“We think of ourselves as a hyperlocal Walmart for a hyperlocal India… That was the big gap that helped us get to the scale and the level of profitability we’ve gotten to,” Palicha said at an event in New Delhi on Saturday.
On June 22, Zepto closed a $665-million funding round at a $3.6 billion valuation – bolstering its position in India’s red-hot quick commerce sector.
“In commerce generally, nobody has been able to build a hyperlocal platform at scale that has quality customer experience…and the reality is that most (of the) commerce in India is done on a hyperlocal basis,” Palicha said.
“The reason why we’re seeing such an incredible product market fit is because we’re the first commerce platform that beats the proximity advantage with the structural advantages of a large-scale retailer in terms of price and sourcing leverage, selection, quality control,” he added.
Even as Zepto, along with other quick commerce players, Zomato-owned Blinkit and IPO-bound Swiggy’s Instamart, continue to add categories such as consumer electronics, fashion, home furnishings, and beauty and personal care, Palicha said that the biggest opportunity remains in groceries and household essentials.
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ETtech“If you want to build a business that’s larger than Amazon or Flipkart…grocery is bigger than all the categories that Amazon and Flipkart serve combined,” he said. “If you take electronics, apparel, furniture and all the others – and double it, it’s still not as large as grocery and household essentials. So, we’re building in the mother of all categories.”
The Indian grocery and household essentials segment is $650 billion in size as of FY23 and is projected to grow to $850 billion by FY29, he said.
Palicha also said Zepto’s focus will continue to be on the top 40 cities in India that are expected to make up for almost half of the grocery and household essentials segment by FY29.
“In India, every single pin code has a grocery store, but just the top 40 cities (will) make up $400 billion of the $850 billion. Just the top 50-70 million households will make up for $200 billion,” he said.
“From our perspective, if we execute well, we can realistically take this business from over Rs 10,000 crore in topline (gross merchandise value) today to Rs 2.5 lakh crore in topline over the next five years in the top 40 cities,” Palicha said. “Our focus is not really on the next 100 cities.”
At the time of its fundraise last month, Palicha had said that Zepto was the fastest company to hit a billion dollars in gross merchandise value (GMV) and continued to grow at over 100% year-on-year.
According to sources, the company clocked $1.4 billion in annualised gross sales run-rate during May. Annualised run rate is a projection of annual sales based on that month’s performance.
ET had reported in April that Walmart-owned Flipkart and Zepto held discussions for a potential acquisition of the Nexus Venture Partners-backed quick commerce firm, but the talks fell through.
Having raised a large funding round, Zepto now expects to double the count of its dark stores or micro-warehouses to 700, as it primes for battle with rivals Blinkit, Swiggy Instamart and BB Now of Tata Digital-owned BigBasket, all of which are also scaling up their operations.