Zepto Business Model Case Study: How Zepto Makes Profit

TL;DR: Zepto, founded in 2020 by Stanford dropouts Aadit Palicha and Kaivalya Vohra, pioneered 10-minute grocery delivery in India. Its network of urban micro-warehouses (dark stores) spans ~900 locations in 70+ cities, stocking ~45,000 SKUs each. In FY25 Zepto's revenue jumped ~150% to ₹11,110 Cr,^[1] but net losses widened to ₹3,367 Cr amid heavy expansion.

Zepto makes money via product sales (15-20% take rate), delivery fees, Zepto Pass subscriptions (₹99/month), in-app advertising and private-label margins, plus its Zepto Cafe arm ($110M run-rate). Backed by a $7 B valuation and ~$900M cash, Zepto plans an ₹11,000 Cr IPO (July-Sept 2026). Major challenges include intense competition (Blinkit holds ~44-46% share), high cash burn and regulatory scrutiny, making the path to profitability uncertain.

What is Zepto? How Does its Business work?

Zepto is an Indian quick commerce startup that promises ultra-fast grocery deliveries. It was founded in late 2020 by Stanford graduates Aadit Palicha and Kaivalya Vohra. They are one of the youngest entrepreneurs in India. After realizing the limitations of an asset-light model, the founders pivoted to building their own micro-warehouses and delivery fleet to ensure speed. Today, Zepto operates hundreds of small, high-tech urban fulfilment centers -- known as dark stores -- to serve its 10-minute delivery guarantee. As of late 2025, Zepto has expanded to roughly 900 dark stores in 70+ cities across India, each stocked with about 45,000-50,000 SKUs (popular grocery, FMCG and pantry items).

These local warehouses are typically placed in densely populated neighborhoods to minimize delivery distance. The company reports handling around 1.7 million orders per day, making it one of the largest quick-commerce players in India.

Financially, Zepto has raised on the order of $1.8-2.0 billion to date (over 18 funding rounds) from investors including Sequoia, Peak XV, and Tiger Global. Its latest round in late 2025 raised $450M at a $7 billion valuation. Zepto's rapid growth has turned it into a tech unicorn, and it is preparing for a public offering (see the IPO section below).

In short, Zepto's core proposition -- grocery in 10 minutes -- positions it at the heart of India's quickly evolving retail landscape. Its success is part of the broader quick commerce revolution, which has transformed consumer expectations of speed and convenience.

Key Milestones:

• 2020: Founded as KiranaKart (grocery aggregator) by Aadit Palicha & Kaivalya Vohra.
• 2021: Pivoted to Zepto brand and launched 10-minute delivery from first dark stores (Y Combinator batch).
• 2023: Achieved ~₹3,000-4,000 Cr annual revenue (100%+ YoY growth) and reached a $5 B valuation in funding.
• Oct 2025: Raised $450M at a $7 B valuation (Board approved ₹11,000 Cr IPO).
• 2026 (H2): Preparing IPO on Indian exchanges, targeting ₹11,000 Cr raise.

Zepto's aggressive expansion and funding have placed it among India's top unicorns. In fact, GrowthJockey's "Top 20 Successful Startups in India" highlights Zepto as one of the most successful newcomers disrupting grocery retail. With this context, let's examine how Zepto delivers 10-minute service and the business mechanisms behind it.

How Does Zepto's 10-Minute Delivery Work? (Dark Stores & Tech)

Zepto's 10-minute promise is made possible by its dark store model. A dark store is a small, customer-free fulfillment center dedicated exclusively to online orders. These stores look like mini-retail outlets from the outside but are stocked and staffed for rapid order processing. Zepto locates dark stores in tight urban zones -- often inside residential or commercial complexes -- so that rider fleets can reach any delivery address within minutes.

What is a Dark Store? A dark store is a retail location optimized for online order fulfillment. Unlike a typical grocery store, it is not open to the public. Instead, it holds inventory that is exclusively sold through app orders, with staff picking and packing orders for fast local delivery.

