The delivery apps reshaping life in India’s megacities

The delivery apps reshaping life in India’s megacities

From 7 a.m. until well past dusk, seven days a week, N. Sudhakar sits behind the counter of his hole-in-the wall grocery store in the south Indian city of Bangalore. Packed floor to ceiling with everything from 20-kilogram sacks of rice to one-rupee ($. 01) shampoo sachets, this one-stop shop supplies most of the daily needs for many in the neighborhood. It’s a carbon copy of the roughly 12 million family-run “kiranas” found on almost every street corner in India. The shop is located in the Whitefield district. It was once a quiet suburb, but it has become a major hub of the city’s growing IT industry. When Sudhakar, who is 49, opened the store 20 years ago, offices had just started going up. Thanks to a flood of construction workers, then IT employees, business picked up quickly. Today, his shop is surrounded by apartment blocks that house hundreds of workers in the nearby tech parks.

These days, the same technology industry that helped Sudhakar’s business thrive is presenting stores like his with a new challenge. A steady stream of delivery drivers lines up to pick up groceries from the “dark store”, a mini-warehouse in the heart of the city that allows for ultra-fast deliveries. Dunzo, a Bangalore-based startup runs the service. It is so popular that it has become a verb. Anyone in Bangalore who needs something transported across the city by a courier will “dunzo it.” The company’s app allows them to book an on-demand bike courier.

views inside a Dunzo Daily
Orders in a Dunzo Daily facility are packed by hand, but machines help, using image recognition to automatically assess the quality of fresh produce.


Dunzo lets users order pickups from nearby shops, but more recently it has pivoted into the rapidly growing market for instant groceries. It’s a highly crowded market. Borrowing from the playbook of Western companies like Instacart, Gopuff, and Gorillas, which deliver daily essentials right to your door, a slew of local firms are vying for a piece of India’s $620 billion grocery market, many of them now promising delivery times of just 10 minutes. In many cases, their goal is clear: they want to take over the kiranas dominant share of “top up” purchases customers make between larger bulk shopping trips.

They’ve got a long road ahead. Today, kiranas account for more than 95% of India’s grocery market, according to research published in March by the consulting firm Redseer. Modern supermarkets still account for only about 4%, even though they first appeared 30 years ago, and online groceries haven’t cracked 1% in a decade. Roughly two-thirds of India’s 1.3 billion people live in rural areas largely untouched by these more modern forms of retail.

But India’s megacities could see rapid change. The urban middle class has become addicted to online shopping thanks to years of aggressive marketing, steep discounts offered by e-commerce companies like Amazon and Flipkart, as well as a heavy dose covid lockdowns. Although they make up only a small percentage of India’s population, their spending power is substantial. In more affluent areas of major cities, the fight for India’s street corner is well under way.

Sudhakar dismisses the bustle of activity just across the street from his shop. He says he doesn’t see Dunzo or its ilk any threat. He admits that about half of his customers shop online and he is concerned about what this trend might mean for his business and others. He says, “It will impact us.” They have more investment. They have more money. They have a better network.”

An Indian institution

A kirana isn’t any old convenience store, says B.S. Nagesh, the founder of Trust for Retailers and Retail Associates of India(TRRAIN), a charity that supports retailers, said: They are closely integrated into their local communities and serve only a few hundred families. “Many of our ancestors grew up with the kiranas. He says that it is an extension of our kitchen. “The shopkeeper not only knows us by our names, but he also knows us by our families. He is more than a person who serves us. Tomorrow, if you have a need, he will actually help you out. Kiranas are an integral part of society .”

This close relationship allows kiranas credit to be provided to many customers. The shopkeeper will keep track of customers’ purchases in a small notebook called “bhai-khata” and then settle the balance on a weekly or monthly basis. Rajat Agarwal, a professor of management at the Indian Institute of Technology Roorkee says that informal credit is a large part of India’s economy. Cash flow is often a problem.

Jayappa S. in front of his store with customer
Jayappa S. runs two kiranas on the border of HSR Layout, an area in the south of Bangalore that’s become a startup hub.


Shankaramma at her sewing machine
Jayappa’s spouse, Shankaramma, used to work in the garment industry and stitches blouses to supplement income from sales at the shops.


close up of hands holding small ledger
Jayappa goes over his bhai khata, the notebook in which he keeps notes of credit he’s extended to regular customers.


