DeepSummary
This episode features a panel discussion with the founders of quick commerce providers Airlift, JOKR, and Zepto operating in emerging markets like India, Pakistan, and Latin America. They discuss the benefits and challenges of operating in these markets compared to developed economies, with lower labor costs but more challenges around infrastructure and supply chain integration.
The panelists share detailed insights into their business economics, including average order values, picking and delivery costs as percentages of revenue, and strategies for reducing these costs through factors like order density and vertical integration. The role of delivery fees and their impact on customer usage and retention is also explored.
Additionally, they highlight the importance of fresh produce categories and local sourcing for both margin advantages and sustainability. The emerging opportunity for advertising revenue streams from CPG brands is also covered, as well as differing perspectives on whether the quick commerce market will undergo consolidation or allow multiple winners.
Key Episodes Takeaways
- Quick commerce providers in emerging markets benefit from lower labor costs but face challenges around poor infrastructure and fragmented supply chains.
- Vertically integrating the supply chain through direct sourcing from producers is critical for emerging market players to achieve profitability and sustainability.
- Fresh produce like fruits and vegetables command high margins and drive customer retention, so they are a key focus category.
- Faster delivery speeds can reduce last mile costs by enabling higher rider productivity and more orders per hour.
- Average order values tend to be higher in emerging markets due to lack of modern retail, enabling better unit economics.
- Advertising revenue from CPG brands is an emerging opportunity, especially in markets lacking sophisticated ad targeting.
- Views differ on whether the quick commerce market will consolidate or allow multiple winners based on operational excellence.
- Investors need to understand the nuances of emerging vs developed markets for quick commerce rather than overgeneralizing.
Top Episodes Quotes
- “The biggest misnomer is around challenging economics. Because unlike delivery, food delivery and ride sharing in previous megatrends, in logistics, technology, the number one thing that's different about q commerce in particular in emerging markets, is that there's a very kind of clear, fast and straightforward path to profitability that does not require immense levels of order density or a lot of capitalization.“ by Ralf Wenzel
- “The fastest we're delivering, the cheaper our last mile gets. Because we're able to do, like Osman mentioned, with input metrics, we're able to do significantly more orders per hour per rider. And that brings down your cost, because effectively, your last mile cost is a ratio of how much are you paying a rider per hour divided by how many orders he's doing per hour.“ by Aadit
- “The biggest, most important thing is just to have institutional investors clear about to make institution investors care about the fact that this is a very complex business and it will be built successfully by some players and not successfully by some players. And the dynamics are different in our market versus other markets.“ by Aadit
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Episode Information
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
Harry Stebbings
6/1/22
Over the last 10 days, we have seen unprecedented levels of layoffs from some of the biggest quick commerce providers in the world from Getir to GoPuff to Zapp and Gorillas. Today we dive into the world of quick commerce in emerging markets to uncover what is the same and what is different about the model in emerging markets.
Usman Gul is the Founder & CEO @ Airlift, one of the fastest-growing quick commerce providers in the world with core operations in Pakistan. Airlift has raised over $100M in funding from First Round, Josh Buckley, Sam Altman, and 20VC.
Ralf Wenzel is the Founder & CEO @ JOKR, a unique provider in the quick commerce market with their dual operations in both the US and LATAM. They are one of the only providers to operate in both emerging and developed economies. To date, JOKR has raised over $288M from Softbank, Balderton, GGV, and Kaszek to name a few.
Aadit Palicha is the Founder & CEO @ Zepto, they have taken the Indian quick commerce market by storm since their early days in YC. To date, Aadit has raised over $360M with Zepto from YC, Lachy Groom, Breyer Capital, and Rocket Internet to name a few.
In Today's Episode on Quick Commerce in Emerging Markets You Will Learn:
1.) Emerging Markets vs Developed Economies: Where is Quick Commerce Best?
- What are the single biggest benefits for quick commerce providers in emerging markets?
- What are the single biggest challenges of operating quick commerce companies in emerging markets as compared to developed economies?
- From a cost of goods and delivery perspective, what is the single biggest difference comparing operating in emerging markets?
2.) Warehouses, Picking and Delivery: The Economics Broken Down:
- What % of revenue does Zepto, Airlift and JOKR spend on average for new warehouses in mature markets? How does this change over time? How do they select warehouse locations?
- What % of revenue is picking costs for Zepto, Airlift and JOKR? What are some needle moving things that could reduce this picking cost?
- What % of revenue is delivery costs for Zepto, Airlift and JOKR? What levers can make this driver efficiency and delivery cost more efficient?
- What % of AOV does Airlift and Zepto charge for delivery? How does Zepto leverage power users to subsidise the delivery costs for newly acquired users?
- Why does JOKR not agree with charging delivery fees? How does charging delivery fees impact usage, frequency and AOV?
3.) Product Selection and Margins: Who Goods Have The Highest Margins?
- How do Zepto, Airlift and JOKR select the products they sell? How do the margins differ across different product categories?
- Why is fruit and vegetable the most important category for all three providers? What other metrics are heavily impacted by large spend on fruit and vegetable spend?
4.) AOV and Customer Spend: What is Good?
- What is the AOV for Airlift, JOKR and Zepto today? How do new markets compare to more mature markets? What are the drivers of the increase?
- Why does Zepto not believe that AOV is the right metric to be tracking? Why is gross profit per order the right metric to be tracking?
5.) Additional Business Models: Advertising:
- How much revenue does JOKR, Airlift and Zepto make from advertising revenue today?
- What can be done to increase this?
- How have JOKR been able to scale advertising revenue in such a short space of time? What has worked? What has not worked?
- How important is advertising revenue to the future sustainability of the business model?