Key features of Zepto's dark store operations include:

• Strategic Placement: Centers in high-density neighborhoods to cut travel time to customers. Each store might cover a 2-3 km radius at most.
• Compact, Efficient Layout: Stores average a few thousand square feet -- just enough to hold about 45,000-50,000 SKUs. This catalog includes groceries, personal care, household essentials and some perishables. Zepto continuously updates stock based on demand data.
• Rapid Order Picking: As soon as an order is placed, the nearest dark store is notified. Store staff quickly pick items and pack the order (often using barcode/RFID systems for speed). Each second matters in the 10-minute window.
• Real-Time Inventory Sync: The app inventory is linked in real time to store stock. When an item sells out in a dark store, it immediately disappears from availability to prevent out-of-stock issues.

On the technology side, Zepto leverages advanced software and algorithms at every step:

• AI Demand Forecasting: Zepto uses machine learning models to predict what products will be needed and where. By analyzing historical order patterns and external factors (day of week, holidays, weather, etc.), it continuously adjusts inventory allocations. This ensures popular items are well-stocked in each dark store. For example, during a cricket match, snack categories might be ramped up. Predictive analytics help avoid stockouts.

• Route Optimization: Once an order is packed, Zepto's system assigns it to an available rider. It then uses real-time traffic data and ML algorithms to compute the quickest delivery route. Riders are directed to multiple drop-offs in an optimized sequence if doing batch deliveries (though Zepto primarily targets one-order delivery for speed). This dynamic routing is crucial; even a 30-second delay at a traffic signal can affect a 10-minute promise.

• Inventory Management Systems: Each dark store runs a warehouse management system (WMS) that coordinates stock intake, replenishment, and order picking. Central software integrates all dark stores so that managers can see overall stock status. These systems minimize human error and speed up processing.

• Mobile & IoT: Zepto equips riders with mobile apps for navigation and real-time tracking. In some dark stores, basic IoT devices (barcode scanners, smart shelves) might be used to further streamline operations.

In short: Zepto's 10-minute delivery is the result of tight coordination between physical assets and tech. The micro-fulfillment centers do the heavy lifting by being very close to customers (low travel time), and Zepto's software ensures the right stock is in the right place and that deliveries take the shortest possible routes. This model -- while capital-intensive -- is the core of Zepto's competitive edge in quick commerce.

How Does Zepto Make Money? Zepto Revenue Model Breakdown

Zepto's revenue model is diversified across several streams. The main sources are product sales & commissions, delivery fees, subscriptions, advertising, private labels, and its fledgling Zepto Cafe chain. Below is a breakdown of each component:

• Product Sales & Commissions (~10-20% take rate): The largest chunk of Zepto's revenue comes from selling goods on its platform. Zepto buys inventory (or partners with retailers) and sells at a markup, or it takes a commission on third-party sellers' orders. Industry reports indicate Zepto's effective "take rate" on GMV (gross merchandise value) is around 15-20%. In practice, this includes roughly 10-20% commission on each order plus the margin built into product pricing. For example, if a grocery item has a landed cost of ₹100, Zepto might sell it to the customer for ₹115-120. This markup (or third-party commission) contributes about 15-25% gross margin on goods sold. Zepto aims to manage these margins carefully, adjusting prices and promotions to balance market share with profitability.

• Delivery Fees & Dynamic Pricing: Every order carries a delivery charge, typically ranging from ~₹15 to ₹40 depending on distance and demand. Zepto uses dynamic pricing, increasing fees for long-distance drops or peak times. For Zepto Pass members (see below), delivery is often free above a minimum order value, but non-subscribers pay per order. These fees (known as the "platform fee" in internal jargon) cover rider payment and last-mile costs. Dynamic pricing also applies to surge scenarios -- if many orders spike in one area, fees adjust. All told, delivery fees contribute a meaningful slice of revenue per order, helping offset logistics costs.

• Zepto Pass Subscription (₹99/month): Zepto offers a premium subscription called Zepto Pass. Members pay ~₹99 per month for unlimited free delivery on orders above a small threshold (historically around ₹199) and occasional exclusive discounts. This recurring model provides steady monthly revenue. For Zepto, Pass subscribers tend to order more frequently, raising their lifetime value. The subscription revenue (Zepto reported having 40+ lakh subscribers contributing ~₹480Cr/year in FY25) aids predictability. In sum, Pass dues offer a healthy premium stream on top of per-order margins.

