Automation, edge computing to bolster Zepto's tech stack: Kaivalya Vohra

Going into the new year, quick commerce unicorn Zepto is looking to double down on improving its technology stack. From automation to edge computing, the grocery delivery major is incorporating emerging tech into its business as it looks to scale up while improving its efficiency.

Founded in 2021 by Aadit Palicha and Kaivalya Vohra, Zepto burst onto the scene with its promise of 10-minute deliveries. The firm quickly scaled up as the quick commerce saw a Covid-19-induced surge in demand for grocery delivery, and is now on the road to turning profitable in about eight months.

“Since we started Zepto, there has been a big focus on building up technology on the supply and fulfilment side of the business. That is a major reason why our cost structures are as low as they are, and we plan to take that further,” Kaivalya Vohra, chief technology officer and co-founder, Zepto, told Business Standard.

“There are certain parts of the business that are yet undigitised, our fruits and vegetables side for instance, that we are looking to digitise,” he said.

This, Vohra said, will give the company a lot more visibility into the business, which they can then pass on to the customer. For instance, allowing customers better live tracking.

Zepto competes with other prominent grocery delivery players like Swiggy Instamart and Zomato-owned Blinkit.

Drawing inspiration from e-commerce behemoths like Amazon, Zepto is also planning to automate some of its large warehouses and fulfilment stores.

“In December, on a trip to the US, Amazon let us visit one of their two fully robotic warehouses. We have taken a lot of inspiration from those principles and tried to apply them to our business. However, this is not rocket science. We are not reinventing the wheel,” Vohra said.

In August this year, Zepto raised $200 million in a series E funding round at a $1.4 billion valuation to become a unicorn, ending an extended dry spell. The round was led by the StepStone Group, a Baltimore-based institutional asset manager, which is also a Limited Partner (LP) of existing investor Nexus Venture Partners.

The firm had previously raised $60 million in October 2021. In December that same year, Zepto raised another $100 million, before raising another $200 million in May 2022. Its penultimate funding round valued the company at $900 million.

Although the company has heavily invested in improving its supply chain efficiency, it is also now looking to double down on improvements on the customer side.

“On the customer side, an area where we have not invested too much in until recently, we are looking at further improvements in areas such as design, and UI/UX. We are also working a lot on improving recommendations, be it in terms of placement of recommendations within the app or improving how relevant they are,” Vohra said.

To improve efficiency in its back end, Vohra says that the company is incorporating edge computing into its tech stack. This involves running light-weight, low-ML models on the customer’s smartphone directly.

The customer usually has to make a request through their device to our back end, to which we send a response. Our ML model will run on their phone directly, which will be way faster and cheaper as it cuts down on computational demand,” he said.

The company is also bullish on its advertisements business.

“Ads are already a very large business at Zepto and we are prioritizing our advertising tech stack,” Vohra said.

Zepto’s revenue from operations increased 14-fold to Rs 2,024 crore in the financial year 2022-23 (FY23) compared to Rs 140.7 crore in the previous year. Meanwhile, the Mumbai-based startup’s losses widened three-fold to Rs 1,272 crore for the period, as against Rs 390.3 crore a year ago, according to filings with the Ministry of Corporate Affairs.

The firm’s total expenses for the year came in at Rs 3,350 crore, a six-fold increase from Rs 532.7 crore in FY22. In total, Zepto spent around Rs 1.7 to earn a single rupee during the year. This is down from roughly Rs 3.7 it spent last year for each rupee earned.

Zepto spent the most on the purchase of stock-in-trade, for which it shelled out Rs 1,894 crore for the year, compared to Rs 213.2 crore in FY22. Its employee benefit expenses were Rs 263.4 crore in FY23 versus Rs 50.3 crore a year prior.

Despite the widening losses, the company improved its Profit After Tax (PAT) margin from -277 per cent in FY22 to -63 per cent in FY23.

Zepto is also likely to achieve $1 billion in annualised sales in the next few quarters. It is currently doing between 300,000-400,000 orders a day, while its average order value (AOV) is between Rs 400-500 at the moment.