Legacy e-commerce companies hold no authority to remark on quick commerce: Zepto’s Aadit Palicha

Zepto founder Aadit Palicha

Legacy e-commerce companies who have not generated significant PAT (Profit After Tax) yet, do not hold the authority to make remarks on quick commerce’s sustainability, said Zepto co-founder Aadit Palicha in response to a question about BigBasket chief executive Hari Menon's earlier comments on the segment.

“We have sustainable economics, equivalent or better than offline. Most of the offline retailers also have not done as well,” Palicha said during a session at the Sharrp Summit in Mumbai on April 12. Unit economics refers to a specific business model's revenues and costs in relation to an individual unit.

Earlier in the day, at another session of the Sharrp Summit, BigBasket chief Menon said that the unit economics of quick commerce businesses that promise to deliver products in 10 to 15 minutes do not work.

Menon also said that because BBNow, the company's quick commerce service, is integrated with the existing e-commerce platform BigBasket, both verticals share costs, whereas separate businesses set up solely for quick commerce struggle to survive.

“When you look at our economics today, we have the lowest hyperlocal last mile delivery cost in the world, it's less than 50 cents. It's easy to look at something with 140 character approach and say this is how it works versus some of the best supply chain minds in the country working into a huge amount of depth and solving these problems,” said Palicha.

Zepto's founder claims that approximately 80-100 of their dark stores have achieved positive cash flow within 12-14 months. Palicha attributes this to a combination of reducing costs and executing higher sales, which are intertwined.

“There are no silver bullets. It's all about basis point-to-basis-point execution across dozens of line items,” he added.

According to Zepto's FY22 financials, it incurred a loss of Rs 390.3 cr on a standalone basis. While its total revenue stood at Rs 142.3 Cr in FY22, it had total expenses of Rs 532.7 Cr in FY22, which was its first year of operations. Companies will start reporting their FY23 financials in a few months.

During his session, Menon also said that e-commerce consumers did not ask for quick deliveries, it was instead thrust upon them and they said why not. However, citing Zepto’s data, Palicha argued that consumers now increasingly prefer quick deliveries over 25-30 minute ones.

“When you look at the revenue retention data, hundreds of thousands of customers getting consistent eight to 12-minute deliveries has better revenue retention versus customers getting 20-25 minutes delivery. So do customers want quick deliveries - absolutely, if you're giving them 10-minute delivery, versus 25 minutes, they will pick the former,” said Palicha.

Founded in 2021 by two 19-year-old Stanford University dropouts – Palicha and Kaivalya Vohra – Zepto offers quick grocery delivery to customers through micro-warehouses.

Palicha and Vohra, brought up in Dubai, are from families that had a background in business and dabbled with ventures early on. While in school they started up their first venture GoPool, a ride-pooling app that was acquired by a Dubai-based firm.

Earlier in May 2022, raised $200 million in its Series D round of funding at a valuation of $900 million, four months after raising $100 million led by YC Continuity for a valuation of $570 million.