• In-App Advertising & Brand Partnerships: Like other e-commerce platforms, Zepto monetizes its digital real estate. Brands can pay for banner ads, sponsored product listings, and targeted promotions within the Zepto app. This advertising service has become significant: industry sources claim Zepto's annualized ad revenue exceeded ₹1,000 Cr by FY25. Such ads allow FMCG and retail brands to reach high-intent shoppers at checkout. (For example, promotions on dairy or snacks on Zepto can directly boost brand visibility.) While we lack Zepto's exact split, media reports note Blinkit and Instamart each earn hundreds of crores from ads, suggesting Zepto's ad and partnership business likely constitutes double-digit percents of its revenue.

• Private-Label Goods: Zepto has begun selling some products under its own private labels (house brands), such as staples and snacks. These items are typically sourced and branded by Zepto to command higher margins. According to market analysis, private-label goods on quick-commerce apps can carry 25-40% gross margins, much higher than name-brand items. For Zepto, this is one of the most profitable channels. As Zepto's scale grows, we expect its own brands to become an increasing fraction of sales, boosting overall profitability.

• Zepto Cafe (Vending/Quick-Service): Zepto has diversified beyond groceries into ready-to-eat items via Zepto Cafe. These are small quick-service outlets (or counter pickups) selling snacks, coffee, and packaged foods -- effectively an offline arm. In 2023, Zepto reported its Cafe vertical at a $110 million run-rate (₹900 Cr annualized). Management has publicly targeted growing Zepto Cafe to ₹1,000 Cr revenue by 2026. While still a minor part of overall revenue, Cafe sales contribute directly to the top line and use the same back-end logistics. As a relatively high-margin business (hot food/beverages can have ~30% margins), Zepto Cafe is seen as an important growth and profit driver in the long term.

Zepto Financial Performance & Unit Economics

Revenue Growth (FY2021-FY2025)

Zepto has grown explosively in a few short years. Its reported numbers show that FY25 revenue (top-line) was about ₹11,110 Cr, roughly 149% higher than the ₹4,454 Cr in FY24. Earlier years were smaller: for context, FY23 was roughly ₹1,500-2,000 Cr. In other words, Zepto went from near-zero revenue in 2021 to over ₹11,000 Cr by March 2025. (Note: Quick-commerce platforms typically recognize only 15-20% of their gross merchandise as revenue due to accounting rules, but the published "revenue" figures here are already following Indian reporting norms.) This pace -- doubling year-over-year and then doubling again -- underscores the 10X growth trajectory of quick commerce in India.

Losses & Path to Profitability

Rapid growth comes at a cost. Zepto's losses have also ballooned. In FY25 Zepto's consolidated net loss was ₹3,367.3 Cr, up 177% from ₹1,214.7 Cr the previous year^[2]. This widening loss reflects heavy spending on marketing, discounts and new store openings to win market share. For comparison, rivals Blinkit and Instamart also remain unprofitable at scale (Blinkit lost ₹1,400 Cr in FY25). The burning question is when Zepto will turn profitable. Management has stated a goal of reaching EBITDA breakeven by FY26. Put differently, the company aims to cover operating costs (excluding interest, taxes) with core profits soon. Achieving this will require continued revenue growth combined with greater efficiency (better utilization of stores and riders) and controlling cash burn. The road to profitability also depends on fending off pricing pressure; for now, Zepto is subsidizing many orders to meet its 10-minute promise.

Unit Economics (Per-Order Metrics)

Drilling down to per-order economics illustrates the challenge. Zepto's average order value (AOV) is around ₹550. On each order of this size, the gross margin (revenue minus cost of goods sold) is roughly ₹50-70 -- that is, just 9-13% of the order value. The company's fulfillment cost (rider pay, packaging, etc.) is approximately ₹35-45 per order. Subtracting that leaves a very thin net margin to cover all other expenses (marketing, tech, rent). In practice, Zepto must get multiple orders per store per day to offset these costs. The good news is Zepto has dramatically improved its productivity: reports indicate that a Zepto dark store now breaks even on its operating costs in about 8 months on average (versus ~23 months two years ago). This 8-month payback -- a result of higher order density and better routing -- is a big improvement. Still, Zepto's unit economics remain tight, and even small increases in input costs (fuel, wages) can swing profitability.

