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How Dunzo Works The Hyperlocal Delivery Business Model

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  • Post last modified:June 23, 2022
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Summary

Dunzo is an online consumer-services app, and can be accurately described as a “multi-services app” or even a “super-app”. Such a multi-service app offers multiple services within one platform.

Dunzo’s app and website provide on-demand concierge services for its users in the hyper-local market. It uses a data-driven platform and connects with the nearest delivery person, wherein the delivery member’s activity (location and movement) is tracked via the app across his entire journey.

Dunzo was the first Indian startup to receive direct funding from Google and has raised several rounds of funding thereafter, amounting to a total of $700 MN.

What is a “multi-service” app?

Also known as a “super app,” a multi-services app is an application that offers several services within one app. Some well-known examples include Dunzo, Grab, and Gojeck.

The idea behind such multi-service apps is aimed at broadening the range of services offered, therefore increasing its chances of achieving profitability. Offering multiple services that their users will need to use at various points in their daily routine gives the app the opportunity to generate more revenue, target a wider section of the audience, and thus improve its profitability.

As a case in point, let us look at how Dunzo works, its revenue model, and its business model.

What is Dunzo?

Dunzo is a hyper-local and on-demand app.

For a small delivery amount, Dunzo will deliver pretty much anything for you. For example, groceries from the market, a parcel from one location to another, a pair of new shoes from your favorite e-commerce store… the list is endless! Dunzo is a multi-delivery service and will deliver all this to its customers. Given below are some key company highlights:

  • App:            Dunzo
  • Founders:     Kabeer Biswas, Ankur Agarwal, Mukund Jha, and Dalvir Suri
  • Founded:     July 2014
  • Category:    Online Consumer Services
  • HQ:              Bengaluru, India
  • Parent Co:   Dunzo Digital Private Limited
  • Downloads: 5,000,000+
  • Valuation:    $245 million

As is the case with 3rd party-aggregators, Dunzo doesn’t own any of these shops, restaurants, or retail/online stores, but follows a business model that is focused on delivery.

Dunzo: funding history.

Starting from its first round in November 2016, when it raised $1.18 million from Aspada Investments, Dunzo has raised a total of $700.1MN in funding over 18 rounds. Their last round was on January 6, 2022.

Dunzo: business-model

The Dunzo app provides an on-demand delivery service in leading Indian cities such as Mumbai, Delhi, Noida, Chennai, Bengaluru, Hyderabad, and Pune.

It has tied up with a whole slew of restaurants, stores (e.g., apparel, general merchandise), and shops. Its strength originates from the convenience that it provides to its users i.e. when a user needs to buy something, or sends over a parcel to another person but cannot – or doesn’t want to – make the physical journey, Dunzo is in play.

Dunzo users can order anything of their choice, from whatever is available from the list of stores on the app. The list of products available on the Dunzo app is spread across food, groceries, medicine, cigarettes, and clothes—to name just a few.

As mentioned earlier, the Dunzo app can also be used as a “personal courier service” i.e. should you want to send a parcel – let’s say a birthday gift for your friend in another part of the city – you could send it via Dunzo delivery.

Dunzo: revenue-model

Let us look at how Dunzo generates its revenue.

1. Delivery-fee: Dunzo charges a delivery fee for each delivery it makes. The amount varies between Rs. 10-60 based on the distance that is to be covered and the order value.

2. Commission: Dunzo charges a commission from its vendors. This rate varies between 15-30%.

3. Services available: Home and repair services (etc.)

4. Surge-pricing: Surge pricing is another source of generating /increasing revenue.

5. Others: In addition to the services mentioned above, there is also a category – called “#kuchbhi”! – that covers miscellaneous requests. Some examples are:

  • Take a picture of the new building under construction at the following address
  • Bring my laptop from home

Apps like Dunzo—i.e., hyperlocal delivery models—have gained popularity in recent years, and now is a good time to consider launching one.

Dunzo: workflow

  • Install the App.
  • The user can make a booking for a package to be sent/picked up from one location to another within a city.
  • Dunzo’s team will pick up and deliver to and from the addresses mentioned—typically, within a few hours.
  • The user pays Dunzo a delivery fee.

FAQs

  • What are some other apps that are like Dunzo?

Numerous examples exist. Grab, Gojek, and Postmates are some popular ones.

  • How much would it cost to set up/create an app similar to Dunzo?

While the final budget would depend on the number of features, and the scope of its functionality (etc.), an app similar to Dunzo would cost between $25,000 USD – $50,000 USD.

Multi delivery apps: what are the challenges they encounter?

As you would have probably guessed by now, a business model like Dunzo’s – while with numerous advantages – is also an operationally intensive one. It also creates pressure on cash flow and available resources and operates under tight margins, constraints, and timelines.

On the side of demand and customer expectations, the challenge is the constant battle to not only onboard new users but also retain them.

Since apps like Dunzo are only providing the “service”, i.e., delivery, in this case, they encounter constant issues like product unavailability, and logistics issues (e.g., traffic, weather). Such issues could lead to customer dissatisfaction and, upon repeated occurrence, will ultimately lead to loss of customer confidence, user attrition, and churn.

Conclusion: As is evident, launching and successfully operating a multi-delivery services app like Dunzo would require capable leadership, robust integration of the inventory system; an optimized delivery network, the online product listings to be updated in real-time so that customers are not misinformed or confused; and strategic pricing policies.

The use of modern tools and technologies like last mile delivery software has also become invaluable, because, without it, you cannot hope to achieve success and profitability in today’s tech and data-driven eco-systems.

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