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Dunzo looks to scale B2B vertical for mid-mile and last-mile deliveries

Hyperlocal logistics company Dunzo wants to scale its B2B vertical, Dunzo for Business, to top 20 cities over the next one year to solve for mid-mile and last-mile logistics demands from SMBs and brands.

Dunzo looks to scale B2B vertical for mid-mile and last-mile deliveries

Friday October 14, 2022 , 6 min Read

When Dunzo’s team noticed frequent orders on its platform during the day from a group of users in 2018, they decided to investigate. These were merchants using the service to send products to other merchants or sellers using the hyperlocal delivery platform of Dunzo, through its courier feature. 

Sensing an opportunity, the company started working on creating a separate interface for Dunzo for Business, the company’s business-to-business vertical. 

“In 2019, we actively started figuring out the specific products and features businesses need. We realised that since the frequency of orders was higher, the customer mobile app doesn’t work for their use case. We created the Dunzo for Business dashboard,” says Dalvir Suri, Co-founder and Head of Dunzo Merchant Services (DMS).

He adds that the pandemic saw a rise in the number of deliveries since Dunzo was one of the few platforms doing last-mile deliveries. 

“We took a call to scale the business after the COVID tailwind. Strategically, it adds a lot of value and helps us venture into the merchant ecosystem,” he says. 

In its current form, Dunzo for Business or D4B offers logistics-as-a-service to nearly 20,000 small and medium businesses (SMBs), restaurants, and national and direct-to-consumer (D2C) brands. The vertical helps businesses with solving for first-mile and last-mile logistics across eight cities, including Bengaluru, Mumbai, Delhi-NCR, Chennai, Hyderabad, and Pune. 

The Reliance Retail-backed company plans on scaling this to the top 20 cities over the next year, apart from adding mid-mile capabilities using different modes of delivery. 

Shifting gears

Dunzo has largely been associated with hyperlocal and quick commerce. The latter was added in August 2021 when the space heated up, and Zepto, Blinkit, and foodtech major Swiggy’s Instamart popularised the 20-minute delivery of grocery and essentials. 

Dunzo’s business can now be divided into business-to-consumer (B2C), which includes its quick commerce service Dunzo Daily, Any Store, Courier, and Marketplace, and its business-to-business (B2B) service. The company has focused largely on scaling B2C, especially its Dunzo Daily business over the last year, with B2C contributing over 90% of revenues for the company. 

The B2B vertical, which was close to 20% in terms of revenue contribution, is now down to 5% though the business has expanded by nearly 5X overall. 

“The B2C business has grown at a faster pace. B2B has the potential to grow multifold as compared to the B2C business,” Dalvir says.

Dunzo currently works with the likes of Amintiri cafe in Bengaluru, fruits and vegetable delivery platform KisanKonnect in Mumbai, and national brands including pharmacy chains Zeno Health, Wellness Forever, grocery stores like Spar, QSR brand McDonald’s, as well as Magicpin and DotPe

The hyperlocal delivery market, which includes Same Day Delivery (SDD) of goods as well as quick commerce,  is estimated to be a Rs 3,000-3,500 crore opportunity today, and set to grow 5X over the next four to five years, says Rahul Sanghvi, Partner at management consulting firm, BCG. He adds that B2B is still “a small part of the entire market”. 

How B2B is different

Dunzo’s B2B business continues to be a pay-as-you-use model, without any minimum guarantee of order volume. 

Dalvir says that this is why SMBs, standalone stores, and local chains use the service. 

“We have two kinds of merchants on the platform—SMBs and national brands or businesses. Among the latter, some have offloaded either their flexible capacity to us or are using us exclusively,” he says. 

He adds, “We understand that a lot of large merchants and some smaller merchants need middle-mile capabilities, Some do not need on-demand deliveries but are okay with four-hour or six-hour or Next Day Deliveries (NDD). Some of them need different form factors of delivery.”

For orders as large as 20-40 shipments that cannot be carried on a bike, Dunzo is researching the market to add Light Commercial Vehicles (LCVs) through partnership with third-party providers for deliveries within the city. 

Dalvir says the company will also be open to acquisitions. 

Unit economics

B2B deliveries are different from single-order B2C deliveries as goods weighing as high as 12 to 15 kilos are transported by bike-borne delivery personnel. The radius covered for B2B orders is typically higher, ranging from 6-8 km as compared to 3-4 km covered for quick commerce orders. The turnaround time is stretched to 45 to 60 minutes for B2B orders. 

According to Rahul Sanghvi of BCG, optimisation in the last-mile delivery models has helped companies reduce the cost of delivery by nearly 20%-30%. 

“The real needle has been moved by last-mile delivery, which has seen reduction in cost per delivery through operational improvement, automation in warehouses, and increased density of volumes,” he says. 

Rahul says attrition among the gig workforce will continue to be a challenge but logistics companies have been passing on the variability of the payout cost to their customers. “This is done through different rates for delivery during peak season, weekends, and other factors. Nearly 20-30% of the payout to the gig works is variable in nature.”

According to Dalvir, scaling the B2B vertical helps in the cross-utilisation of delivery personnel throughout the day instead of peaks witnessed by grocery and food delivery companies. 

The payouts to delivery partners differ, based on their skill set and job at hand. For example, in the case of pickup and drop of a B2B order, payouts are lower as compared to picking the right items from a store and delivering it to the customer (in the case of Dunzo marketplace). 

As per documents filed with the Registrar of Companies (RoC), Dunzo witnessed a 66.5% increase in revenue from operations to Rs 45.8 crore for FY21, as compared to Rs 27.5 crore in FY20. The company managed to reduce its annual losses by 33.3% for FY21 to Rs 225.7 crore as compared to Rs 338.4 crore in FY20. 

Apart from different modes of delivery and meeting expectations on bulk orders, Dunzo will also have to evaluate the capex needed to set up capabilities including LCV and warehouses. This will also bring it in competition with the likes of Blowhorn, Porter, and Loadshare, apart from a platform like Flipkart-backed Shadowfax, which has managed to build a crowdsourced network of gig workers on its platform.  

Edited by Teja Lele