Zepto rolls out subscription service, fuels competition in quick commerce market

“The company has piloted Zepto Pass with 5% of its user base for a month and seen rapid adoption—almost a majority of orders came from Zepto Pass subscribers within two weeks during the pilot,” it said in a statement.

According to the company, those who subscribed to the Zepto Pass increased their spending on the app by over 30% and showed a 10% increase in monthly retention. The subscription, priced between 19 and 39 rupees per month, for a majority of customers, offers unlimited free deliveries and up to 20% off on grocery items.

The move is intended to drive customer adoption of quick commerce, said Devendra Meel, vice president, Strategy, and head of Zepto Pass.

Founded in 2021 by Stanford University dropouts Aadit Palicha and Kaivalya Vohra, Zepto promises 10-minute grocery deliveries through its network of dark stores nationwide. It competes in the highly competitive quick commerce arena, alongside players like Swiggy’s Instamart, BigBasket’s BBNow, Zomato’s Blinkit, and Google-backed Dunzo, all vying for market dominance and profitability.

Zepto hopes to draw a million customers into the subscription programme within a month of the rollout. 

“Even after offering compelling value to customers with Zepto Pass, we continue to be on track to be near PAT (net profit) positive in two quarters. This is because our profitability improvement is coming primarily from cost reduction through supply chain excellence, which gives us the ability to pass value back to customers sustainably,” said Palicha, co-founder and CEO, Zepto.

Palicha also highlighted that the subscription model is expected to raise the average order value (AOV), offsetting the cost of discounts through a mix of company and brand funding. 

“We’re in this position where we can afford to take the hit, because our supply chain costs have come down dramatically. All of our core productivity metrics have improved, throughput has improved and our wastage has reduced,” Palicha said in an interview.

Zepto’s move comes as quick commerce firms scramble to meet customer demands, expand market presence, and diversify their product offerings. Estimates by consulting firm RedSeer suggest that India’s quick commerce market is expected to touch $5.5 billion by 2025, up from $0.3 billion in 2021.

Meanwhile, Palicha said the company is on track for a public listing in fiscal year 2025-26 (FY26). 

“Obviously, it depends on the cost of capital, depends on where we see private markets going but right now we are building out all the internal infrastructure—whether it’s the financial controls, whether it’s the reporting, whether it’s having a big board or a statutory auditor, all the core controls needed, we are building out to be a public company,” he said.

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Published: 29 Feb 2024, 02:48 PM IST