Reliance-backed Dunzo is shifting gears as the rush of quick commerce subsides
- ByStartupStory | August 18, 2022
After a rambunctious first half of the year in which it ramped operations of its 15-20 minute grocery delivery service Dunzo Daily, Reliance Retail-backed instant commerce platform Dunzo is shifting gears on its growth momentum. In Jan, it closed a $240 million funding round headed by Mukesh Ambani’s Reliance Retail, which acquired a stake in the startup worth more than 25%.
Following that round, the company accelerated its expansion plans in the face of fierce competition from rivals such as Swiggy’s Instamart, Zepto, and a new entrant, BigBasket’s BB Now. Based on an internal presentation as well as people briefed on the matter, it had a monthly burn of more than Rs 100 crore, or about $15 million, during the June quarter and in July.
However, the hypergrowth era has passed, and the Bengaluru-based firm has informed a select group of individuals that it must concentrate more on its expenses as late-stage funding slows. According to people familiar with the situation, it is currently in the midst of funding talks and has hired an investment bank, Morgan Stanley. The specifics of the potential funding round have yet to be determined. According to sources, the company is now aspiring for a slower month-to-month growth rate for the rest of the year. It is also postponing plans to expand from seven to fifteen or sixteen cities. During an internal town hall, one of the presentation slides had the header ‘let’s focus on unit economics.’
According to the presentation last month, Dunzo Daily received approximately 5.5 million orders in June and forecasted a minor increase to 5.7 million by December. These estimates change as sources report that Dunzo Daily order volumes were higher in August due to rain-induced demand in key cities such as Bengaluru. Overall, it hopes to reach 11 million monthly orders by December, including verticals such as its marketplace & pick-up-and-drop service. Dunzo’s shift comes at a time when almost all ‘ultra-fast’ delivery platforms, including Zepto and Instamart, have stopped promoting 10-minute delivery.
Internally, it has also fixed a city-based profitability target this year in Bengaluru and Pune, according to people familiar with the matter. “The plan to expand to 15-16 cities is also scrapped due to significant volumes from the existing seven cities.” “That’s where they want to go deeper in existing markets & turn a profit in Bengaluru and Pune,” one of the above-mentioned individuals added.
Dunzo’s competitors have also slowed their investment and expansion, albeit on a smaller scale. Swiggy’s Instamart is currently the clear market leader when it comes to daily order volumes across most cities, with Dunzo, Zepto, and Blinkit dominating in specific cities. According to sources, Blinkit, like its new parent company Zomato, remains strong in the Delhi NCR market.
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