbeat are you about the future that will unfold in the near future as far as e-commerce and quick commerce is concerned?
As pioneers of quick commerce in India, we are building a sustainable model that will set global benchmarks in both efficient logistics and customer satisfaction. As we continue to grow, industry reports have also indicated that India’s quick commerce sector will grow by as much as 15 times over the next five years, touching $5 billion by 2025.
An increasing number of consumers rapidly adopting quicker deliveries for every-day needs will lead to shortening of delivery times for more categories. With homegrown and small businesses joining the industry, we are positive about talent demand going higher.
Additionally, as orders continue to increase for fresh fruits and vegetables, the farmer ecosystem is likely to reach more audiences through quick commerce platforms through critical innovations in supply chain systems.
What are the trends we are yet to witness in the next year as far as the quick commerce supply chain is concerned?
2022 was the year of quick commerce where we witnessed an increasing preference for quicker delivery times. In the coming year, we’re optimistic that the need for quicker delivery times will only continue to grow. Trends like warehouse automation for better efficiency, use of EVs with customised bikes designed for last mile delivery, higher retention and sustainability, innovation to increase storage capacity will be the driving forces of this change. Additionally, Investment in new technologies is likely to grow to optimise supply chain and logistics operations to expand the range of products offered on quick delivery and reduce the delivery cost over time.
We are doubling down our efforts to not only meet the customer demand for groceries, but also expand our horizons and make deliveries across wider categories in 10-minutes a reality. In addition to adding more product categories for delivery, we are driving the applicability of our business model to Zepto Cafe, where you can order snacks and tea from well-known brands within 10 minutes.
What’s your views on the fast shaping up EV trend in last mile delivery? Is Zepto taking the EV route?
Considering the sustainability and unit Economics focus, EVs, in last mile delivery, are one of the key focus areas for Zepto. EVs bring down the variable cost for riders by 80% leading to higher earnings and reduced cost. There are a bunch of challenges like pickup speed, battery range, efficiency and safety, vehicle endurance and safety which exist in the present ecosystem. We are working with OEMs on solving these challenges and building solutions from scratch.