Zepto incentivises larger basket sizes with discounts but squeezes EBITDA margins

Quick commerce business Zepto has launched a new ‘Super Saver’ programme to encourage shoppers to increase their basket sizes which is boosting revenue but squeezing earnings before interest, tax, depreciation, and amortisation margins. 

Zepto’s Super Saver service offers online shoppers discounts on higher order values, which are often twice as high as average basket sizes, to boost overall basket sizes, ET Online reported. This helps to increase the average order value but lowers EBITDA margins from around 6% to around 3%, according to HSBC analysts. 

Quick commerce is designed as an addition to modern retail rather than a replacement for it, the Economic Times reported. The service, which offers 10 minute deliveries of goods in constantly expanding product categories, is widening its reach across India through businesses such as Zepto, Blinkit, and Swiggy. The service has established itself with a model of high frequency orders with a low basket value. However, by increasingly focusing on value, the quick commerce customer dynamic will undoubtedly evolve. 

“BigBasket’s original model was this,” Datum Intelligence advisor Satish Meena told the Times of India. “Now you see even quick commerce looking this way. They are going behind DMart’s target group, to beat the perception that quick commerce is priced on the higher side. Amazon India’s original play in groceries had also taken this approach.”