How Dunzo’s merchant-first strategy can give it a much-needed edge over other e-grocers

Bengaluru-based hyperlocal delivery platform Dunzo is helping neighbourhood stores and kiranas go digital by providing an alternative platform for ecommerce logistics, inventory management, and demand prediction.

How Dunzo’s merchant-first strategy can give it a much-needed edge over other e-grocers

Monday October 05, 2020,

9 min Read

The coronavirus pandemic changed things overnight for Indra Kumar, 48, who runs a small kirana in Bengaluru’s Malleshwaram. 

From a steady stream of 100-200 people walking into the store, he went to zero walk-ins and an inability to home-deliver orders. The fact that supply was limited and that the store was shut for a long time compounded his problems. 

But he wasn’t as badly hit as some of his peers as he had already connected with Dunzo “as an experiment” in December 2019. 


The founding team at Dunzo

This turned out to be a blessing as orders continued to flow in even as walk-ins stopped due to COVID-19. How did Dunzo turn things around? By offering delivery support, help with multiple orders, live tracking, and API integration.  

Indra Kumar realised the importance of going digital. He wasn’t the only small merchant to benefit from Dunzo’s merchant-focused product.  

At a time when ecommerce biggies are pushing out small retailers, the hyperlocal logistics company is providing offline and small businesses with an alternative platform for ecommerce logistics, inventory management, and demand prediction.

The team saw a 4X increase in order volumes from pre-COVID-19 days. Dunzo is also profitable in Bengaluru, and aims to replicate the model across different cities now.

It wasn’t just about helping the kirana gain customers, but also help it with day-to-day activities such as inventory management, stock-keeping, delivery, and 24/7 support in the language of their choice. 

Dunzo put forward a merchant-first strategy and focused on onboarding small merchants 18 months back, but COVID-19 accelerated the effort to help kiranas compete in the digital marketplace, maximise their reach, and grow business online. 

Dunzo for kiranas and small stores

Dunzo works differently from regular e-grocers such as Bigbasket, Swiggy, and Zomato. It isn’t a regular two-sided marketplace; it encompasses three aspects: partner (delivery executive), source (merchant), and the consumer. 

While the other players are also now connecting all the three aspects, what sets Dunzo apart is its focus on educating and helping the merchant understand the importance of inventory planning and management. 

Kaustubh Chakraborty, Merchant Lead, Dunzo, says any grocer has close to 900 SKUs in store. If they use a PoS system, it is only for billing, not for inventory. “If they see the product in the store, the consumer gets it. They rarely think the consumer will go to a neighbouring store. The concept of losing a sale is lesser,” he adds. 

Dunzo helps educate the merchant on why this is important. The team believes it is important that each side is “dynamic and adaptable to the fluid changes in policy and strategy”, and worked on making processes seamless and efficient on all sides.

Dunzo - Merchant-first strategy

Kaustubh Chakraborty, Merchant Lead, Dunzo

In an earlier conversation with YourStory, Mukund Jha, Co-founder and CTO, Dunzo, said: “I keep saying this: we are cataloguing all items in the world and are running multiple companies in one. The workflows are different. The app and algorithms needed to be built to catalogue and search everything in the store.”

So, for medicine delivery, the system should be able to detect prescriptions. In other stores, the system should know items that are out of stock and those with changing prices. The idea is to empower merchants with digitisation and ensure a “smoother and cleaner experience”.  

Dunzo-Merchant-First strategy

Mukund Jha, Co-founder and CTO, Dunzo

This has also helped the team reduce the time taken to deliver an order. With the merchant onboard, with a system that helps them manage their catalogue and inventory, the delivery partner doesn't have to wait at the store.

The merchant already knows where the product is, and packs it and keeps it ready for the delivery partner to pick it up and deliver to the consumer. Dunzo now has an average delivery time of 20 to 25 minutes. 

Prior to the pandemic in January, Dunzo had onboarded 600 merchants. By September, the number touched 15,000 across cities. Its merchants saw a 150 percent increase in revenue during the lockdown. 

Ashraf Peedikayullathil, Dunzo merchant, Green Mart Bengaluru, says, “When local customers purchase products from my store, to see the happiness they get from it is the most satisfying part of my job.” 

Why did it decide to launch a product for merchants?

Dunzo has always addressed the problem that most time-strapped people face today: the need to get things done. The app, which now has multiple functions, categories, flows, and even a B2B version, started life on WhatsApp. Users would type out what they needed to be done, and Dunzo would get to work. 

So, instead of the consumer going to the kirana, why not Dunzo the groceries? For that, it is important to have a strong focus on merchants. Dunzo aims to be the go-to place for the urban consumer for everyday needs. 

