Dunzo pulls out all stops to be No.1 in quick commerce; bets on automation

Automation, Reliance deal to help it expand faster

Dunzo, the hyper-local delivery platform, will soon be using robotics in its city warehouses to cut down the time taken for processing orders to just 30 seconds. The company’s aim is to get 90 per cent of its operations, including stringent quality checks, sorting, and packaging, done through automation.   

Dunzo is also experimenting with drones, having tested them for over 300 hours, to undertake last-mile delivery in just 5-6 minutes, instead of 10 minutes currently. In addition, the company is planning to set up 2,000-3,000 square feet of dark warehouses in every city it enters. The warehouses are to be located within 2.5 km of the customers to ensure quick delivery, and they have already reached below 2 km.

Welcome to the new Dunzo — the start-up which is aiming to shift its business model from a B2B last-mile delivery platform for small retailers and individuals, to becoming the country’s largest quick commerce player in the next 18-24 months. The objective is to deliver all your daily essentials to your homes in less than 15 minutes. The company, which recently raised $200 million from Reliance Industries for a 25.8 per cent stake, says the alliance with RIL will help speed up that plan. 

Says Kabeer Biswas, founder and CEO of Dunzo: “Our aim is to become the number one player in quick commerce in 18-24 months. Of course, competition will come and go. The Reliance deal will help us grow 30-50 per cent more than what we had earlier planned for by this December, and double of what we had envisaged in 5 to 10 years.”

Biswas says the big advantage of the partnership is that Dunzo can now enter new cities using Reliance’s existing supply chain. This will help Dunzo offer its 15-minute service to customers efficiently, while Reliance will benefit from Dunzo’s fleet in its omni-channel play. “Our entire focus this year will be on incubating and growing the quick-service delivery business,” says Biswas.   

Dunzo’s target this year, Biswas says, is to go to 20 more cities with quick commerce (they currently offer the service in Bengaluru, Chennai and Pune), instead of the 15 they had planned before the deal with Reliance. It will also hit 50 cities with the B2B model, where they can support Reliance’s omni-channel platform. The company is aiming to undertake over 60 million transactions a month from quick commerce alone and have more than 350 warehouses in the cities by the end of 2022.  

Biswas says that though the money raised is enough to achieve this target by December, Dunzo will go for another fund raise of $200-300 million in the next 3-6 months, which will help it grow faster and also make it into an unicorn. There are, however, no plans for launching an IPO before 2024.

Dunzo uses data analytics to study consumer buying patterns. Based on that, the stock-keeping units (SKU) of products which they keep in a warehouse are between 2,500 and 3,000 items. Says Biswas: “Our research shows that 80 per cent of the gross merchandising value comes from only 20 per cent of the SKUs, so that is what we focus on. But there has to be flexibility.” For instance, what consumers buy in the morning is often very different from what they buy in the evening.

The good news for Dunzo is that in areas where they have launched quick commerce, about 35 per cent of the customers are repeats, ordering at least twice a week. This shows that next-day delivery will soon be a thing of the past.

However, Dunzo will also offer an option for customers looking for products beyond its SKUs. In the next phase, it plans to list the local retail outlets for such products and fulfil last-mile delivery orders for them. And next year, it plans to replicate the quick commerce model in other countries