From 10 min to 19 min delivery, how has Dunzo’s strategy changed over the years?

Tanveer Khan, AGM, brand and marketing, Dunzo, says a hybrid model is the only sustainable way forward.

It all started with a promise of 10-minute delivery time and, now, it’s anywhere between 19 and 22 minutes. Today, the focus of quick commerce platforms is more on making their business model sustainable, than the delivery time.

There was a time when q-comm followed the marketplace model. Brands would pick up products from a nearby retail store (neighbourhood ‘kirana’ store) and deliver them to the customers as and when they ordered, resulting in lower inventory costs.

Then came the ‘dark stores’ model. Brands would select popular neighbourhoods in cities with high online presence, and rent or buy micro-warehouses that they called dark stores.

Although most brands these days typically operate these two models, many have also been shutting the dark stores. But why?

“We were never into the ‘minutes game’. We want to deliver fresh and good quality products at the best price within the shortest possible time. In essence, we are the ‘neighbourhood sabziwala’. Our average delivery time for an order, is around 19-22 minutes, and our customers are fine with this,” shares Mrunmayi Oke, VP, category and growth, Dunzo.

Reliance-backed Dunzo, a leading q-comm platform, wants to make its business sustainable by operating both the marketplace and dark stores model.

Oke says, “Today, our network is hybrid - a combination of marketplace stores in peripheral areas with low demand density, and dark stores, where we have high traffic. This is the most economically viable model, and it will shorten our path to profitability. What’s important to us is that the customers enjoy a seamless experience, whether they buy from the marketplace or dark stores.”

Tanveer Khan, AGM, brand and marketing, Dunzo, adds that in the q-comm space, what we’re seeing is that to make the business sustainable, a hybrid model is the only way, going forward.

From keeping in mind slim margins, to the number of orders, to the radius within which the order needs to be delivered, Dunzo has been trying out multiple things lately in order to work in a sustainable way.

In FY 21-22, Dunzo’s overall business grew by 94%, and the burn rate for key categories was down 50%. In FY23, it plans to further optimise its investments to build robust unit economics. This will help the brand give more back to the customers.

Marketing strategies

The brand has been mostly into in-app marketing. Khan points out, “Over the last 6-7 months, we have been quite choosy, with respect to how we want to do marketing. We are focussed on RoI-driven marketing, which is also smart marketing for us. We are slightly away from big scale and national-level campaigns, as we are chasing profitability and want to spend money smartly.”

On the back of the popularity of its Indian Premier League (IPL) campaign, the brand has launched a new one, titled ‘LightGayiKya’. While the IPL campaign included mascots and ‘Duniverse’, ‘LightGayiKya’ will be based on fun and quirky social media posts by Dunzo’s customers.

As a part of this campaign, the brand will introduce a special coupon code during power cuts. The customers will, as a result, get discounts on their favourite products. The aim is to turn an inconvenience into a fun and rewarding experience for the brand’s customers.

“Whenever we face a power cut, our first instinct is to wish for the power to come back soon. While that’s something we can’t solve, we’ve found a way to lessen the inconvenience and cheer people up by giving them a special coupon to shop on Dunzo Daily during a power cut,” says Khan.

The campaign will be initially launched in Bengaluru and Pune, and then expanded to other cities.

“Even though this isn’t a time-bound campaign, we’re looking for a two-week window for it to pick up,” adds Khan.

The brand’s media spends go largely towards performance-based (digital) marketing, informs Khan. Beyond that, the brand isn’t looking to spend on channels like radio, print and TV.

Industry scenario

Even though Dunzo has been trying to hit the sweet spot in its category, q-comm’s fate still remains questionable. The growth potential of q-comm platforms, varies depending on factors like market conditions, customer preferences, competitive landscape, and the ability of businesses to adapt and innovate in response to changing consumer demands.

Oke points out that since q-comm has impacted the shopping patterns of customers, one will see more shopping missions emerge, over time. For instance, Dunzo started a late night delivery service, where the customers used the app (at night) to buy snacks and beverages.

Other than daily grocery items, q-comm will also become a go-to option for ancillary products during festive seasons, major life event celebrations, etc. This is a very customer-focussed business. So, the players in the space need to stay agile, identify trends and continue evolving their product selection accordingly.

Dunzo has been looking at category expansion into segments such as pharma, cosmetics, fashion, etc. It has launched electronics, personal care products, baby care and even a gourmet range.

Oke mentions, “Category expansion will be a trend to watch out for. Last year, we introduced signed copies of Amish Tripathi’s novel ‘War of Lanka’, flexing our muscles beyond daily essentials. You will see more experiments like these, where we test waters to identify new q-comm opportunities.”

afaqs! decided to get third-party views on the fate of the q-comm industry in India. Here’s what three experts had to say.

Edited excerpts:

Vaitheeswaran K, founder & CEO, Again Drinks

Most Indian households prefer one large monthly purchase of groceries and a few top-ups. 10-minute delivery is still not a huge thing, except for a small number of households. It works when supported by huge VC funding and when growth, instead of profitability, is a key metric.

What has changed now is that easy funding has dried up. This is pushing q-comm firms to focus on profitability. Most q-comm firms opened dark stores everywhere just to deliver products in 10 minutes, without worrying about costs. Now, they’re forced to optimise resources, which means shutting down some dark stores.

It will continue to grow, but only in urban areas, where many young nuclear families, working couples or single working folks reside, and where ‘10 minutes’ is a compelling proposition.

Saurabh Uboweja, founder & managing partner, BOD Consulting

A 10-minute delivery model isn’t financially sustainable. Everyone knows it. The primary reasons for this are the two main costs involved to offer this kind of service. One is the delivery charges that you pay to the delivery boys, and the second is the rental cost of dark stores.

Consumers who want their order delivered in the next 10-15 minutes, are impulse purchasers. They do not end up ordering high ticket item.

A consumer won’t plan and spend much on a 10-minute order. But the moment you spend at least 30 minutes on one order, it means that you plan to buy more items.

The q-comm platforms are playing with the consumer’s psyche, while delaying the order time. The more you push the delivery time back, the better planned the consumer is on what he/she wants to order.

These platforms are using the 10-minute model as a customer acquisition strategy. They may run this model for a while and then drag the customer to longer duration delivery (times), or convert them into subscription buyers.

Rashi Goel, founder and CEO, Performonks

There is a three factor of flywheel for e-commerce, i.e., selection, price and speed. What q-comm did was it over-skewed on speed, with a lesser number of SKUs.

Today, the consumer is actively making the choice to pay more and be able to select quick items for emergencies, through q-comm. The category did very well in 2021-22, because people were working from home and ordering a lot. The ‘quick delivery conversation’ worked well during COVID. The moment offices reopened, the total addressable market shrunk.

On the contrary, any q-comm platform that is part of a bigger model, will do well. For instance, BigBasket and Dunzo, which are marketplace models, will work well.

Brands are shutting down their dark stores, as they aren’t contribution margin positive. In India, (customer) taste changes every five kilometres. So, if a company excels in the dark stores model, it will also need to have a micro-level analytics model. For instance, if chewing gum is selling more in a particular area, then the dark stores should have more quantity of chewing gum. They will need to do micro-level tie-ups to possibly make every small area profitable.