16 highlights
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It looks like Dunzo is increasingly shifting from an order-anything startup to a grocery business.
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What Dunzo is doing with Daily is presenting the user up front with a selection of groceries to buy from, much like what a Grofers or BigBasket would, with a promise to deliver within 35 minutes. To the customer, it looks like they’re buying straight from Dunzo rather than choosing a local store, while in the back end the order will be picked up from a Dunzo “micro fulfilment centre” in the vicinity.
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As part of the arrangement, BigBasket will let some of its facilities and the inventory there be used as fulfilment centres—or dark stores in e-commerce terms—for Dunzo Daily orders.
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Dunzo is targeting a valuation almost double what it got in the last round, according to a person aware of the talks.
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And despite reports of Dunzo being the next acquisition target of the Tata group, the company is not interested in selling, according to two people close to the developments.
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The sector has been hot for a while, but profitability and, to some extent, growth has eluded most companies. Company after company tried to scale with different experiments, pivots and levels of cash burn. And then came the pandemic.
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On one hand, the giants of Indian industry entered the fray—Reliance Jio via JioMart, Tata via an acquisition of BigBasket. On the other, most online commerce startups worth their salt decided to give it a go—from social commerce platform Meesho and fitness startup Curefit to food delivery companies Zomato and Swiggy.
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In the past 12 to 18 months, some of the biggest names in Indian online commerce, including Swiggy and Walmart-owned Flipkart, have launched their own Dunzo-like services, Swiggy Genie and Flipkart Quick, to compete.
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All this is what has made grocery in a way more important than Dunzo’s years-long positioning as a horizontal delivery app.
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Dunzo Daily is two things—a move to position the Dunzo brand as the go-to option for your everyday grocery needs, and a supply chain-driven operation.
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For a couple of years now, Dunzo has been using dark stores in some form or another. As have Grofers, BigBasket and Swiggy. It would be fair to say that a broad trend in online grocery in India has been that inventory-led models work better than hyperlocal marketplace approaches.
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Dunzo is angling for something similar, but with a twist, where the inventory and the dark stores are not necessarily owned or managed by it, at least for now.
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Under the new setup, BigBasket dark stores would provide Dunzo Daily inventory in some areas. The difference now is that the service is mainly under Dunzo’s brand rather than BigBasket’s as the merchant.
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Owning inventory allows a cushion for a grocery or hyperlocal delivery business, where the margins are usually slim, since you earn the entire proceeds of the sale. But with BigBasket in the picture, Dunzo only gets a commission, just as it would with local shops.
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It’s worth mentioning that holding inventory in grocery retail is complicated for most startups in India because of the limitations on foreign direct investment in the sector. Since most venture capital funds route their investments through overseas entities, the startups are effectively majority owned by foreign investors much of the time. The way to get around this is to have separate entities.
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For instance, BigBasket has one corporate entity, which runs the app and website, interacting with the consumer. Another entity would act as a wholesale or B2B seller, which would hold the company’s inventory and sell it to the B2C unit. (Now that Tata Digital, an Indian company, will own BigBasket, the company can actually merge the two and not have to worry about FDI norms.)