 "Zepto")
Quick commerce firm Zepto on Thursday announced the launch of a subscription programme that gives customers unlimited free delivery and up to 20 per cent discounts on groceries.
Zepto Pass has an introductory price of Rs 19 to Rs 39 monthly for a majority of customers, said the Mumbai-based firm. Zepto customers spent more than 30 per cent more on the app after opting for the loyalty programme during a one-month pilot. Their monthly retention improved by 10 per cent.
The programme has got “rapid adoption” with almost a majority of orders coming from Zepto Pass subscribers within two weeks during the pilot.
“We have seen a huge frequency benefit as a result of the programme. Zepto Pass subscribers are buying more categories. In terms of adoption, we expect to cross one million Zepto Pass users within the first month,” Aadit Palicha, co-founder and chief executive officer of Zepto told Business Standard.
The programme analyses customers’ purchases and average spending to offer personalised incentives. “Let’s say a customer has an average order value of Rs 500. If they cross that threshold, they would be offered additional discounts on the order,” said Palicha.
Zepto is the second quick commerce firm to offer subscription benefits, after Swiggy Instamart. Bengaluru-based Zepto subscription benefits, however, also extend to its food delivery business.
Zomato-owned Blinkit does offer free deliveries on orders above Rs 99, but the programme does not have a subscription plan.
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Regardless, the introduction of membership programs has proven to be a meaningful avenue for quick commerce and food delivery platforms to fast-track growth.
According to a report by IIFL Securities, Swiggy clawed back a marginal market share against Zomato in the first half (H1) of calendar year 2023 (CY23).
Analysts said this was due to the aggressive pricing of Swiggy’s membership programme, which was available at a discounted launch price of Rs 99 for three months.
Zepto’s strategy of offering its membership program for an introductory price of Rs 19 for might, therefore, prove fruitful in gaining market share over its peers. Instamart’s contribution losses during H1 CY23 fell by as much as 75 per cent, as it focused on gaining scale and improving profitability, according to filings from Prosus, Swiggy’s largest investor.
This comes at a time when quick commerce companies are inching their way towards profitability.
“Even after offering compelling value to customers with Zepto Pass, we continue to be on track to be near PAT positive in two quarters. This is because our profitability improvement is coming primarily from cost reduction through supply chain excellence, which gives us the ability to pass value back to customers sustainably,” Palicha 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.
“We are also working on expanding our assortment,” said Palicha, as the company is looking to bring a wider variety of products onto its platform.
In August last 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.