“It’s like doing a service,” says Narendra Gupta, who runs a kirana in Kolar, a small city about two hours from Bangalore, with his brother. Gayathri Prasad has been shopping at the Guptas’ kirana for 15 years and wouldn’t shop anywhere else. She says, “They are like brothers.” Prasad was without money for about a week, so the Guptas allowed her to take what she needed and then paid them back when she could. Rachana Sharma, a sociologist at Guru Nanak Dev University, says that Kiranas cater for all classes. Sharma claims that modern retail stores often exclude the less-well-off.

The granularity with which these shops understand their shoppers would be the envy of any e-commerce data science team, says Agarwal. In a country with six major religions, 121 languages, and thousands of castes, each with its own habits, diets, and traditions, knowing your customers is essential. The items kiranas have in stock are matched to the locality. He says that without any data-mining techniques they are already doing their own analytics to understand their customers. Despite these unique strengths many companies believe kiranas have the potential to disrupt. India’s online grocery industry has grown quickly from a relatively small base, says Abhishek Gupta, a business consultant at Redseer, going from $500 million in 2016 to $5.5 billion by 2021. This growth was mainly due to urban Indians who started shopping online for bulk groceries. But now some sense an opportunity to eat into the smaller, more frequent top-up purchases that Gupta says make up 60 to 70% of the average kirana’s business.

Tapping that market requires an entirely different approach. Typically, goods bought online are stored in large warehouses near the city’s outskirts. It can take hours or days for customers to receive their goods. To get on the turf of kiranas, you need to build networks of smaller “dark shops” deep within the urban environment. This allows you to ship items much faster than a customer can walk to your local shop. Gupta says that “quick commerce” has disrupted the kirana spending. Redseer estimates that the segment could be worth $5B within five years. The opportunity has sparked a feeding frenzy. Zepto, a startup founded by a pair of 19-year-old Stanford dropouts, came out of stealth in November with a promise to deliver groceries in 10 minutes and has since raised a total of $360 million in venture backing. In December, Indian food delivery giant Swiggy said it would invest $700 million in its fledgling grocery business Instamart, and an online grocer called Grofers rebranded as Blinkit and dropped its conventional delivery service for a 10-minute guarantee. Ola, Uber’s main rival in India, joined the 10-minute craze in January, announcing plans to expand its network of dark stores to 500 over six months. Dunzo had already launched its Dunzo Daily service last June but announced in March that it would more than double its dark-store count to 200.

While slower to warm to the idea, the country’s largest online grocery company, BigBasket, launched a 10-minute delivery option in April. Three years ago, it tried out one-hour delivery for quick commerce, according to Seshu Kumar, the head of buying and marketing. However, it was unsuccessful in gaining traction. The pandemic followed. He says that kirana stores were shut down due to lockdown restrictions in many parts of the country. Customers had no choice but to use e-commerce. While most people went back to shopping in person when the lockdowns eased, a significant portion of them kept their old habit. “Now, people are realizing that these 10-minute delivery startups, instant-gratification startups–they can actually replace the need of a local kirana,” says Vaibhav Khandelwal, CTO of Shadowfax, which provides logistics to a who’s who of Indian e-commerce companies.

It’s a massive logistical undertaking. Khandelwal estimates that there are several hundred dark shops in the country’s largest cities. Even though the company has a large footprint, it is difficult to ensure timely deliveries. This is due to the need for efficient packaging and cutting-edge demand forecasting. It is also important to know where the dark stores are located.

N. Sudhakar in his shop in Bangalore.
N. Sudhakar in his shop in Bangalore.


“The core of it is network design,” says Aadit Palicha, the CEO of Zepto. The goal is reach as many people as possible and keep delivery distances to an average of 1.8 km. While a traditional supermarket may stock thousands of products, quick-commerce companies have found that most customers buy from a smaller range. It’s a careful balancing act to ensure you can still meet customers’ needs, says Palicha, but his company has found that about 3,000 products is enough to cover almost all of a customer’s shopping basket.

Speed and selection aren’t the only important criteria, says Dunzo CEO Kabeer Biswas. People choose to stick with a shop they trust because of the quality of its offerings.

