Instead of getting into the express delivery race, which has taken on a whole new dimension with companies such as Grofers offering deliveries in 10 minutes, Google-backed Dunzo said it would rather be empathetic towards its delivery partners and stick to a 19-20 minute deadline.
“The 10-minute delivery timeline is a little hard to meet without either being disruptive on density where your stores are not going to make any sense or going ahead and really putting a lot of pressure on the delivery partners,” Kabeer Biswas, founder of Dunzo, told Moneycontrol. “People can go ahead and figure out how to run their businesses but we went ahead and picked the 19 minutes because we wanted to make sure that we were empathetic to partners… even if it seems that we are a little slower to people.”
The startup, which launched its on-demand delivery service Dunzo Daily earlier this month, had run the pilot project for almost a year. Backed by Google and Lightbox, Dunzo claims to be the largest in terms of express delivery of goods in Bengaluru, where it is based.
According to Biswas, Dunzo delivers 30,000 orders a day in Bengaluru during weekdays. This amounts to $5 million in gross merchandise value. It operates through a mix of dark and local stores. Currently, about 50 percent of the business comes through dark stores and it plans to add 300 such centres across 20 cities.
A dark store is a retail facility that houses goods used to fulfil orders placed online.
Inventory churn
Dunzo claims that it sets up these centres in partnership with local merchants and supermarkets.
“The cost of setting up the warehouses isn’t very large – about Rs 20 lakh ($30,000) to be able to put up the inventory inside a warehouse and set up a location. As the selection is small, inventory required is much lower and the inventory turnover ratio is much higher. Even if you were to set up 1,000 dark stores, that takes up about $30 million,” he said.
The key to crack the express delivery model is to ensure the right inventory, proximity of fulfilment centre to consumers and the design of these centres. According to Biswas, the average time required to travel 1 km in Indian cities is 6-7 minutes.
The pick, pack and ship process at a dark store takes place in about two-and-a-half minutes after a customer places an order. Thereafter, the delivery partner picks up the package and gets it across to the customer.
Infrastructure issues
Globally, companies such as Germany’s Gorillas and Getir in Turkey promise deliveries in 10 minutes. However, the infrastructure in western countries is more advanced than in a developing country like India.
Dunzo, which gets 65-70 percent of its business from on-demand grocery, is said to be in talks to raise $150 million. It last announced a fundraise of $40 million.
Earlier this month, Grofers, which is backed by SoftBank and Zomato, said it planned to reduce the delivery time for groceries to 10 minutes from 15 minutes, while expanding services to more cities in the country.
Swiggy, which runs on-demand delivery service Instamart promising deliveries in 15-30 minutes, has expanded services to five new cities. Other companies that have entered this space include BigBasket and Zomato.
As per a recent survey by RedSeer, quick commerce is expected to grow 10-15-fold over five years to become a $5 billion opportunity by 2025.
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