In summary, Zepto's financials show hyper-growth coupled with losses at scale. The top line is expanding impressively (FY25 revenues +150% YoY) but the bottom line remains deep in the red. The company expects to leverage scale and its diversified revenue streams (especially Zepto Pass and Cafe) to eventually swing into profit. Key per-order figures -- AOV ₹550, gross profit ~₹50-70, break-even ~8 months -- highlight how critical volume and efficiency are to viability.

Zepto IPO 2026: What Investors Need to Know

Zepto has signaled its intent to go public, eyeing a mid-2026 listing. In late 2025 Zepto's board approved a ₹11,000 Cr initial public offering (IPO). The company filed its Draft Red Herring Prospectus (DRHP) confidentially with India's regulator (SEBI) around year-end 2025. The IPO is planned as a mix of new equity and some offer-for-sale by existing shareholders. Leading the IPO are global banks: Morgan Stanley and Goldman Sachs are named as bookrunners.

Zepto IPO Snapshot

• Expected Timeline: July - September 2026

• Target Raise: ₹11,000 Cr (~$1.3B)

• Bookrunners: Morgan Stanley and Goldman Sachs

• Key Focus: Network expansion, technology, and reaching EBITDA profitability.

The timeline for the IPO is expected to be July-September 2026. This would place Zepto's listing in the second half of next year. If successful, the offering would raise about ₹11,000 Cr ($1.3B), valuing the company around its last private valuation (~$7 B).^[3] The share sale is structured to comply with regulations (Zepto has moved its corporate domicile to India and limited foreign ownership to 40%).

For investors, key takeaways are:

• Valuation & Size: Pre-IPO valuation is expected near $7B, consistent with late-2025 funding. The large issue size (₹11,000 Cr) would make Zepto one of India's biggest tech IPOs ever.
• Growth Prospects: The IPO pitch emphasizes Zepto's 150% annual growth (FY25 revenue ~₹11,110 Cr) and expanding offerings (Zepto Pass, Cafe, B2B). Analysts note India's quick-commerce market is still growing rapidly, potentially worth $30-40B by 2030.
• Profitability Path: Key investor question is when profitability arrives. Zepto discloses targets (EBITDA breakeven by FY26 and PAT by FY27) if growth continues. Comparisons to Blinkit/Instamart will be drawn -- both are still loss-making as well. Zepto will need to convince investors that its unit economics can improve post-IPO.
• Use of Proceeds: The IPO funds are slated for network expansion (more dark stores, tech, marketing) and possibly international forays. Some portion may be used to pay down debt or buy assets.
• Risks: Investors will scrutinize Zepto's high burn rate, competition from incumbents, and potential regulatory hurdles (below). The timing also depends on market conditions; any volatility in tech valuations could impact pricing.

In summary, Zepto's IPO is set to be a landmark event in India's startup scene. With top bankers on board and a strong growth story, it aims to reward patient investors -- assuming it can maintain momentum and gradually tame losses. The stock should draw comparisons to Zomato (Blinkit) and Swiggy (Instamart), so investors will weigh Zepto's unique strengths (pure-focus on groceries, tech efficiency) against industry challenges.

Zepto Marketing Strategy

Zepto's marketing approach is predominantly digital and data-driven. The startup invests heavily in online customer acquisition via social media ads, search marketing (Google/Facebook), and app-based promotions. Campaigns often highlight Zepto's USP (10-minute delivery) and use catchy messaging or humor to go viral (for example, quirky videos comparing delivery speed). Growth hacking tactics -- such as referral programs and limited-time deals -- are also key: new users often receive discount codes for first orders, and existing users earn credits for referring friends.

A central pillar is the Zepto Pass loyalty program, which not only generates subscription revenue but also drives repeat orders. Zepto uses in-app notifications, emails and push alerts to remind subscribers of perks or special offers, keeping retention high. They frequently run bundle deals and festive promotions to boost order frequency.

