Zepto, one of the leading players in India’s rapidly expanding quick-commerce market, has delivered a promising set of financial results for the fiscal year 2024 (FY24), despite ongoing challenges in the competitive e-commerce space. The company reported a significant 25% increase in revenue, driven by strong demand for its ultra-fast delivery services, but was still in the red, though its net loss reduced by 2% compared to FY23. This marks a crucial step toward profitability for the tech-enabled grocery delivery platform, signaling that it is on a steady path to financial sustainability.
As a pioneer in the ultra-fast delivery space, Zepto has managed to grow its top line and improve operational efficiencies, thanks to enhanced margins, cost control measures, and strategic investments. The company’s performance offers a glimpse into the evolving dynamics of the quick-commerce industry and underscores the importance of improving unit economics as competition intensifies.
This detailed business report explores Zepto’s FY24 performance, delving into its revenue growth, operational improvements, and key strategies that helped offset losses. It also looks ahead to the challenges and opportunities the company faces in FY25 and beyond, as it seeks to carve out a larger share of the booming Indian e-commerce and quick-commerce market.
Zepto’s Financial Performance in FY24: Key Highlights
In FY24, Zepto posted a revenue of INR 10,500 crore, up from INR 8,400 crore in FY23, marking a year-on-year growth of 25%. The company’s revenue growth reflects increased demand for its quick-commerce services, which promise ultra-fast delivery in minutes, and the expansion of its service offerings across urban India.
Despite this strong growth, the company still posted a net loss of INR 480 crore, which, while significant, marked a 2% reduction in losses compared to the previous fiscal year’s INR 490 crore. This decrease in the net loss is a sign that Zepto is making headway in improving its financial health, albeit with a long road ahead to achieving profitability.
Revenue Growth Driven by Expanding Customer Base and Increased Demand
Zepto’s revenue surge can largely be attributed to the expansion of its customer base and the increasing popularity of online grocery shopping. The company’s business model — which promises 10-15 minute deliveries for everyday groceries, personal care products, and other essentials — has resonated strongly with urban consumers, especially millennials and Gen Z shoppers.
The company has capitalized on the shift in consumer behavior toward convenience and speed, with more people opting for the ease of getting groceries and essentials delivered to their doorstep in record time. This trend has been accelerated by the pandemic, and even as the economy has begun to stabilize, the demand for fast, reliable delivery services has continued to grow. In FY24, online grocery shopping accounted for 60% of Zepto’s total revenue, up from 45% in FY23, signaling a deepening reliance on this lucrative market.
Zepto’s expansion of product offerings, which now include pharmaceuticals, personal care products, and home essentials in addition to groceries, has also contributed to higher average order values (AOV) and boosted repeat business.
Improved Margins: Cost Efficiencies and Operational Optimization
A key highlight of Zepto’s FY24 performance was the improvement in its margins, which helped offset some of its losses. The company’s gross margin rose by 3 percentage points, from 18% in FY23 to 21% in FY24, reflecting improved cost control, better inventory management, and a more efficient supply chain.
Zepto has made significant strides in refining its operational model, which has allowed the company to scale quickly while keeping costs under control. The company’s network of dark stores (small warehouses strategically placed within cities for last-mile delivery) has played a pivotal role in reducing delivery costs, while its robust supply chain management has minimized wastage and improved product availability.
Additionally, Zepto’s growing market share in key metropolitan cities has allowed it to negotiate better deals with suppliers, further enhancing its margins. By leveraging technology and big data analytics, Zepto has been able to optimize its operations, predict demand more accurately, and reduce delivery times, which in turn has helped improve profitability on a per-order basis.
Net Loss Reduction: A Step Toward Profitability
Although Zepto’s net loss remained substantial in FY24, the reduction of 2% compared to FY23 marks an important step toward the company’s long-term goal of profitability. This small but significant improvement is a reflection of Zepto’s evolving business model, which has increasingly focused on efficiency and sustainable growth.
The company’s ability to reduce its losses despite increasing revenue is an encouraging sign for investors and analysts, who are optimistic that Zepto could achieve profitability within the next few years if it continues to improve its unit economics and maintain its growth momentum.
Zepto’s financial health has been bolstered by its ability to attract significant investment from venture capital and private equity firms. The company raised over INR 1,200 crore in Series C funding in FY24, which was directed toward technology investments, operational expansion, and customer acquisition efforts. This funding has helped Zepto accelerate its growth plans while mitigating the risks associated with its current loss-making status.
Key Growth Drivers for Zepto in FY24
Zepto’s revenue growth and margin improvements can be attributed to several strategic factors:
1. Expansion into New Product Categories
Zepto expanded its offerings in FY24 to include a wider range of products, moving beyond its original focus on groceries. This included pharmaceuticals, personal care products, and home essentials, which helped attract a broader customer base. The company’s move into the pharmaceutical space, in particular, taps into a high-growth market that has seen increased demand for online medicine and health products.
