Cracking the direct-to-consumer (D2C) market in India is challenging, as many founders are bound to vouch. Experts indicate two major pitfalls in this space: Low gross margin and high customer acquisition cost. However, a recent PYMNTS report has delved deeper and said that the success of D2C brands hinges on customer trust. As soon as an order is placed, D2C shoppers expect the entire fulfilment process – from checkout to order processing, packaging, careful handling of goods and timely delivery – to run like clockwork.
Clearly, it takes more than a great product to win the race. With more than 60K live stores (just on Shopify) in India vying for attention, customers are spoilt for choice and the competition is intense. More often than not, D2C players are pitted against omnichannel legacy brands and deep-pocketed marketplaces that never fail to provide a smooth digital shopping experience, robust customer support, and most importantly, fast and flawless deliveries.
In fact, 96% of global customers think ‘fast delivery’ is equivalent to same-day delivery, a report by Invesp suggests. Similar delivery standards are now expected of homegrown D2C brands in post-Covid India, even though many of these businesses are resource-strapped in the wake of a global funding freeze.
The importance of swift deliveries became evident to Madhav Kasturia, the founder of the multi-brand cloud kitchen startup Beijing Street during the 2020 Covid-19 lockdown when he was immobilised due to an injury. “Despite being in Delhi, the ‘capital city’ and a metropolitan hub, most of my ecommerce orders took five to eight days to arrive, leaving me waiting desperately for urgent supplies,” he noted.
Of course, many would blame it on the supply chain breakdown and a long queue of online orders at the time. Nevertheless, quick-commerce apps like Zepto and Blinkit were already on the roll by that time, ensuring that groceries and essentials reached consumers as soon as possible. The only glitch, said Kasturia, was that most new-age D2C players could not list themselves on the 10-minute delivery platforms easily due to cost constraints and a lack of bargaining power, which ended up benefiting only a select few FMCG giants and category-leading brands.
That was why he came up with the concept of Zippee in the thick of the pandemic and introduced a full-stack fulfilment platform with the focus on logistics. It powers same-day delivery for D2C brands through its network of 150 dark stores and last-mile delivery fleet (more on its operations later).
It only takes a few clicks to integrate the platform’s tech stack with a brand’s existing online store for complete visibility into fulfilment and logistics operations. Zippee’s centralised dashboard allows brands to track all aspects of their operations, from order confirmations to live tracking of deliveries.
Better still, it offers plug-and-play integrations with major ecommerce website builders (Shopify, WooCommerce, Magento and more) and marketplaces (Amazon Self Ship and Seller Flex, Easyship, Flipkart-Myntra, AJIO) for a unified experience, enabling D2C brands to sync orders, catalogues and inventories with Zippee without any hassle.
Operating across 1K pin codes in 10 cities and 9 states, Zippee claims to have served more than 120 D2C brands.
Unlike larger courier players that offer instant signup to brands, Zippee prioritises a curated experience. It operates on a waitlist to optimise demand and ensure a seamless post-purchase experience for the brands’ customers. This also allows it to maximise sales and customer loyalty for brands and fulfil the promise of swift, same-day deliveries.
According to Kasturia, it helps brands improve conversion rates & RTOs (return to origin) by up-to 95% as delivery TAT (turn around time) reduces from three to ten days to three to 10 hours.
It also claims an average of 1.25 Lakh shipments every month and works with prominent brands such as Lenskart, Epigamia, Clinikally, Frido, Mondelez, Masterchow, Supertails and more. The platform charges a fixed cost per order based on weight slabs and is targeting INR 50 Cr in annual run rate (ARR) in the current financial year, eyeing nearly 3.5x year-over-year growth.
The startup has ambitious plans to extend its reach to 10 more cities in 2024, as Kasturia believes that same-day delivery will be pertinent to the growth of ecommerce brands, and this is achievable with a robust tech and supply chain infrastructure to support demand.
How Zippee Overcame 4 Key Hurdles To Crack Same-Day Delivery For D2C Brands
Initially, Zippee faced the typical challenges, just like other early-stage startups. Kasturia pinpointed these as demand, supply (read delivery), capital and competence, adding that these four crucial components could make or break any business. But it overcame the initial hiccups thanks to an experienced leadership team with experience in product, operations and growth at companies like Reliance Retail, Tracelink, Zomato and Retention Science.
Aiming to generate demand at scale, Zippee decided to tap into a persistent performance gap plaguing D2C brands, especially those selling non-perishable goods. Most companies witnessed conversion drop offs and non-delivery reports (NDR) pile up as well as RTO rates skyrocket due to long delivery periods or substantial delays. The platform’s upfront, transparent charges and short turnaround time attracted eager D2Cs keen to push their online sales without paying hefty marketplace fees and commissions. Zippee also leverages its partnerships with ecommerce enablers and investors to open up access to their portfolio brands.
The founder says the startup still relies heavily on word-of-mouth marketing to attract leads and minimise its marketing expenditure. “While our sales team helps create brand awareness, we firmly believe in word-of-mouth as it underscores one’s core competencies and operational excellence. Interestingly, a lot of D2C founders end up joining the waitlist, after being intrigued with our service with a competitor,” he added.
