3 Mistakes By The Quick Delivery Start-Up Dunzo Dunzo founded in 2015 by Kabeer Biswas, Dalvir Suri, Mukund Jha, and Ankur Aggarwal, has been a darling of the Indian startup scene for years.
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Dunzo founded in 2015 by Kabeer Biswas, Dalvir Suri, Mukund Jha, and Ankur Aggarwal, has been a darling of the Indian startup scene for years. For the so-called Twitterati and early adopters of internet products in India, 'Dunzo it' became a common refrain between 2017 and 2020, whether it was for sending things from one place to another or for ordering things from a nearby store.
In many ways, Dunzo has been a lone flag-bearer in the graveyard of hyperlocal startups that mushroomed and promptly shut down between 2015 and 2016. For many years, Dunzo was the last startup standing in this space. For Dunzo, access to capital has become a problem. Recent reports, based on anonymous posts on Grapevine, hint at financial troubles brewing in the company, with managers allegedly getting a flat salary of INR 75K for June 2023, although the company has promised to release the remaining amount later this month.
1. Opposite Outcomes
The hyperlocal delivery game is fraught with low margin and unit economic challenges, and when one adds quick commerce expectations to the mix, things get more complicated. While the popular notion was that Reliance's investment would let Dunzo fuel up for blitzscaling, the opposite has come true.
2. Quick Commerce
This is the original hyperlocal delivery proposition that Dunzo had created a niche in since 2015 onwards till 2020 before jumping into quick commerce. The retreat is perhaps in line with the cost-effective strategy that the company is adopting in mid-2023. However, it must be noted that quick commerce through dark stores will be a focus for the company in certain areas where it is guaranteed high demand and better unit economics. For instance, in April, the startup decided to shut dark stores that were seeing less than 1,000 orders per day, as per sources. Now it's reevaluating more such dark stores and going back to the hyperlocal play in many cities.
3. Unexpected Transition
In these cities, the idea is to use the same inventory management tech that has remained a mainstay at Dunzo and turn it to supermarkets for relatively quick deliveries, if not always within 10-15 minutes. This way, the company would curb the high overheads associated with dark store expansion and focus on tech to match delivery riders with orders from retail stores, and therefore complete orders without the human resource cost of managing a dark store. The reasoning is sound, but there's one major headwind for Dunzo in this plan. Grocery and household shopping behavior in metros and Tier 1 cities has quickly transitioned to quick commerce platforms such as deep-pocketed Swiggy Instamart, Zomato-owned Blinkit and Zepto.
In comparison, Swiggy and Zomato have raised billions and have a huge revenue base to invest from. Even as these rivals have scaled up in the quick commerce space, Dunzo had to shut down dark stores late last year.