Zepto is one of the fastest-growing quick-commerce startups in India, providing ultra-fast grocery deliveries in under 10 minutes. The company has rapidly expanded its presence in major metropolitan areas, leveraging its dark store model and data-driven logistics. But how does Zepto make money while offering such rapid deliveries? In this article, we analyze Zepto business model and revenue streams to understand its financial sustainability and growth potential.
Zepto Company Details
| Attribute | Details |
|---|---|
| Name | Zepto |
| Former Name | KiranaKart |
| Type | Private |
| Industry | Quick-commerce |
| Founded | July 2021 |
| Founders | Aadit Palicha (CEO), Kaivalya Vohra (CTO) |
| Headquarters | Bengaluru, India |
| Number of Locations | Over 250 dark stores across ten metropolitan areas in India (as of August 2024) |
| Services | Online grocery delivery |
| Revenue | ₹4,454 crore for FY24 |
| Funding | Total funding of $1.95 billion over 10 rounds |
| Latest Funding Round | Series G, $350 million raised in November 2024 |
| Valuation | $5 billion as of August 2024 |
| Competitors | Swiggy Instamart, Blinkit, Dunzo, Amazon India, Flipkart, BigBasket |
| Website | zeptonow.com |
Business Model Overview
At the heart of Zepto’s operations is the “dark store” model. These are small, strategically located warehouses in densely populated urban areas, optimized for rapid order fulfillment. By positioning these dark stores close to high-demand neighborhoods, Zepto minimizes delivery times, ensuring that customers receive their orders promptly. Advanced algorithms and machine learning are employed to manage inventory efficiently, predict demand, and optimize delivery routes, further enhancing speed and reliability.
How Does Zepto Earn Money?
1. Direct Sales Revenue
Zepto generates the majority of its revenue through direct sales of groceries and daily essentials on its platform. Customers order items through Zepto’s mobile app, and the company earns a profit margin on each sale. Since Zepto purchases products in bulk from suppliers, it gets them at lower prices, allowing it to sell at competitive rates while maintaining a profit margin.
Key Aspects of Direct Sales Revenue:
- Sells groceries, fresh produce, dairy, packaged foods, and household essentials.
- Prices are slightly marked up to cover costs and ensure profitability.
- Benefits from economies of scale by buying in bulk at lower prices.
Also Read: SWOT Analysis of Zepto
2. Delivery Charges
Zepto offers free delivery on certain orders, but in specific cases, customers may be required to pay delivery fees.
When does Zepto charge for delivery?
- Small Orders: If the order value is below a certain threshold, Zepto adds a delivery fee.
- High-Demand Hours: During peak hours, a dynamic pricing model is used to charge higher delivery fees.
- Priority Delivery Option: Customers can choose express delivery at an additional cost.
The delivery fee acts as an additional source of revenue, helping the company recover logistics costs.
3. Commission from Brands (Product Placement & Advertising)
One of Zepto’s biggest revenue streams is charging brands for premium placement and advertising within its app. Since Zepto has a large user base, FMCG brands and grocery suppliers are willing to pay for better visibility on the platform.
How does Zepto earn through brand partnerships?
- Featured Listings: Brands pay to have their products appear at the top of search results.
- Sponsored Products: Certain brands pay for “highlighted” product placements.
- Exclusive Brand Collaborations: Some brands launch exclusive products on Zepto, paying a premium for priority listing.
This advertising model is similar to what e-commerce giants like Amazon and Flipkart follow, creating a significant revenue stream.
4. Subscription & Membership Plans (Future Potential Revenue Stream)
Zepto is exploring a subscription-based model, where customers can pay a monthly or annual fee to receive benefits like:
- Free deliveries on all orders.
- Exclusive discounts and early access to deals.
- Faster order fulfillment with priority delivery.
This model, similar to Amazon Prime or Swiggy One, could provide Zepto with a steady revenue stream.
5. Advertising Revenue from Third-Party Brands
Apart from grocery brands, Zepto can also generate revenue by allowing non-competing businesses to advertise on its platform. This includes:
- In-app banners and video ads.
- Promotional push notifications.
- Sponsored discount coupons.
Since Zepto has a highly engaged audience, advertisers are willing to pay a premium to reach potential customers.
6. Private Label Products (Future Growth Area)
Many quick-commerce platforms, such as Blinkit and BigBasket, have launched their own private-label grocery brands to increase profit margins. Zepto could follow a similar strategy by introducing its own brands for:
- Packaged food items (spices, flour, rice, etc.).
- Personal care products (shampoos, soaps, and household cleaning items).
- Dairy and fresh produce.
By selling private-label products, Zepto can eliminate middlemen and earn higher profit margins.
7. Commission from Restaurants & Cloud Kitchens (Potential Expansion Strategy)
Although Zepto is currently focused on groceries, it could expand into food delivery, partnering with cloud kitchens and restaurants to offer ready-to-eat meals. This would allow Zepto to earn commission-based revenue from restaurant partnerships, similar to Swiggy and Zomato.
Cost Structure: How Zepto Manages Expenses
To maintain profitability, Zepto follows a lean cost structure by optimizing various operational aspects.
1. Warehousing & Dark Store Operations
- Zepto operates dark stores, which are smaller and more cost-efficient than traditional supermarkets
- These fulfillment centers are strategically located to minimize delivery time and logistics costs.
2. Logistics & Last-Mile Delivery
- Zepto has an in-house delivery fleet, reducing dependency on third-party logistics companies.
- The company optimizes delivery routes using AI, cutting fuel costs and improving efficiency.
3. Technology & AI Investments
- AI-driven demand forecasting ensures that each dark store stocks only the most in-demand products, minimizing waste.
- Automated order processing speeds up fulfillment, reducing labor costs.
4. Marketing & Customer Acquisition
- Zepto invests heavily in digital marketing, influencer partnerships, and app promotions.
- The company runs aggressive discount campaigns to attract new users, which increases customer retention.
Conclusion
Zepto’s business model is built on speed, efficiency, and multiple revenue streams. By combining direct sales, delivery fees, advertising, and potential subscription plans, Zepto has created a sustainable financial ecosystem.
With growing competition in the quick-commerce sector from players like Blinkit, Swiggy Instamart, and Dunzo, Zepto must continue innovating to maintain its market leadership. Future expansion into private-label brands, restaurant partnerships, and premium subscription services could further strengthen its profitability and long-term growth.
Zepto’s rapid success proves that quick-commerce is the future of online grocery shopping, and its business model provides a blueprint for how companies in this sector can thrive
Shashi Kant is the Founder and Editor of BusinessScroller.com, a leading platform for business insights, finance trends, and industry analysis. With a passion for journalism and expertise in business reporting, he curates well-researched content on market strategies, startups, and corporate success stories. His vision is to provide valuable information that empowers entrepreneurs and professionals. Under his leadership, BusinessScroller.com has grown into a trusted source for in-depth articles, customer care guides, and financial expertise.
