In the last few years, the grocery industry has seen a massive disruption with the emergence of 10 minutes grocery delivering apps. Companies like Zepto, Blinkit and Dunzo have changed the way Indian consumers shop for groceries.
But how is this possible for them to deliver groceries in 10 minutes? What is their business model? How do they run their operations? And how do they even make money?
In this blog, we will decode these 10 min grocery delivery apps and their business model,all while considering strategic objectives in the context of business values and strategy execution.
It was in the year 2021, two 19-years old Stanford dropouts started a 10 minute grocery delivery app called “Zepto”. Zepto entered a market that was untouched. And In less than a year, Zepto disrupted the Indian startup ecosystem. So much so that the grocery delivery app “Grofers” that has been in the market since 2013 rebranded themselves as Blinkit to establish themselves as the instant delivery app. Food delivery apps like Swiggy and Zomato launched their instant delivery apps called swiggy instamart and Zomato market. And at the same time Dunzo started to deliver groceries in 19 minutes.
But why do we see such rapid surge in Instant delivery market?
The Platform and Operations
Have you ever wondered what dark stores are and how they operate for online orders?
Dark stores are retail fulfillment centres that operate solely for online orders. Allowing apps for optimal picking and packaging process. As they have no instore customer to serve, their goal is for effective online orders. These instant delivery businesses have dark stores placed in various locations to reduce delivery distance.
Are you curious about how these apps decide which products to stock in their dark stores?
By analysing data, these apps understand the in demand and regular ordered products in that area. They ensure to stack most used and ordered items in their dark stores. This method helps them reduce time to pick their orders and the business avoids stacking products that are not necessary for a large number of customers.
Have you ever wondered how these instant grocery delivery apps plan the most efficient routes for their delivery partners?
Route optimized algorithm is also known as vehicle routing problem(VRP) solver. It is a software that helps these instant grocery delivery apps to determine most efficient and time saving routes for their delivery partners. It takes various factors such as real time traffic conditions, order proximity, and delivery agent availability to optimize the most efficient routes.
Customers place orders for the grocery they want through the app. They add items to their virtual cart and proceed to checkout. As soon as an order is placed, the app processes it instantly and sends the order details to the nearest dark store with the customer address.
When dark stores receive order details, staff pick up the items and pack them quickly. The staff in the dark store can do this quickly because these companies use data to understand what products are most used and they stack those items in a way where everyone can access it easily.
Ever wondered how delivery partners are assigned to deliver your orders?After the order is packed, a delivery partner is assigned to deliver the items to your address. And as discussed above, they use Vehicle routing problem solvers to find the time saving and efficient route.
Do you wonder why delivery agents often ask for feedback or ratings after delivering your order?
Businesses use customer feedback to find the area of improvement and to understand where the service is falling behind.
The Business Model
Zepto, Dunzo, and Blinkit have reshaped the grocery industry with their rapid delivery apps, promising to deliver groceries and essentials within minutes. Zepto's model centers on data-driven inventory management, dark stores, and subscription plans while charging local stores commissions and generating revenue through in-app advertising. Dunzo's hyperlocal delivery and task management platform is supported by dark stores and data-driven efficiency, with delivery fees and surge pricing during peak hours as revenue sources. Blinkit, formerly Grofers, now offers instant grocery delivery with dark stores, data-driven inventory management, subscription plans, commissions from local stores, and in-app advertising. These innovative models focus on speed, efficiency, and customer convenience in an evolving market.
Customer Acquisition and Revenue Generation
These platforms connect customers to their local grocery stores and vendors. Are you wondering how these platforms operate between local grocery stores and customers?
The connection is not direct, they act as an intermediary between local stores and customers. It makes customer shopping experience smooth as they can choose products and make payment on their fingertips.
Are you aware about subscription plans offered by these apps and the benefits they provide to customers?
Some apps offer free or discounted delivery fee, exclusive offers or priority access for those customers who purchase their monthly or yearly subscription. The main goal is to encourage customer loyalty and make a stable source of income. This plan serves both customers and the business. Customers get exclusive offers and businesses get their regular customers. These plans play with customer psychology as well, making them make regular and repeated purchases. Subscription plans help these businesses to enhance their customer retention.
Do you wonder how these apps generate revenue from their partnership with local stores?
Under this model, these apps charge a percentage-based commission from the local stores they have partnered with on all the orders they receive. For instance if you have ordered groceries worth 1,000 rupees and the commission percentage is 10% then the app will get 100 rs. App makes this money as compensation for bringing customers and local stores together. By this way both apps and grocery stores make money. It is a win-win situation for both parties as the local stores get more customers and the app gets a diverse range of products for their customers to have.
Do you know how these instant delivery apps generate additional revenue through in-app advertising?
This is one of the additional revenue streams these instant delivery apps have. These apps showcase featured products and exclusive deals of their partnered stores to their customers and get paid to do so.
Have you experienced surge pricing on delivery fees during peak demand hours and wondered why it happens?
During peak hours of high demand, these apps may implement surge pricing on delivery fees. This means that the delivery fees on the product you order at this time would be higher than usual. It serves as an incentive for delivery agents to ensure that they are available during those high demand periods.
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