Investors in North America and Europe have piled into delivery businesses, from food to grocery to booze.
After DoorDash’s bumper US IPO last year, its UK food delivery counterpart Deliveroo plans to list in London at a $10bn valuation. Others, such as US-based GoPuff or Turkish Getir, are raising money and expanding with delivery of everything from convenience-store basics to alcohol.
But a handful of Asian companies are taking this frenzy a step further, vowing to deliver anything, to anyone, at any time. This could be onions from the corner shop, that hard-to-find book from a bookseller or the phone charger that you forgot at home.
In India, six-year-old Dunzo, which has raised $120m from investors including Google, has become a mainstay in India’s tech hub Bangalore and is expanding into seven more cities. Swiggy, a food delivery company backed by Naspers and Tencent, branched into the “anything” business in late 2019 and is now offering the service in more than 60 cities.
They argue that the only limit on what can be delivered is the size of the driver’s backpack. Elsewhere, companies such as Grab in Singapore and Meituan in China offer similar services as part of their “superapp” models.
Plenty of companies have attempted similarly ambitious delivery models, with little success. US-based Kozmo.com, launched in the late-1990s, and its more recent counterpart Magic, from 2015, both failed to catch on. Postmates, bought by Uber last year, started with a similarly bold vision but now concentrates on food delivery.
Investors and entrepreneurs argue that large, fast-growing Asian economies like India’s offer the unique cost structures and incentives for such a seemingly quixotic model to thrive.
“One large difference as to why the east will look very different from the west is the labour cost,” said Kabeer Biswas, Dunzo’s chief executive. “It allows you to build a model that moves things around your city for less than half a dollar. That’s unlike what’s possible anywhere in the US.”
Dunzo says its average order value from partnered merchants is Rs400 ($5.40), but for many deliveries — which may be no more than milk or eggs — it is far lower. The vast majority of shopping in India is done in bustling markets or informal neighbourhood shops, rather than one-stop supermarkets.
Furthermore, the density and chronic congestion of a city like Bangalore or Mumbai mean that those who can afford it happily pay someone to run their errands for them. This demand has only been turbocharged by the risk of catching Covid-19.
But the fact that such companies even have a shot at success highlights some hard truths about the market in India, a country of almost 1.4bn people.
One is the enormous surplus of the unemployed or under-employed. Hundreds of thousands join the workforce every month, and only the luckiest find salaried jobs in the formal economy.
This has led to an explosion of gig-economy workers — euphemistically dubbed “executives” or “partners” — who bring home sums often ranging from Rs15,000 to Rs25,000 a month, frequently working long hours. Dunzo says its drivers’ typical earnings are higher, approaching Rs40,000.
Secondly, it highlights how so many of India’s tech- and corporate-growth strategies are geared towards creating the ultimate comforts for a tiny sliver of elite, high-earning city dwellers. Like so many companies catering to India’s “middle class”, Dunzo’s target market is about 25m to 30m people.
Even given these conditions, it is unclear whether such a model will ultimately work.
Dunzo has already scaled back growth plans to concentrate on Bangalore and a handful of other cities where it hopes to turn a profit, but continues to burn as much as $2.5m in cash a month. Biswas says the company hopes to quadruple the value of goods it handles in Bangalore this year, at which point it will have a scaleable model that can serve as a blueprint for other cities.
For delivery of “anything” to be profitable may always be a long shot. The service may instead allow a company to build customer loyalty and obtain a place on phone homescreens before growing their businesses in other ways. Swiggy, for example, is piloting a “cloud” store model in a Delhi suburb, allowing it to sell goods from wholesalers. Dunzo has branched into ride-sharing in one city.
Whether or not such ambitious plans succeed, the future of delivery in a country like India is destined to be very different from the UK or US.
benjamin.parkin@ft.com