Quick commerce startup Zepto is planning a larger foray into the instant food delivery market as it looks to expand its reach and tap into the growing demand for quick delivery services. It had run a pilot, ‘Zepto Cafe’, in April last year, which it later closed down.
According to sources aware of the development, Zepto is exploring alternative forms of financing for expanding its ‘cloud cafe kitchens’, which could include venture capital funding and strategic partnerships. The company is also said to be hiring operational heads for the new vertical as it looks to build out its team and infrastructure.
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“Zepto is not keen on diluting its equity shares to fund this expansion, hence it has been working with alternative forms of funding such as inventory and asset financing for the infrastructure. The plan is to set up cloud cafes similar to cloud kitchens within large neighbourhoods in metro cities,” a source close to the developments said.
Zepto Cafe was initially piloted in select areas of Mumbai last year, offering customers a variety of quick bites and beverages that could be delivered within 10 minutes.
The move into instant food delivery doesn’t necessarily put Zepto in direct competition with established players like Swiggy and Zomato
During its pilot for Zepto Cafe last year, the startup partnered with food brands such as Mumbai’s A1 Samosa, Chaayos, Blue Tokai and Rachel’s Sassy Teaspoon to source inventory. The q-commerce firm will now expand its inventory by opening dark stores in high-demand neighbourhoods, sources said.
This is the first instance of a delivery startup getting into instant food delivery. Zomato, in particular, launched its own 10-minute food delivery pilot in a few areas in Delhi and Bengaluru in March last year. However, the service was eventually paused due to operational constraints and high costs. Zomato said in a statement last month that its dark stores setup for instant food delivery would remain intact and the service would be launched in a rebranded format later this year.
As the demand for quick commerce and instant delivery services continues to grow, Zepto’s entry into the instant food delivery market is likely to be an important foray as it looks to grow its revenue and claim a more significant share of the rapidly growing quick commerce segment.
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Zepto’s expansion of its instant food delivery service comes at a time when the promise of 10-minute deliveries at low charges is fast fading as quick commerce startups have struggled to grow the service on a profitable scale. FE reported in November last year that services such as Zepto have been raising the delivery fees from customers for speedy deliveries hoping the services will become more remunerative even if it means the number of orders falls.
Zepto competes with quick commerce companies like Zomato-owned Blinkit, Bigbasket’s BBNow, Reliance Retail-backed Dunzo, and SoftBank-backed Swiggy’s Instamart. The startup, which began operations in April 2021 during the pandemic, generated total revenue of Rs 142.4 crore in FY22, while its revenue from operations stood at `140.7 crore. In the same year, it incurred a total loss of Rs 390.4 crore.
Founded by Aadit Palicha and Kaivalya Vohra in April 2021, Zepto has so far raised over $360 million from investors like Nexus Venture Partners and Glade Brook Capital and is valued at $900 million. Its valuation more than doubled to $570 million during its Series C round and surged to $900 million after its Series D round.