Beyond digital, Zepto has begun experimenting with offline and celebrity tie-ins. It has sponsored events and partnered with influencers to raise brand awareness among urban youth. (For instance, Zepto has run ads featuring popular themes during cricket tournaments.) While not as TV-centric as some larger brands, Zepto does use a mix of OOH and digital OOH (billboards, metro ads) in key cities.

In summary, Zepto's marketing is data-intensive and ROI-focused. Every campaign is measured on user acquisition cost and lifetime value. By continually optimizing ad spend and leveraging customer data, Zepto aims to keep its growth engine humming. Its strategy reflects that of a tech startup rather than a traditional retailer: test fast, iterate, and double down on what works.

SWOT Analysis of Zepto

This SWOT highlights that Zepto's strength lies in speed and technology, but it faces operational and financial strains. Its opportunities come from leveraging fresh funding and moving into new segments, while threats range from fierce rivals to government regulation and rising costs.

Swiggy Instamart vs Blinkit vs Zepto Business Model & Market Comparison

The quick-commerce sector in India is dominated by three players: Zepto, Blinkit (owned by Zomato), and Swiggy Instamart (Swiggy's grocery arm). Below is a brief comparison of key metrics:

Analysts estimate Blinkit controls roughly half the market (Blinkit ~46% vs. Zepto ~29%). This is partly because Zomato has aggressively expanded Blinkit's network (Blinkit has over 1,000 dark stores) and benefits from Zomato's larger capital. Swiggy's Instamart, while popular in key cities, sits third with about a quarter of volume.

In terms of business models, all three are similar (dark-store delivery), but differ in scale and strategy. Blinkit leans on being part of a public company (Zomato) and has started tempering its 10-minute promise to 10+ minutes to improve unit economics. Zepto insists on 10-minute delivery in its core markets, driving its brand image. Instamart's promise is closer to 15-18 minutes, reflecting its integration with Swiggy's broader logistics (food+groceries). The average order value (AOV) also varies: Zepto's AOV is about ₹550, while Blinkit's is higher (~₹660) and Instamart's slightly lower. Higher AOV usually means better margins.

Financially: Zepto reported ~₹11,110 Cr GMV in FY25. Blinkit's GMV (through Zomato) was around ₹20,000 Cr (Zomato annual report shows Blinkit's gross order value ~₹5,206 Cr recognized revenue in FY25, which implies higher GMV). Instamart's GMV is smaller. In raw scale, Blinkit's businesses are bigger, but Zepto is growing faster (FY25 revenue +149%). For investors and customers, the table above sums up their head-to-head positioning. Zepto's key advantages are its funded growth and tech focus, but Blinkit's sheer scale and Swiggy's cross-sell (food + groceries) keep them neck-and-neck.

Challenges & Future Outlook

Despite its rapid rise, Zepto faces several major challenges on the horizon:

• Regulatory Scrutiny: In early 2025, the Competition Commission of India (CCI) began probing quick-commerce firms (Zepto, Blinkit, Instamart) over allegations of predatory pricing and deep discounts^[4]. Distributors have complained that Zepto and others sell everyday essentials below cost, undercutting small retailers. A formal CCI inquiry (filed by an industry group) could force Zepto to curtail some promotions or change pricing policies. Additionally, new e-commerce regulations in India (around seller contributions, local sourcing, etc.) could impose compliance costs. Any labor law changes (like minimum wage hikes for gig workers) would also raise Zepto's delivery costs.

• Intense Competition: Established players continue to ramp up. For example, Reliance JioMart (with Reliance Retail behind it) has rapidly built a quick-commerce network. As of Oct 2025, JioMart operated ~600 dark stores (up from 400 earlier^[5]) and claims integration with 3,000+ physical stores in 1,000+ cities. Amazon and Flipkart are testing instant delivery in select cities as well. Blinkit itself is increasing capacity (Blinkit had ~1,007 stores and ~40% market share by late 2025) and could expand further.

This means Zepto will have to maintain high investment just to defend market share. Price wars (discounting) and intense marketing are likely to continue.

• Profitability Pressure: Zepto has a path to break-even by FY26, but any slowdown in growth or increase in costs could delay profitability. The unit economics are fragile; if order sizes shrink or rider costs rise, Zepto's losses could deepen. Investors and market sentiment will be watchful for signs that Zepto can achieve sustainable margin improvements.

