Zepto surpasses $1Bn in annual sales: Goldman Sachs
Quick commerce, a segment that saw meteoric rise during and post COVID, and one that many believed would die off soon, is showing up trends that has left even the best of industry commentators scratching their heads. And leading that Quick commerce pack is India’s Zepto, the 29 months old unicorn that can largely be credited for convincing investors that a business, built just around quick commerce, can actually be scaled. And today, there’s even more proof of that scale.
According to a note from Goldman Sachs (via TechCrunch), based on inputs from Zepto management, the less-than-3-year-old Indian startup has surpassed $1 billion in annualized sales within just 29 months of its establishment. Currently, its annualized sales amounts to $1.2 billion, according to Goldman note.
Competing with notable players such as Zomato-owned Blinkit and Swiggy Instamart, Zepto has achieved substantial sales figures alongside making considerable strides in the overall market share in the Indian quick-commerce sector as well. According to Goldman Sachs, the startup is now nearing the position of the second-largest player in the Indian quick-commerce landscape.
The upstart currently operates across seven major Indian cities, utilising a network of over 300 dark stores to bring a host of products, including groceries and electronics, to the doorsteps of customers across the country. Today, the startup continues to offer deliveries within a timeframe of 10 minutes, and so far, Zepto has garnered significant traction among consumers, processing approximately 550,000 orders daily.
In addition to Blinkit and Swiggy Instamart, Zepto also faces competition from other players such as Dunzo, backed by Reliance. To enhance profitability, Zepto has introduced strategic initiatives such as the Zepto Pass membership program and platform fees for users.
Despite its rapid growth, Zepto remains focused on improving its financial performance. While its overall EBITDA margin currently stands at a negative single-digit percentage, the company is on track to achieve EBITDA break-even within the next quarter, according to media reports. Zepto anticipates reaching a steady state contribution margin of 12%, with a steady state EBITDA margin of 7%, Goldman Sachs notes, adding that the startup has reduced the time required for newly opened dark stores to achieve profitability to just 9 months, down from 15-18 months previously.
Looking ahead, Zepto is exploring opportunities for expansion and consolidation in the market. Reports indicate that the company is in discussions to raise approximately $300 million from global investors, aiming for a valuation range of $2.5-$3 billion. This influx of fresh funds will enable the startup to accelerate its expansion efforts, both geographically and operationally, which will be useful for its plans to enter new cities and scale up its existing operations. Moreover, the funding round will provide Zepto with the financial firepower to invest in innovation and tech and allow it to stay ahead of the curve.
