Fast Commerce: Dunzo Looks at the Evolution of the Retail Shopping Experience
A new black store in a day and a half. This equates to 18 new dark stores over the next 30 days. It is at this speed that Dunzo seeks to establish itself in new cities. The objective: to set up in 15 new cities by the end of the year. Currently, it operates 120 dark stores across the eight cities. This broad base of partners would be the backbone of its multi-city rollout plan. That aside, over the next two to three years, the platform will expand into pockets of top metropolitan and Tier I cities that remain under-penetrated or unaddressed at the moment. Kabeer Biswas, CEO and co-founder of Dunzo, believes it is cities that will experience the next stage in the evolution of the retail shopping experience in the form of quick commerce or q-commerce.
Dunzo Daily, its instant delivery service arm launched in September 2021, fits perfectly into this plan.
“We grew the Dunzo Daily category by 40-50% mom, with new cities seeing 70-80% mom growth. Along with growth, managing the operational efficiency and order fulfillment of our dark stores is a priority area for us,” adds Biswas. Dunzo Daily contributes 60% of Dunzo’s overall business and this share is expected to increase to 80% by the end of this calendar year. “While other verticals continue to be an integral part of the business, their share is expected to reach 20-25% of overall business by the end of this calendar year as we focus on growing our business. the Dunzo Daily category,” he said. The company also offers a white label logistics service to merchants.
India’s q-commerce sector is expected to grow into a $5 billion (Rs 38,500 crore) market by 2025, according to RedSeer. In terms of execution rates, in the first quarter of CY22, industry rigs made around $1.5 billion (Rs 11,550 crore) annualized, says Rohan Agarwal, Partner, Redseer Strategy Consultants. The biggest challenge for players now is to increase the order value per customer in addition to convincing those still sitting on the fence to take the plunge.
More than a quarter of Dunzo’s customers come from the satellite cities of Delhi NCR and Hyderabad. While he sees an addressable market of around five crore consumers in the q-commerce category, Biswas says there is a huge market for on-demand delivery of non-consumable products – products such as medicines , fresh flowers, etc. “We want to get into on-demand grocery delivery and then gradually expand to fulfill other adjacent categories,” he adds. Adjacent categories are convenience-oriented and require quick rotation. Alcohol, over-the-counter drugs, quick bites are typical products in this category, and they require very different storage, packaging, and operating facilities. Biswas adds that their potential largely depends on their ease of access. He says the demand will come when we are able to expand the selection to a large assortment of 3,000 to 4,000 SKUs.
Improve the customer experience
Kearney partner Rajat Tuli adds that the capabilities needed to serve these adjacent categories include accurate customer and data analytics, mechanization of dark stores to enable fast pick-up and delivery, lower fulfillment costs and l improving the customer experience. In other words, how quickly Dunzo will be able to crack this segment will depend on how quickly it can deploy technology to make faster and better decisions and to eliminate operational bottlenecks.
That said, the key to running efficient dark stores – mini-warehouses – is to first reduce the number of tasks and processes that need to be done in these warehouses. To enable sustainable operations, it is essential that mini-warehouses are located near areas where demand densities are highest.
Besides increasing warehousing facilities and delivery partners who can meet multiple needs, says Rutu Mody Kamdar, founder of Jigsaw Brand Consultants, what will really help is a steady shift in consumer behavior. This can be done by giving them a good reason to choose their app over the local kirana/medical stores through highly targeted communication.