• Operational Risks: Scaling from 10 metros to all of India brings logistic complexity. Zepto plans to move into Tier-2/3 cities, but lower urban density means 10-minute delivery may not be feasible everywhere. Zepto will need to adapt its model (perhaps promising 15-20 min in smaller towns). There is also a risk of execution -- ensuring quality and speed consistently as the network grows. Supply chain disruptions (e.g., floods blocking roads) can easily upset the tight 10-min promise.

On the opportunity side, the outlook is still bright. India's quick-commerce market is forecast to grow manyfold (some estimates put it at $30-40 B by 2030). Zepto's IPO capital will fuel expansion :it plans to invest in more dark stores^[6], tech, and marketing. The company's strong balance sheet (~$900M in cash) provides a cushion to experiment with new strategies. Zepto can also monetize partnerships: for example, tying up with neighborhood kirana shops to extend reach or launching new verticals (healthcare essentials, etc.). Its Zepto Cafe chain is expected to accelerate as well, diversifying away from groceries.

In summary, Zepto must navigate a very competitive and capital-intensive landscape. Near-term challenges include regulatory actions and margin pressure, but its robust funding and technology edge offer resilience. If Zepto can continue to grow its user base and gradually improve unit economics, it stands a chance of becoming a dominant profitable player. The coming year (IPO time) will be crucial -- success may hinge on both delivering on the hype and demonstrating a path to breakeven.

Conclusion: Is Zepto's Business Model Sustainable?

Zepto's business model - high-frequency small-basket delivery - is ambitious. Its strengths are clear: enviable growth rates, investor support, and a unique value proposition (10-min delivery) that resonates with urban consumers. In FY25, Zepto's revenue hit a billion-dollar scale with impressive momentum. However, the model is capital-intensive and margin-thin. As of FY25 Zepto was still losing money overall, meaning it relies on continuous funding until it can achieve scale efficiency.

The big question is whether the numbers will ever turn positive. On the plus side, Zepto has strong incentives to control costs. Its improved store-level payback (~8 months) and diversified revenues (Pass, ads, cafe) suggest management is actively driving toward profitability. The planned IPO will also provide fresh capital to reach breakeven. Ultimately, sustainability depends on volume: if Zepto can keep attracting enough orders (and maintain its market share of ~29%) while gradually raising prices and cutting subsidies, it can cover its high fixed costs.

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FAQs on Zepto Business Model

Q1. Is Zepto profitable?

Not yet. Zepto's FY25 net loss was ₹3,367 Cr as it prioritized growth. Management aims for break-even (EBITDA) by FY26, but at present Zepto is still burning cash.

Q2. Who are Zepto's founders?

Zepto was founded by Aadit Palicha and Kaivalya Vohra in 2020. Both are Stanford-educated entrepreneurs who previously co-founded KiranaKart and then built Zepto's 10-minute grocery model.

Q3. What is Zepto's valuation in 2026?

Zepto is valued at around $7 billion after its Oct 2025 funding. This $7B figure comes from a late-2025 $450M round.

Q4. When is Zepto's IPO?

Zepto plans to file and list its IPO in the July-September 2026 window. The IPO is targeting a ₹11,000 Cr issue under the lead management of Morgan Stanley and Goldman Sachs.

Q5. How many dark stores does Zepto have?

As of late 2025, Zepto reports having about 900+ dark stores nationwide. These micro-warehouses are the backbone of its 10-minute service.

Q6. How does Zepto's revenue model work?

Zepto makes money through multiple streams. The core is product sales/commissions (approximately 15-20% take rate on orders). It also earns delivery fees per order, Zepto Pass subscription fees, in-app advertising fees from brands, and sells high-margin private-label products (25-40% margins). Each stream adds to Zepto's diversified revenue mix.

1. 150% to ₹11,110 Cr, - Link ↑
2. ₹3,367.3 Cr, up 177% from ₹1,214.7 Cr the previous year - Link ↑
3. last private valuation (~$7 B). - Link ↑
4. allegations of predatory pricing and deep discounts - Link ↑
5. JioMart operated ~600 dark stores (up from 400 earlier - Link ↑
6. :it plans to invest in more dark stores - Link ↑