Hyperlocal delivery service takes wings; Dunzo banks on first mover’s advantage
What started out as a small WhatsApp group has today transformed into a hyperlocal, app-based service. Founded in 2014 by Kabeer Biswas, along with Co-founders Ankur Agarwal, Dalvir Suri, and Mukund Jha, Dunzo’s delivery service network is spread across Bengaluru, Delhi, Gurgaon, Pune, Chennai, Mumbai and Hyderabad. The company is headquartered in Bengaluru.
Dunzo has raised several rounds of funding from various investors such as Blume Ventures, Aspada Ventures and from Rajan Anandan, former MD of Google India, and Sandipan Chattopaday.
Over the last five years, Dunzo has taken long strides in the hyperlocal delivery service market across B2B, B2C or C2C space. For instance, if a consumer forgot his/her keys at a place, he/she can use Dunzo to get it delivered. Secondly, they also provide delivery services for merchants and businesses. They are present in 9 cities and have literally built up this category.
Interestingly, Swiggy, a leading online food delivery player, has decided to enter this market with Swiggy Go. The development has made the discussion around the category hot as Swiggy comes in with deep pockets and strong learnings on the online space and delivery market. The brand plans start from Bengaluru and expand to 300 cities by 2020.
It will be interesting to see how Dunzo counters Swiggy. It opens interesting questions about the future of this space in the market and competition. It is anyways evident that when the market heats up, there will be heavy advertising spends as well.
While affirming that it is a growing category, Sai Ganesh, Brand Lead, Dunzo, has compared this market to the e-commerce market eight years ago. According to him, “The potential of this market is huge. It is a new concept for people, who still need to be educated about it.”
There is no doubt that Dunzo has created this market from scratch. The delivery strategy of the brand is simple – each city is divided into smaller pockets. These divisions are mainly focused on the mobile penetration, number of merchants and customers and platforms as they are a 3-sided platform. All the three aspects are looked into by Dunzo before tapping into a market. The trust factor in such a situation is very important for customers. Dunzo has created a strong user base and a strong trust factor. This user base acts like their unofficial brand ambassador as word of mouth publicity works best for the brand this way.
However, a lot will depend on the pricing of these services. Till now, Dunzo has been focusing on cities where the Internet and mobile penetration is good.
Dunzo charges a lower rate for their services, compared to Swiggy. Ganesh mentions that they don’t count this as an advantage as customers are using different delivery apps like Swiggy, Zomato, Grofer’s, etc., mainly looking for efficiency and the time saved through these services. “What will really define this category is the efficiency of the brand, such as the operational efficiency of the merchant partners involved, the average order delivery. Dunzo has a massive merchant partner base on their platform and claims to be the fastest order delivery service,” he added.
Dunzo believes that Swiggy’s entry in the market doesn’t really trouble them as they do not think that they might have to really invest more in customer acquisition, marketing or advertising. “We are focused on retaining customers as we believe that a customer will stay with you as long as your service is superior. We are focused on expanding our geographic spread and improving our efficiency,” Ganesh further said.
At the same time Swiggy’s capabilities cannot be ignored. The online food delivery player has a strong user base and a high top-of-mind recall. People would definitely sample their services at least once to understand the difference between Dunzo and Swiggy Go. Swiggy has the advantage of already being a national level player.
Digging deeper into Dunzo
Dunzo delivers various commodities through its service ranging from fruits, vegetables, meat, gifts, documents and electronics. They have partnered with Mi to provide customers with tech supplies for their phones and maintain the health and wellness of the device.
They have a variety of user cases, however, their fastest growing category over the last 8-9 months has been groceries and food. While people normally order groceries on an urgent basis to cook food at home post work, food delivery works like any other platform and sees its peak at the time of breakfast, lunch and dinner.
Dunzo claims to have grown 40x in the last 18 months in the realm of their user base, operating at 2 million monthly orders, of which 70 per cent are repeat customers. This 70 per cent comprises the “good quality” customers, who transact at least four times a month. Dunzo’s user base is growing at 15 per cent month-on-month. The average delivery turnaround time is 25 minutes. The company is driving micro-market profitability and focused on building customer experience. In the next 18 months, Dunzo plans to expand its operations to the top 25 cities in India.
Dunzo had an initial marketing strategy with a focus on service and creating a good customer experience, which, in turn, created strong word of mouth for the brand. In the initial years, they spent very little on marketing. Even their customer acquisition was mainly based on their strong user base.
As Dunzo expands to more cities and geographies, their main focus will be on performance marketing. The brand will be using digital media to acquire new users. However, there are several challenges here. The first challenge is how to educate the potential user about the various possibilities of an app like Dunzo, where one can get anything delivered – right from tiffin boxes and keys to food and groceries. Another challenge is letting the users know that any and nearly every store in their city is now online. From laundry to paan shops, anything can be delivered and received through the Dunzo app. Therefore, educating people on the multi-purpose usage and functionality of the app is a big part of the marketing challenges they face. They also come up with new purposes for their app through customer reviews and requests.
Getting new customers on board is always a challenge for any brand. Dunzo focuses on social media channels and affiliate marketing for this. Engagement is a very important aspect here. Ganesh said, “One of the things we learnt early on was that it is not only important to get users onboard at the lowest cost, which is what all brands do, but for us, it is also important to get good quality of users who will transact at least 4 times a month.” Hence, the focus is on customers who stay on board with the platform continuously and over a long period of time with regular activity.
So far, Dunzo has not spent any money on outdoor campaigns, influencer or celebrity marketing and instead are focussing on educating potential customers and strengthening their community. They believe in customer experience. A new channel has opened up for the merchants to use Dunzo for their own logistics services.
With the market in its initial stage and a huge potential for growth, each player is looking to make most of it in various ways. Focussing on growing the market, Dunzo is undaunted by the upcoming competition. But how the market itself grows and where it is headed will be clear in the times ahead.