Podcast Highlights: 20VC - Quick Commerce in Emerging Markets

1 June 2022

Lots of good data in this podcast featuring the founders of JOKR, Airlift and Zepto.

Usman Gul is the Founder & CEO @ Airlift ( raised over $100M in funding from First Round, Josh Buckley, Sam Altman, and 20VC).
Ralf Wenzel is the Founder & CEO @ JOKR, with dual operations in both the US and LATAM. (JOKR has raised over $288M from Softbank, Balderton, GGV, and Kaszek to name a few).
Aadit Palicha is the Founder & CEO @ Zepto (have raised over $360M with Zepto from YC, Lachy Groom, Breyer Capital, and Rocket Internet).

What I found interesting.

Zepto says it is making 4% of rev as ad revenue and sees this growing to $25m by end of this calendar year!(I think i heard this right but seems well impressive / incredible!)
Over 40% of Zepto rev from Fruits & Vegetables / Fresh.
Post the 3rd order the probability that the user is likely to be retained is 95%, post 5th order to 11th it is 97%. At this point delivery fees don’t matter as much. So they add the fees post the 5th order. Frequency drops off a bit but as AOV is rising, the GMV doesnt get impacted. AOV is growing 5-7% mom. AOV is 40-45% higher by month 6-8 in the customer’s journey (natural growth he says as customers get familiar w the app).

Aadit: Raj Subramaniam, Fedex told him: “in QCommerce, density is destiny.”
Aadit: Average dark store in zepto is operating at a north of 1k orders a day. Rent is 0.7-0.8% of rev(?) and operating cost is 7-8% of rev? (These two numbers weren’t entirely audible to me)
Ralf: need larger distribution centres in addition to the dark stores as the frequency of replenishment of supply is higher than normal
Aadit: fresh fruits and vegetables buy-sell margins of 40-50%, 12hr farm to fork (source fm farmers), overall >40% of revenue fm f&v, meat, bakery, 350bips lower wastage than offline peers.
Usman: f&v is anchor category; 3 factors - buy fm local producers (huge cost savings); having the right distribution centre structure to reduce procurement and supply costs - one metric they track is quantity per shipment of delivery (for procurement savings), and lastly, inventory turnover.
Picking costs (public is 4-8%) - Ralf: biggest levers of margins - procurement strategy (how much local / share of fresh etc). Picking cost is 2-3% of rev - says can bring this down through semi automation. Combined delivery and picking cost is 12-15% of rev (wants to bring it down to 10%). Scale / density is a big factor in getting these down. Order stacking (fulfilling multiple orders in one trip), increasing penetration / increasing scale, warehouse automation are key drivers of bringing these costs down.