Zepto, India’s fastest-growing quick-commerce unicorn, is making significant strides toward its much-anticipated Initial Public Offering (IPO) slated for later this year. In a pivotal move, the company has established a new entity named Zepto Marketplace Private Limited, signaling a strategic effort to simplify its operations and align its business model with industry peers like Blinkit and Swiggy Instamart. This article delves into the implications of this restructuring, its potential impact on the quick-commerce landscape, and Zepto’s plans for the future.
The Current Model: Complex but Effective
Zepto currently operates under a business-to-business (B2B) model through its Indian entity, Kiranakart Technologies Pvt Ltd. This model involves procuring goods from brands and distributing them exclusively to three licensed sellers: Geddit Convenience, Drogheria Sellers, and Commodum Groceries. These licensee firms then sell the products to end consumers through the Zepto platform.
While effective in ensuring control over the supply chain and maintaining product quality, this model has been criticized for its complexity, making it less transparent for investors.
Why the New Entity?
1. Simplification for Investors
The creation of Zepto Marketplace Private Limited, registered on October 22, 2024, marks a move toward clarity and transparency. According to insiders, this restructuring aims to align Zepto’s operations with the marketplace model used by rivals like Blinkit (owned by Zomato) and Swiggy Instamart (operated by Swiggy). These models are well-understood by investors, making it easier to evaluate the company’s financial health and scalability.
“Zepto’s current model is very confusing. The new entity will likely rejig operations to ensure that its business model is the same as rivals Blinkit and Swiggy Instamart,” a source revealed.
2. Potential Shift to a Marketplace Model
A marketplace model would allow Zepto to diversify its seller base and expand its distribution network. Unlike its current approach, this model could reduce dependency on the three existing licensee firms and bring more sellers into the fold.
This transition would enable Zepto to report final transaction revenues instead of gross merchandise value (GMV), aligning with industry standards. It could also simplify compliance with India’s foreign direct investment (FDI) norms, providing further operational clarity.
3. Structural and Operational Adjustments
Another source indicated that the new entity primarily serves as a structural tool to separate Zepto’s internet platform and intellectual property (IP) from its core business operations. This move could streamline the company’s functions, making it more agile and investor-friendly without fundamentally altering its business model.
“The company is anyway running an e-commerce platform with that IP. The business model, despite a new entity, doesn’t fundamentally change,” the source added.
Zepto vs. Rivals: The Numbers Game
Zepto’s current operational model has enabled it to outperform its competitors in terms of revenue, despite challenges in market share and order values.
| Company | Revenue FY24 (₹ Crore) | GMV FY24 (₹ Crore) | Average Order Value |
|---|---|---|---|
| Zepto | 4,455 | 5,500–6,000 | Lower than rivals |
| Blinkit | 2,301 | Comparable | Higher than Zepto |
| Swiggy Instamart | 1,100 | Comparable | Higher than Zepto |
Zepto’s impressive revenue numbers reflect its operational efficiency and ability to scale rapidly, even with a complex B2B model. Transitioning to a marketplace model could unlock further growth and allow for a clearer comparison with competitors.
IPO Preparations: What Lies Ahead
1. $500 Million IPO
The establishment of Zepto Marketplace Private Limited is a precursor to Zepto’s plans for a $500 million IPO later this year. The move positions the company to present a more transparent and scalable business model to investors, potentially increasing its valuation.
2. Revenue Diversification
Zepto is also exploring ways to diversify its revenue streams. Plans include launching a separate food delivery app and expanding into new geographies. These initiatives aim to reduce dependency on its core quick-commerce segment while capturing additional market opportunities.
3. Competitive Edge
The Indian quick-commerce market, valued at $6 billion, is one of the fastest-growing sectors in the e-commerce space. By adopting a marketplace model and simplifying its operations, Zepto aims to gain a competitive edge, both in terms of market share and investor confidence.
The Marketplace Model: Benefits and Challenges
Benefits
- Increased Seller Diversity: A marketplace model allows for a broader range of sellers, reducing dependency on a few licensees.
- Transparency for Investors: Reporting transaction revenues instead of GMV provides a clearer picture of profitability.
- Scalability: The model supports faster geographic and operational expansion.
- Alignment with Rivals: Adopting a proven model simplifies comparisons with competitors like Blinkit and Swiggy Instamart.
Challenges
- Operational Overhaul: Transitioning from a B2B model to a marketplace model involves significant changes in infrastructure and processes.
- Seller Management: Ensuring quality and consistency across a larger seller base can be challenging.
- Regulatory Compliance: Marketplace operations must align with FDI norms and local e-commerce regulations.
Zepto’s Journey: From Startup to Unicorn
Zepto was co-founded in 2021 by Aadit Palicha and Kaivalya Vohra with the vision of transforming India’s grocery delivery landscape. The company leveraged the growing demand for quick-commerce services, delivering essentials within 10–15 minutes.
Key milestones in its journey include:
- Rapid Expansion: Zepto quickly scaled its operations across major Indian cities, attracting millions of users.
- Investor Backing: With significant funding from global investors, Zepto achieved unicorn status within two years of inception.
- Technological Innovation: The company invested heavily in AI-driven logistics and inventory management to enhance efficiency.
Impact on the Quick-Commerce Ecosystem
Zepto’s strategic moves are likely to have far-reaching implications for the quick-commerce sector in India:
- Increased Competition: The transition to a marketplace model could intensify competition with established players like Blinkit and Swiggy Instamart.
- Investor Confidence: Zepto’s focus on transparency and scalability could set new benchmarks for investor expectations in the sector.
- Market Growth: By streamlining operations and expanding its seller base, Zepto could contribute to the overall growth of the Indian quick-commerce market.
Conclusion
Zepto’s decision to establish Zepto Marketplace Private Limited marks a pivotal step in its journey toward becoming a publicly listed company. By aligning its operations with industry standards, the company aims to simplify its business model, attract investors, and capture a larger share of India’s booming quick-commerce market.
As Zepto prepares for its IPO, its focus on operational clarity, revenue diversification, and market expansion positions it as a formidable player in the quick-commerce ecosystem. Whether it can sustain its momentum and outpace rivals remains to be seen, but its bold steps signal a promising future.