Four years ago, two teenagers went door to door in the by-lanes of Mumbai’s Bandra suburb, delivering grocery ordered through a WhatsApp group. Undaunted by the raging pandemic, Aadit Palicha and Kaivalya Vohra handed over orders to the early users of their startup, KiranaKart.
What started as a scrappy experiment would soon evolve into one of India’s fastest-growing outfits and one that would play a vital role in the thawing of the so-called funding winter for India’s startups. But not before it changed its model and introduced the concept of dark stores in India—small warehouses that are not open to the public and which only fulfil online orders from nearby consumers—based on their own experience in early 2021.
At the time, Vohra and Palicha, upon receiving an order, would pick up the items from neighbourhood stores and the delivery would be in 45 to 60 minutes after receiving the order.
“It wasn’t designed for speed,” Vohra recalls, “but some customers who lived close to the stores were getting deliveries in 10 to 15 minutes, just by chance.” These users ordered more frequently, prompting the duo to wonder if speed could be a differentiator.
To test their theory, they narrowed the delivery radius to 1 km around a store in Oshiwara and delivered the orders on rented bicycles. “We just wanted to see… If someone ordered and we showed up in 10 minutes, how would they react,” recalls Vohra.
The response, he says, was electric: “You could see the sparkle in their eyes when they received their orders in minutes.” That sparked the idea for Zepto’s dark stores and the 10-minute deliveries. “That was far more conviction in the model than any investor or journalist could offer,” Palicha says.
In a country where 80 percent of household spending happens within a three-kilometre radius, hyperlocal, several-times-a-week grocery has reshaped how urban India shops—with quick commerce now woven into the fabric of daily life and Zepto, along with Eternal’s Blinkit and Swiggy’s Instamart, becoming household names.
Meanwhile India’s quick commerce (q-com) market is estimated to have reached ₹64,000 crore in 2024-25 (FY25), registering a staggering compound annual growth rate of 142 percent between FY22 and FY25, according to market analytics firm CareEdge. Far from done, the segment is expected to nearly triple to ₹200,000 crore by FY28.
Riding the wave, Zepto became a unicorn in 2023, has so far raised $2 billion in inventory funding, and is expected to float an initial public offering (IPO) sometime next year. It has built a maze of dark stores and has seen its app downloaded by 110 million consumers.
Now it shifts gears to add depth by focusing on wallet share, unit economics, and sustainable growth.
The company tracks search conversion rates across cities to identify the gaps. If a product is being searched for, but not bought, it signals a problem—either it is unavailable, overpriced, or not relevant. “Anything ‘low conversion’ means something is wrong,” he explains.
With 50,000 unique products across geographies, search has become a critical interface. But in India, search is complex. Regional language variations and colloquial terms often obscure the intent. “People call mechanical pencils ‘pen pencils,’ and traditional search would show pens and pencils separately,” Vohra says.Artificial intelligence is here to help. Zepto leans on large language models (LLMs) to interpret user intent. Today, more than 60 percent of Zepto’s business comes directly from search.
Instead of relying solely on subsidies like discounts, cashbacks etc, Zepto focuses on improving supply chain efficiency—from packaging and dark store operations to forecasting demand and minimising waste. A dedicated team of data scientists predicts spikes in demand, such as like estimating flower sales during festivals. This reduces stock-outs and expiry. Vohra says: “Even for fruits and vegetables, our expiry rate is only around 1 percent.”
The team is working to reduce platform fees to near zero, not by absorbing losses but by driving down the all-inclusive cost of fulfillment. “Making money from fees is easy,” Vohra says. “But it comes at a cost—every extra rupee in fee means fewer orders.”
This philosophy was shaped early on by investor Paul Hudson from Glade Brook. “In 2021, during the funding winter, everyone was chasing profitability at the cost of growth,” Vohra recalls. “Paul told us the best companies in the US and China did not choose between growth and profitability, they did both…. The harder path is doing both, and that’s the one we have chosen.”
Chief technology officer Nikhil Mittal—also Zepto’s first employee—says the company built its tech stack from scratch, under resource constraints. “We were not repurposing food delivery tech; we built it custom, end-to-end, for speed and accuracy,” he says.
Zepto’s tech optimises everything from manpower productivity and routing to shrinkage and expiry. There are industrial-grade robotic automation in its mother hubs outside city limits, a first in the industry.
“Tech has helped us build efficiencies that directly impact the bottom line,” Mittal says, “and we continue to invest in it.”
Chief product officer Ankit Agarwal adds that Zepto’s supply chain complexity exceeds that of traditional ecommerce platforms. “Ours spans farm-to-table fresh produce, packaged foods, electronics, apparel, pharmacy, and even cooked items from Zepto Café—all at once,” he says. “Tech is what makes it possible.”