“Most of our time in the organization is spent trying to figure out how we can deliver best produce,” he said. The company uses image recognition technology to automatically determine the quality of fresh goods. It is also working with Qzense Labs, a startup that produces sensors to measure the sweetness, ripeness, and spoilage of fruit.

These companies have a long-term goal that is ambitious. In March, posters started popping up around Bangalore featuring a picture of a refrigerator with the text “In loving memory of Sri Fridgesh Coolkarni, 1854-2022.” It was a guerrilla marketing campaign from Dunzo suggesting that instant groceries would soon make the fridge obsolete.

“You can decide what to make for dinner 10 minutes before you start cooking,” says Palicha. The aim is to fundamentally alter consumer behavior by removing the need to plan purchases, he adds: “When you give somebody a button to get something that they want in 10 minutes, they’ll press it a lot more frequently.”

For some, it seems to work. Arshad Ayub, 33, used to shop once a week at a large supermarket and rely on local stores for things like vegetables, milk, and bread in between. Since he tried Zepto in April, he has been transformed. “Instead of doing bulk shopping, now whatever is required on a daily basis, we just order and get it in the next 10 minutes,” he says. “I never had a situation where I needed something and I had to actually go to a local shop.”

Reality check

It’s not surprising e-commerce companies are eager to get into groceries, says Arvind Singhal, founder of the India-based consulting firm Technopak, since grocery shopping accounts for two-thirds of the total Indians spend on merchandise each year. But that spending is spread across roughly 8,000 towns and 600,000 villages, the vast majority of which are well beyond the reach of online shopping. He says that while India’s food market is attractive in absolute numbers it is very fragmented and difficult to consolidate. “Anybody who claims that the kirana is threatened does not understand anything about India.”

Quick-commerce companies say they are focused on the affluent upper strata of city dwellers for now, but even then there are questions about the viability of the model. Redseer’s Gupta says that India’s large supermarket chains make pretax profits between 5 and 6%. This is despite having no delivery costs and benefiting from favorable supplier agreements due to their volume. Even if quick-commerce companies can reach similar scales, they will still have margins of 2 to 3% due to their additional logistics requirements. They are far from profitability today. Gupta says that on average, they are losing 15 to 25 rupees on every 100-rupee order they receive.

Cracks are beginning to appear. Less than four months after announcing its foray into quick commerce, Ola has scaled back its ambitions, reportedly laying off 2,100 dark-store workers in April. And in March, Blinkit found itself so short on cash that it had to take a $150 million loan from food delivery company Zomato, one of its main investors.

shop in Chamrajpet, a neighborhood in Bangalore


portrait of Kirana owner Sharfuddin


close up of hands tying a bag of grains


Kirana owner Sharfuddin in his shop in Chamrajpet, a neighborhood in Bangalore. He took over running the shop from his father about 15 years ago.

It’s also not clear what problem they are solving, says Singhal, as most kiranas already take orders via WhatsApp and deliver to customers’ doorstep. He says that there is only one explanation for the global capital glut, which is looking for investment opportunities in an age of low interest rates. He says that the reason for this excitement is because of the unrestrained pressure of money, which is forcing these entrepreneurs not to follow economic logic.

There are no signs that the money taps will soon stop, according to Anand Ramanathan of Deloitte India. Investors have been throwing money at Indian startups for at least a decade, scrambling to get a foothold in a nation whose overall consumer markets could be worth $6 trillion by 2030, according to the World Economic Forum. “Do these models make money?” Is it sustainable. He says they are not even close.” “It’s all just an acquisition game .”

India has features that make it more suitable for quick commerce than Western countries. According to Zepto’s Palicha Indians are more likely to buy groceries than shoppers in the Western world. India’s crowded cities make it possible for large numbers of customers to be reached from one dark store. He says that this model thrives on density.

There is evidence that kiranas in India’s largest cities are feeling the pinch. Shopkeepers in a neighborhood bordering HSR Layout, a growing suburb in the south that has become a hub for startups, were unanimous in stating that online shopping was reducing their profits. Ashraf Puncheehar says business at his shop has dropped by 20% in the last six months. He says that new companies are opening every day. You can’t be a competitor .”

