The biggest loss that Kabeer Biswas, 35, had been facing since co-founding delivery and e-commerce company Dunzo in 2015, was not being able to follow his passion for reading. But since the outbreak of the pandemic 12 months ago, Biswas has been able to read a lot of books. These include: “No Rules Rules: Netflix and the Culture of Reinvention”, “The Hard Thing About Hard Things”, and “Misbehaving: The Making of Behavioral Economics”, which was recommended to him by an executive at Google, which is an investor in Dunzo.
The goal behind Biswas reading such books is self-improvement and understanding consumer behaviour. Since last year, Biswas has also witnessed a shift in consumer behaviour and a robust level of growth in Dunzo’s business, as the coronavirus pandemic accelerated the adoption of e-commerce in 2020. An increasing number of consumers are shopping online with greater frequency.
Under Biswas’ leadership, Dunzo has turned the covid crisis into an opportunity. The Bengaluru-based firm doubled its active userbase from 2.7 million to 5.1 million from 2019 to 2020. With a gross merchandise value (GMV) growth of 2X over the past year, Dunzo is now an about $100 million annualized GMV business. The growth in 2020 comes on the back of strong, organic user demand while maintaining gross margin profitability for the overall business. It reduced EBITDA (earnings before interest, taxes, depreciation, and amortization) loss by 68 per cent year-on-year.
“Covid has been the largest tailwind event for the overall business,” said Kabeer Biswas, chief executive of Dunzo. “What (business) we would have thought would take 24 months to execute on actually got done in 6 months.”
For the first time, according to Biswas, local merchants realised that there was so much traffic that they can get from a platform such as Dunzo and revamped their operations to cater to the demand. One of the most powerful changes that took place and which helped Dunzo is that merchants understood the importance of e-commerce and digitised their store inventory as well as kept the pricing information live on the platform. Consumers are now able to shop a significantly larger set of products on the platform from particular stores rather than a smaller set of SKU’s (stock-keeping unit) that were published before the pandemic.
Customers would earlier use Dunzo for convenience but that changed as a platform for “lifeline products” that includes daily and weekly essentials being delivered by the firm. It is also delivering medicine which is becoming a major category for the platform.
“We did a lot of work over the last six months to understand consumer behaviour and usage,” said Biswas.
In the last several months, Dunzo supported over 300 neighbourhoods across 8 cities, delivering essential goods to users within 29 minutes on average. It is focusing on sustainable growth across its fastest-growing cities such as Mumbai, Chennai, and Pune. Its biggest city Bengaluru has become profitable.
“The financial aspect of this business has completely changed over the last 12 months,” said Biswas.
Indeed, Dunzo saw its revenue from operations grow 35X to Rs 27.5 crore during FY20 from making less than Rs 77 lakh in FY19, according to Entrackr, a new age media platform. But like other e-commerce ventures, so was the loss — more than two times that of the previous year, at Rs 338.4 crore.
But India’s e-commerce market is expected to grow dramatically as a result of the pandemic. The market is forecast to increase by 84 per cent by 2024 to $111 billion, according to a new report by financial technology firm FIS.
Dunzo’s product and operational model is also changing. It would be working with stores in every neighbourhood and provide them insights about the products that they should be keeping in the store and pricing competitiveness exists for those items. This would help the firm grow much faster. Biswas said because of the shift to e-commerce in 2020, Dunzo is a lot more confident to tap “middle of the belly” consumers, who are looking for value products rather than convenience.
“Indian cities themselves have so many customers,” said Biswas. “Not everyone in Bengaluru is rich. The urban middle class and poor is a significantly large chunk of our cities, close to 80 per cent of them. We were catering to about 25 per cent of them, but now we would start providing service to about 75 per cent of them in cities where we are present.”
To support sustainable growth, one of the major inflection points for Dunzo took place this year in January when it attracted a fresh round of $40 million in capital from new and existing investors. Investors including Google, Lightbox, Evolvence, Hana Financial Investment, LGT Lightstone Aspada, and Alteria participated in this Series E Round. The funding would help it compete with players such as Swiggy, Zomato, Amazon and Flipkart.
Google is closely working with Dunzo for various product areas including making user transactions a lot easier, according to industry sources. People in the know said that Google would be working with Dunzo in large spaces such as ‘search and payments’ and convert the traffic into actual fulfilment, like doing local transactions. For instance, the ability to search and pay the store and also explore the products there.
The company is also in talks with new and existing investors to raise another funding round of about $50 million to bolster its expansion plans, according to the sources. A business like Dunzo requires cities that are very dense. The firm is planning to roll out its services to about 25 such cities in India from about 8 in the next 18-24 months and has a goal to become profitable in those locations. Dunzo is also looking to go global and tap dense locations such as Singapore, Dhaka and New York and enable 15-minute delivery.
“I think the future of everything in this business is about how can we enable cities to be 10-minute cities,” said Biswas.
Indeed, the pandemic crisis has led to the need for a re-think of the cities and re-emergence of the concept of the “15-minute city,” which was initially proposed by Carlos Moreno of the Sorbonne University in Paris. Here spaces are used nonstop and life is close to hand like. For instance, spaces will adjust to new conditions like an office during the day and a youth club in the evening. Everything can be done in 15 minutes including much faster deliveries.
The success of such concepts would require a lot of technologies including the use of drones. There are regulatory hurdles for flying drones in the country. However, it is expected that trial runs of drone deliveries for ‘beyond visual line of sight’ (BVLOS) will be soon be taken up after being given approval by the government. This would enable unmanned aerial flights like drones to cover longer distances. Last year Director General of Civil Aviation (DGCA) had given a nod to food startups including Dunzo, Zomato and Swiggy to start testing beyond BVLOS drones for deliveries.
“I don’t see how we can live in a world, where we don’t have drones,” said Biswas. “It is something that is bound to happen.”
Biswas, who has an engineering degree from the University of Mumbai and an MBA from Narsee Monjee Institute of Management Studies, co-founded Dunzo with Ankur Aggarwal, Dalvir Suri, and Mukund Jha in 2015. The company, which started over a small WhatsApp group to fulfil random tasks like laundry pick-ups and drops for a small fee, has evolved into a full-fledged local-commerce firm where it sees tapping the offline businesses as a massive opportunity.
Presently, Biswas is overwhelmed by the key role Dunzo has been playing during the peak of the pandemic. One evening, while accepting a Dunzo delivery at his suburban home, when Biswas asked the delivery partner about ‘how his day had been?’ the partner told him that was after delivering grocery for a family, people in the building came out on the balcony and saluted him.
“It was a jaw-dropping moment for me,” said Biswas. When asked, how soon is Dunzo expected to become a unicorn or a start-up valued at more than $1 billion, Biswas was quick to say that he doesn’t care at all for such metrics. “We don’t do this for valuation, we do this for our customers,” he said.