At the time, Zepto was clocking $1 billion in annualised Gross Order Value (GOV), with roughly 500,000 orders a day, 300 dark stores, and 5 million monthly transacting users (MTUs). A year later, the numbers have multiplied.
“We have gone from $1 billion [annualised GOV] to about $4 billion,” says Palicha. Daily order volumes have surged to 1.5 million and MTUs have grown to 16 million by September. Zepto now operates close to 1,000 dark stores across 70 cities.
This growth came at a cost. “We definitely spent a few hundred million dollars on that, no doubt about it,” Palicha admits. “But we felt it was the right call, because it cemented our position in the market.” He emphasises that mature dark stores continue to run profitably, with 6–7 percent Ebitda margins. (Ebitda is short for earning before interest, tax, depreciation, and amortisation.)
So, will the quick commerce model ever stop burning cash?
Palicha believes it will. “You can expect us to keep improving Ebitda every quarter to a point where, before the end of next year, or by the second half of next year, I think we’ll be in a very good position on our bottom line,” he says.
That conviction comes from the performance of profitable stores. “The reason why people have conviction, investors putting capital behind us consistently, is because we have been able to consistently show stores running profit,” says Palicha further. But, for him, scale is just as critical as profitability. Using hypothetical numbers to make his case, he says: “If you generate ₹15 of Ebitda per order, you want to do that on 7.5 million orders per day… Then we are talking a couple thousand crores of cash flow.”
For now, though, the aggressive growth phase is catching its breath. “We feel that the market is in an equilibrium currently,” says Palicha. He acknowledges that competitive intensity was high last year, largely driven by Zepto’s own expansion. Once ranked number seven in the online grocery market, it claims to have emerged as one of the top players by a significant margin.
Now comes scale with discipline. The goal is to keep improving the Ebitda quarter-on-quarter while scaling sustainably.
“There are three reasons to do private label,” says Vohra. “One is when there is white space—no brand is fulfilling a need at a certain price point. Second, when the margins are better. And third, if the product can be cheaper for the customer.”
Fresh meat presented a clear case. But the company is selective. “In categories where those criteria are met, yes,” he says. “It only works if you are genuinely giving customers another option.”
Marketing for these brands remains minimal and focussed within the app. Despite the rise of Relish, overall revenue from private label remains modest for now, in the single-digit percentage range of overall sales.
In May, Zepto launched an advanced data insights subscription platform called Zepto Atom for consumer brands. It also launched Zepto pharmacy in August. Categories like electronics, apparel, cosmetics, and others are now clocking approximately ₹350 crore in monthly top line, and industry experts expect this to grow 1.5 times over the next year.
As the model expands, questions have emerged about the viability of delivering high-value items within minutes. The cost of delivery for products like smartphones and laptops is often three to four times higher than in q-comm than in ecommerce, and return rates tend to be elevated—raising concerns about sustainability.
Palicha offers a different view: “Actually, contrary. Our return rate for apparel is, I think, a third or a fourth of what at least ecommerce benchmarks are.” This suggests that though electronics may pose logistical challenges, certain lifestyle categories are thriving within the q-comm model.
Scaling high-ticket items like smartphones and laptops comes with complexities, but cost isn’t necessarily the barrier, says Palicha. “We have got the opposite feedback—that our cost of doing business (CODB) is competitive,” he says. “Because in quick commerce, you’ve got 1,000 dark stores, and while the working capital overhead is higher, the cost to deliver is actually lower due to shorter distances.”
The biggest challenge lies in inventory and infrastructure management. “It is maybe P&L light, but working capital-intensive. We are solving that by aggregating inventory in clusters, putting stock in two or three dark stores instead of 10, and showing it across all.” This approach helps optimise coverage while reducing inventory load.
Though Zepto does sell smartphones—around 300 a day—Palicha admits it is not a strategic priority. For now, Zepto remains focussed on high-frequency essentials, where repeat purchases drive volume. “From a consumer perspective, I don’t think there’s a strong need for quick delivery of smartphones or high-end fashion,” Palicha says. “But if you put a phone on a shelf and you’ve got footfall, you’ll sell some phones.”
Asparsh Sinha, managing partner at OPEN Strategy & Design, says: “Our understanding is that consumers don’t deliberate here, they recognise. In under five seconds, they act on memory, context and trust.” According to him, brands that are “well-coded and razor-sharp in terms of positioning and identity” enjoy an advantage on q-com platforms, where speed and familiarity drive conversions.
