To say Dunzo is spoiled for suitors would be an understatement. In the last few months, the hyperlocal delivery startup has turned down interest from two leaders in their respective fields. Talks with Tata-owned BigBasket, the country’s leading e-grocery platform, collapsed after the two parties were unable to come to an agreement on valuation. Similarly, Swiggy—one half of India’s foodtech duopoly—also saw its offer declined.

With both approaches now decidedly in Dunzo’s rearview mirror, the Bengaluru-based startup is reportedly in fresh talks. Once again, with a veritable giant—Reliance Industries, India’s largest conglomerate.

Just two years ago, this level of interest in Dunzo would have been hard to fathom. In December 2019, even as murmurs of a deadly new virus in China were just surfacing, Dunzo found itself in retreat. It stopped servicing many areas in Bengaluru, Mumbai, Gurugram, and Noida.

Indeed, even today—seven years since Dunzo first sprang to life—it is present in just eight cities. In contrast, the hyperlocal grocery offerings of both Swiggy and Grofers are present in ~11 and 13 cities, respectively.

Dunzo’s slow and steady approach didn’t immunise it from losses either—it’s deep in the red. The company reported a loss of Rs 225.7 crore ($30.37 million) in the year ended March 2021, against revenues of Rs 45.8 crore ($6.16 million). It is burning ~Rs 17.5 crore ($2.35 million) a month, with expenses outstripping revenue by 7-10X. This, even as the pandemic saw weekly order frequency spike 33% and average order values (AOV) double as people relied on Dunzo’s services to avoid leaving their homes. As Covid continues to subside, its business is only expected to slow down further.

Seen in this context, the flurry of interest in Dunzo seems counterintuitive. Neither has it managed to gorge on growth—the opiate of the startup world—nor is it close to profitability. The appeal of Dunzo has less to do with its past, and more to do with the lessons it has learnt, and how that has shaped its ambition moving forward.

“We’ve built our brand as a logistics company,” Kabeer Biswas, the company’s chief executive (CEO) and founder, tells The Ken. However, he continues, in the last two years, Dunzo realised that shopping is more valuable than shipping. “And within that, it’s crucial to go category by category.”

The pandemic provided an opportunity to put this learning to use. The company pivoted from concierge services and towards food and grocery, which today constitute 85% of the overall business. The transition also paved the way for Dunzo’s own inventory-led quick delivery business, Dunzo Daily, which is currently limited to just Bengaluru. Armed with a 19-minute delivery promise, the service is growing 2X quarter-over-quarter, with Biswas claiming that Dunzo controls 60% of the daily and weekly hyperlocal delivery market in Bengaluru. This has helped Dunzo’s gross merchandise value (GMV) grow 1.6X to Rs 590 crore ($79.38 million) in the year ended March 2021.

AUTHOR

Aayush Agarwal

Aayush covers businesses that are primarily Internet for The Ken. In his previous stint at Goldman Sachs, he spent slightly more than a year analysing investment opportunities in the China Internet space. A science graduate, he completed his postgraduate from the Indian Institute of Management, Kozhikode. Write to him if, among other things, you wish to talk about e-businesses, journalism or just offbeat career choices.

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