Although it is unlikely that kiranas will suffer a widespread death, there are some localized retrenchments. Aaron Shapiro, an Anthropologist at the University of North Carolina Chapel Hill, says that this could lead to “infrastructural extinction”. In the West, companies abandoned “unviable markets,” which were poor areas in order to open larger supermarkets. This led to “food deserts” that are places where residents don’t have easy access to affordable, healthy food. The phenomenon could have a unique flavor in India. Mohammed Ryaz, a regular customer of a kirana shop in Chamrajpet, said that the shop was a lifeline for less tech-savvy customers during lockdowns. He says, “These people are not educated–they don’t know how to order [online],”.”

Another concern is the impact delivery drivers will have on their business. More than 80% of India’s economy is informal, meaning workers have no official employment contract and aren’t protected by employment laws. For many Indians, gig work doesn’t differ from other options. However, gig workers still struggle with unpredictable wages due to sporadic work or incentive-based earnings, according to Aditi Surie, a sociolog at the Indian Institute for Human Settlements. She says that it can make people feel precarious. “You have no way of really calculating what is going to happen with your wages next month.”

A Dunzo delivery driver, who didn’t want to be named, said he doesn’t mind the work and regularly pulls 12-hour shifts. But it’s only really worth his time if he hits an incentive target of 21 orders a day, which boosts his wages by nearly 50%. He says, “It’s a waste if there are no incentives.” “All my efforts are gone in vain.” He typically hits the target eight to 10 days per month.

A helping hand

Why, if India already has a hyperlocal retail network perfectly tuned to the needs of every community, should anyone spend money building a new one? Many “kirana tech startups” have decided that there is no need. Instead, they are creating tools to help shops compete with modern retail giants. Prem Kumar, CEO at Snapbizz, a digital technology company, says that the network of kirana shops in the country is a national infrastructure comparable with the power grids and railroads.

His company’s products help kiranas track inventory, accept digital payments, and manage credit with customers and suppliers. The company offers basic services via a mobile app. However, it also rents bar-code scanners that can be combined with a handheld payment terminal and a touch-screen computer for checking out credit cards. Kiranas can place orders online using an app. The company also has tie-ins to major brands that offer promotions on products sold by the stores.

A key factor in designing technology for kiranas, Ravish Naresh (CEO of Khatabook), says that simplicity is key. The app acts as a digital copy of the notebooks that are used to track credit card purchases. The app automatically adds up debts and sends reminders to customers.

Other financial service providers want to tap into the kirana community. PayNearby offers kiranas a mobile app and a mini card reader that allows them to accept digital payments. CEO Anand Bajaj says that it also makes them neighborhood banks. Customers can withdraw cash, transfer money, purchase insurance and book travel tickets.

The kiranas have seen the most impact from the handful of e-commerce apps that allow businesses to connect with each other. These apps provide shops with an infrastructure that can compete with the large retail chains. Sujeet Kumar, cofounder and chief executive of Udaan, said that traditionally kiranas have sourced their products from a network of distributors or wholesalers. Each takes a cut. The company negotiates favorable deals with producers by aggregating the demand for more than 3.5million kiranas. This allows them to cut out the middlemen and lower prices. Nearly all kiranas MIT Technology Review spoke with said Udaan and other B2B apps, such as Jumbotail or Jiomart, had helped boost their business.

Dinesh Matahji, who owns a kirana in Chamrajpet, uses apps to help run his shop.
Dinesh Matahji, who owns a kirana in Chamrajpet, uses apps to help run his shop. The “kirana tech”, which has been developed, allows shop owners to accept online orders and track the credit they give to customers.


Efforts to wrest control of the supply chain that feeds kiranas should raise some alarm bells, though, says IIHS’s Surie. She says that the informal nature of traditional distribution systems gives workers a lot of resilience and allows them to quickly change jobs as their circumstances change. Some companies could have a huge impact on the economic lives of millions by centralizing these complex networks into a few tech platforms that have little government oversight. She says, “They become the orchestrators for demand and supply and market forces.”

However, kiranas appear to have some allies as they fight for the street corner. Snapbizz’s Kumar believes that the wide range of technologies and services available to them could drastically change these micro-businesses. He says the kirana of tomorrow will be a “concierge to the household”–a one-stop shop that provides everything their customers need. He hopes this will allow them to flourish, not just for their own benefit.

” Kumar says that the network of kirana shops that we have today is the infrastructure to get essentials to the masses in this country. “As of now, there isn’t another viable option.”

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