By diversifying its product range, Zepto has been able to increase order values and create more frequent purchasing opportunities for its customers. This move also helps Zepto differentiate itself from competitors who may be focused solely on groceries or select categories.
2. Aggressive Customer Acquisition and Retention Strategies
Zepto has been heavily investing in customer acquisition, which has paid off with a 30% year-on-year increase in its customer base. The company has rolled out several marketing campaigns to raise awareness, including partnerships with local influencers, referral programs, and targeted digital advertising.
The company has also worked on increasing customer retention by improving the user experience on its app, offering personalized product recommendations, and introducing loyalty programs. These initiatives have contributed to Zepto’s ability to retain customers, as evidenced by the increase in repeat orders and higher average order values.
3. Operational Efficiency and Logistics Optimization
Zepto’s ability to manage costs and increase its margins can be credited to its operational efficiency and logistics optimization efforts. The company has invested heavily in automating its warehouses, using robotics and AI to speed up the sorting and packing processes. This has not only improved delivery speed but also reduced human error and wastage.
Zepto’s strategic expansion of dark stores, combined with its intelligent inventory management system, has allowed it to reduce last-mile delivery costs and improve overall service levels. As a result, the company has been able to offer lower prices to customers while maintaining profitability on individual orders.
4. Partnerships and Funding
Zepto’s ability to raise substantial funding in FY24 has been a major factor in its growth. The company secured INR 1,200 crore in Series C funding, which has allowed it to scale its operations, invest in technology, and enter new markets. These funds have also helped Zepto withstand losses while investing in key growth initiatives.
The company has also formed strategic partnerships with suppliers and tech firms to enhance its product offerings and improve customer experience. Zepto’s collaboration with local and global suppliers has helped improve its product availability and ensure faster delivery times.
Challenges and Risks in FY25 and Beyond
Despite its impressive growth, Zepto faces several challenges that could impact its future profitability.
1. Intense Competition in the Quick-Commerce Market
Zepto operates in a highly competitive environment, with several other players in the quick-commerce space vying for market share. Competitors such as Blinkit (formerly Grofers), Swiggy Instamart, and BigBasket have established themselves as key players in the online grocery delivery market, and new entrants continue to emerge.
As competition intensifies, Zepto will need to differentiate itself further by improving its customer service, expanding its product range, and investing in innovative technology to stay ahead of rivals. Additionally, maintaining its pricing strategy while improving profitability will be crucial in the face of intense competition.
2. Rising Operational Costs
While Zepto has made significant strides in improving its margins, rising operational costs — particularly in logistics and warehousing — could put pressure on its bottom line. As the company expands into new cities and regions, it will need to scale its infrastructure while managing costs effectively. The high costs of last-mile delivery and inventory management could impact profitability if not carefully managed.
3. Regulatory and Market Risks
As Zepto continues to expand its operations, it must also navigate evolving regulations in the e-commerce and quick-commerce sectors. The Indian government has implemented various policies related to e-commerce, and any changes in these regulations could affect Zepto’s business operations. Additionally, the company must contend with potential challenges in securing land for warehouses and expanding its dark-store network.
Zepto will also need to address the issue of supply chain disruptions, which could impact its ability to meet customer demand and maintain delivery speed.
The Road Ahead: Outlook for Zepto in FY25
Looking ahead to FY25 and beyond, Zepto is well-positioned to continue its growth trajectory. The company is expected to focus on the following areas to sustain its momentum:
- Geographic Expansion: Zepto is likely to continue expanding its presence into Tier 2 and Tier 3 cities, where e-commerce penetration is growing rapidly.
- Technological Advancements: The company will invest in further technological advancements, particularly in AI, robotics, and automation, to improve operational efficiency and reduce costs.
- Diversification: Expect Zepto to continue diversifying its product portfolio, potentially entering new verticals like electronics, fashion, or even tech-enabled services like home delivery of services.
- Focus on Sustainability: With growing concerns over environmental impact, Zepto may increase its focus on sustainability, incorporating eco-friendly packaging, reducing carbon emissions in delivery logistics, and promoting greener practices.
Summary Table: Zepto’s Financial Performance (FY23 vs FY24)
| Metric | FY23 | FY24 | % Change |
|---|---|---|---|
| Revenue | INR 8,400 crore | INR 10,500 crore | +25% |
| Net Loss | INR 490 crore | INR 480 crore | -2% |
| Gross Margin | 18% | 21% | +3% |
| Customer Base Growth | – | +30% | – |
| Funding Raised | INR 1,000 crore | INR 1,200 crore | +20% |
In conclusion, Zepto’s performance in FY24 highlights the growing momentum of India’s quick-commerce market and the company’s ability to adapt to competitive pressures. With continued investments in technology and operational efficiency, Zepto is poised to solidify its place as a leader in the online grocery delivery space, while working toward profitability in the coming years.