However, the supply part — having the required capacity to manage deliveries within committed timeframes — was more challenging. The startup gradually gained momentum, putting its own fleet in place and scaling its operations strategically.
“Many last-mile delivery companies have tried to offer customers same-day and next-day deliveries (SDD/NDD). But most skip the order processing time in their calculations, as they simply pick up pre-packed items from warehouses,” explained Kasturia.
In contrast, Zippee handles the entire order fulfilment process, gaining greater control over delivery span and customer experience.
The platform admits its pricing is higher than market but its customer brands understand that good things are bound to cost more.
“Our model will only scale if brands see a tangible return on investment (ROI) and this approach is working out well for both sides. More importantly, it always keeps us grounded and laser focussed to continue solving the most-pressing ecommerce pain points,” said Angad Singh, founding member at Zippee.
While the startup’s cash burn rate has dropped since its launch, revenue has grown exponentially. But that is just one way of controlling excessive capital outflow.
As Zippee scales up, cost optimisation will also occur from increasing order density within specific zones. Simply put, each rider will be able to deliver more orders per route when the order volume increases. This will not only reduce operational expenditures and boost earnings but also unlock competence at individual and company levels.
In June 2023, the startup announced raising $1.6 Mn from consumer giant Haldiram’s and a clutch of marquee angels such as Kunal Shah (CRED), Peyush Bansal (Lenskart), Ashneer Grover (Bharatpe), Prashant Pitti (easemytrip), Aakash Anand (Bella Vita Organics), Arjun Vaidya (V3 Ventures) and Raj Shamani (House of X) to scale up hiring, further build its tech infrastructure, and expand its physical footprint.
That the platform boasts many prominent D2C customers is another proof of its competent services and robust reliability.
According to Kasturia, a right mix of people and continuous improvement in its playbook helped it deliver. “We will reach an operational breakeven in newer markets in less than four months as we have constantly worked to strengthen our launch strategy by infusing more automation across the value chain.”
Inside Zippee’s Innovative Dark Stores, Advanced Tech Features
Dark stores are Zippee’s niche, to say the least.
It has turned the concept on its head and is using them as storage-cum-fulfilment centres exclusively for D2C brands. These are fully equipped with advanced systems, including cloud-based inventory management, packaging services, last-mile delivery and reverse logistics support. The secret sauce lies in integrating these units with D2C websites for operational sync and enabling brands to offer same-day delivery in major Indian cities backed by this network of dark stores.
“Think of a Zippee dark store as a mini warehouse, but strategically located in densely populated urban areas (rather than outskirts) to enable quick delivery to customers.,” explained Kasturia.
According to industry experts, setting up dark stores instead of full-fledged warehouses also ensures cost advantages. These smaller spaces, usually between 2K and 5K sq. ft., are mostly repurposed industrial units that have long been defunct. This results in lower rentals, which benefits emerging players like Zippee to navigate the competitive landscape and cope with the rising costs of warehousing.
The startup also offers a number of tech features to enhance customer experience and address ecommerce pain points. Its WhatsApp tool allows consumers to monitor their order statuses in real time helping brands improve WISMO (where-is-my-order) rates and reduce RTOs. Then there is a COD (cash on delivery) verification system that prompts customers to reconfirm their orders before dispatch, thus reducing logistics costs .
Can Zippee Conquer Cost & Competition Amid A Q-Commerce-Like Disruption?
Exactly a decade ago, McKinsey made a bold prediction about same-day delivery, foreseeing it as the next evolutionary step in parcel logistics. Now that it is happening, all stakeholders, from multichannel retailers to logistics players and digital-first customers, may witness a q-commerce-like transformation in mainstream logistics.
According to Inc42 data, the Indian ecommerce industry is expected to surpass $400 Bn by 2030, growing at a CAGR of 19%, reflecting a significant shift towards online shopping— driven by growing internet penetration & income levels.
But in spite of consumer readiness and the market picking up, this growing trend in D2C and the larger ecommerce delivery space will not be without its share of challenges.
Kasturia acknowledges the hurdles in managing same-day delivery and establishing dark store networks across India, citing these as significant entry barriers. Small and niche logistics players also face competition from incumbents like Delhivery and XpressBees which possess ample capabilities in advanced tech, warehousing and middle-to-last-mile deliveries.
The presence of Amazon and the re-entry of ecommerce giants like Flipkart in this space do not bring good tidings, either. In January 2024, the Walmart-owned ecommerce major said it would roll out same-day delivery services across multiple categories in 20 cities. Kasturia says he sees such announcements as validation of what he foresaw two years ago. This, he highlights, will act as a force multiplier for brands to level up on their own delivery experience, further expanding the market.
Zippee and its ilk are at a crossroads, and investors are taking note of this new trend. The $3 Mn funding secured by Blitz in July 2023 (it has a similar model) is a testament to investor confidence and signals an exciting future for these logistics disruptors.
Zippee has a strategic vision and aims to carve a niche in the D2C ecosystem by offering an all-in-one solution for logistics and other components of order fulfilment.. Such an approach is bound to be attractive for D2C brands that can redefine customer experience and embody the true spirit of direct-to-consumer sales. And online shoppers are going to love it.
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