“A lot of new brands that are trying to build a brand from scratch, punt a lot on ad revenue to try to get scale,” says Palicha. “But the platform will not be able to guarantee you scale. It entirely depends on the price point, pack size and quality of the product.”
For emerging FMCG brands like ZOFF Foods, quick commerce has become a cornerstone of discovery and conversion. “Unlike many FMCG brands that are still heavily dependent on general trade and modern trade, we have built a strong presence on q-comm platforms from the very beginning,” says Akash Agrawalla, co-founder, ZOFF Foods.
ZOFF reinvests 10–15 percent of its q-comm revenue into ads and visibility on these platforms—more during the festival season. Agrawalla says the return on investment is more immediate and measurable compared to traditional digital channels.
For Two Brothers Organic Farms, quick commerce plays a different role. “Quick commerce for us is largely about convenience, not discovery,” says its co-founder, Satyajit Hange. Most of its consumers first engage with the brand through its D2C platform or social media and then turn to q-comm for faster deliveries.Over the past year, Two Brothers says its q-comm business has grown nearly 10-fold.
However, for Zepto, a chunk of its advertising revenue comes from established brands such as Coca Cola, Unilever, and P&G.
Palicha attributes this to consistent growth and disciplined execution: “Last year, we were able to keep growing the business 100 percent-plus year-on-year for two years straight, and we were able to keep improving Ebitda. It is as simple as that.”
Unlike many consumer internet companies that rely on deep-pocketed backers, Zepto has built its funding base through independent investors. “We don’t have a large big bankroller,” Palicha says. “We are getting independent investors all the time.”
He believes funding is a tool, not a crutch. “We always need to consistently show the numbers,” he says. “And, right now, we have obviously spent a lot of capital, but over the next 12 months, we think we will be able to show numbers that are compelling enough on both top line and bottomline.”
Q-comm is in a sweet spot and Zepto exemplifies this momentum, says Ankush Chandgothia, head-family office, at Mankind Pharma, which invested in November 2024. “When we invested, Zepto was in terms of GMV doing about ₹1,200 crore per month. Within eight months of our investment, sales grew to ₹2,700 crore GMV per month. Our entry valuation was $4.6 billion pre-money and we were confident this investment will give decent returns,” he says.
He sees that stores are getting profitable within 18 to 20 months and capital turnaround is fast. “Zepto’s market share is growing. This capital efficiency and execution gives us the confidence that Zepto has the ability to sustain and lead in this space despite competition,” Chandgothia says.
While Zepto isn’t in need of more funding, Palicha believes in raising capital when the terms and timing are right. “Whenever you have the opportunity to raise equity cash from high-quality investors at good terms, you should always do it.”
He acknowledges the risks of overcapitalisation but thinks they are manageable. “I’d rather have a problem that I have to solve than a problem that I’m dependent on the kindness of strangers to solve. The game is to build a very large company. It doesn’t matter if I own 9 percent or 11 percent of it,” he says.
The dark pattern controversy, however, led to introspection. “We did things on delivery fees and pricing. We tried experiments… and a lot of the feedback was valid,” Palicha admits. “It was a mistake. It won’t happen again.”
The focus now is no longer just on acquiring new users but on deepening engagement and unlocking wallet share. “Now that the scale is quite meaningful, we are going to keep acquiring customers organically. But we don’t have to go crazy on that,” says Palicha.
Instead, the next phase is about getting more spends from each customer. That means expanding selection, adding new use cases, and passing back value. “Can we operate with lower fees, lower prices?” Palicha wonders. “Can we operate with less friction on the platform… and do it in a way where we lower our cost structure to a very lean cost structure to be able to afford to pass on some value to the consumer?”
Professor Manish Gangwar of the Indian School of Business contrasts the strategic philosophies of DMart and Zepto, highlighting how DMart’s “profitable growth is owed to stringent cost control and leaving out ‘nice-to-have’ customer experiences”. In contrast, Zepto is pursuing a “scale first and profit later” approach, investing heavily in dark stores and operational convenience to deliver on its promise of instant delivery. Though this rapid scale is ambitious, Gangwar cautions that it is also risky. He emphasises that platforms must “balance user convenience with disciplined expense management for long-term viability”, and that success in quick commerce will ultimately depend on “cost discipline, optimised operations, and measured expansion—rather than offering ‘too much too soon”.
The competition is heating up—with Blinkit and Instamart spending in full throttle to capture market share.
“Right now, the only sustainable edge long term is execution,” says Palicha. “I personally believe this game is all about cost excellence.”
Zepto’s early success, he explains, was built on relentlessly reducing costs. “We are just going to nibble away at cost, paisa-by-paisa, basis point-by-basis point, and just optimise.”
First Published: Oct 08, 2025, 17:49
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