Kabeer Biswas, Co-founder and CEO, Dunzo, explains. “If we want to be the first place for consumers to go to for their local delivery, we need to make everything simple and predictable, and even give them the choice of the grocer they want. The idea is to get delivery within a short frame of time.”

 “A deeply predictable experience for the consumer happens when merchants transact and interact well on the platform along with the consumers and delivery partners,” he adds. 

Dunzo- Merchant-First strategy

Kabeer Biswas, Co-founder and CEO, Dunzo

Banking on the existing network 

Kaustubh says hyperlocal deliveries don’t offer the luxury of putting in filters. “In my Urban Ladder days, we had the luxury of QA; you don’t have that with local, general traders. So, customer experience is impacted,” he says. 

To ensure that customer experience is not impacted, merchants need to be onboard and aided. 

Towards this end, Dunzo on Wednesday announced that it had collaborated with the 'Grow with Google' initiative last week to reach more merchants and help them digitise their stores and work closely with delivery partners.

Merchants get their first three deliveries free, a step-by-step aid to grow their business online, relevant tools that maximise their reach, and earnings per order. They also get 24x7 merchant support in the language of their choice. 

There already is a strong network of local merchants in India, and Dunzo is enabling them to come online for the very first time and expand their footprint in ways that were not possible earlier.

Kaustubh says COVID-19 acted as a sandbox. It allowed them to address delivery issues for merchants who customers were available over the phone or WhatsApp but couldn’t leave their store as walk-ins were high and they were open for shorter hours during the lockdown. It also helped merchants gain new customers. 

“Urban consumers value time; that is what they pay us for. It just isn’t a delivery partner reaching from point A to point B on time that ensures the smoothness of a service; it is the merchant's need to ensure the right quality of product or give something the consumer wants. That makes it necessary to integrate them closely in the value chain.” 

Changing merchant behaviour 

The team was working to help the merchant come online, but Kaustubh says there were issues like a resistance to inventory systems. 

But COVID changed that, especially when the Dunzo team could use data to show them the difference it could make. “Being savvy on one platform makes it easier to be onboarded and save on others as well,” Kaustubh says. 

COVID-19 also led to high demand but deliveries were a problem as the entire supply chain was frozen. Dunzo worked with the authorities to ensure smooth operations for their delivery partners and merchants. 

“We used our larger supply chain and provider tie-ups to ensure that stores get supply as well. This, in turn, helped their consumer base. Most employees had gone back to their hometowns or villages, meaning stores did not have the bandwidth to even cater to standalone walk-ins let alone the surge in demand. That is when we stepped in as logistics partners,” Kabeer says. 

The issues of stock-outs, high walk-ins, and low bandwidth continue. But Dunzo has been able to work hacks around that: talking to the store in advance and ensuring products are ready for pickup before the partner reaches. 

“Wherever there are stores with low manpower, we have helped them. They can serve both offline and online orders. This has possibly increased merchant trust in us,” says, Kartik Misra, Head of Strategy and new initiatives. 

The coronavirus pandemic has led all e-grocery platforms to join hands with merchants and help them grow. Dunzo stands out for the hand-holding its team offers.  

Kabeer says, “Merchants realised that it was imperative for them to go online and work with digital delivery platforms. When we manage their inshore ops, it becomes easier for them to deal with delivery platforms a lot better. If they don’t do that, the platform will organically start decreasing their orders. Merchants need a lot of orders from delivery partners to grow their businesses today. And for that, every order has to work.”

Dunzo-Merchant first strategy

Image credit: Anubhav

A permanent shift 

Abhishek Chauhan, Associate Partner, RedSeer, says close to 75 percent of the retail industry is run by the FMCG and grocery segment. Of this, unorganised players like local kiranas or mom-and-pop stores comprise 95 percent. 

“During the lockdown and the pandemic we realised that these unorganised retailers were the backbone and the most reliable. But what the disruption of the supply chain did was make them woefully aware of how disconnected they were without access to digitisation. This, in turn, hurts the hyperlocal delivery players as well. What works and will work is a B2B2C play, where the kirana stores become an epicentre for hyperlocal delivery,” Abhishek says. 

Though stores do not need logistics support or help in their stores, they need aid and help in ensuring that they are digitally savvy. The team is now helping merchants with inventory management, supply chain, and in-store operations to help them deal better with delivery platforms.

“Today, there is a lot more openness from merchants. We believe we are creating a win-win situation for the merchant and for us by working on inventory management, supply chain, and the in-store experience,” Kabeer says. 

RedSeer’s Abhishek explains that there has been a shift in the industry and market. While larger players are looking at local fulfilment centres, digitising the kirana works better for hyperlocal delivery startups. 

“These startups can help with last-mile fulfilment. A kirana that earlier had a radius of 500 metres can serve a radius of close to 4 km. And, the consumer has a wider choice,” Abhishek says. 

Edited by Teja Lele