A Heart That Beats For Supply

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“My personal thesis of what the product is has changed,” says Biswas. He believes that it is not about creating a horizontal for users, but a supply horizontal, and today, Dunzo is primarily a supply company.

A realization like this most often comes after the bad experience.

Late last year, the cancellation rates on tasks for Dunzo was at a peak of 60% -70% because of the non-availability of riders. “It is a horrible way to run a product,” says Biswas.

Wide range of the services provided

It looked at outsourcing the supply to companies. But that exercise didn’t last for more than a week, says Jha. As Dunzo does a variety of tasks, it was not able to drive a consistent experience from outsourced riders who are best at handling one kind of task.

So it hired its own fleet. The idea is to create enough demand so that it has a predictable supply.

It is also trying ways to earn from both the user and the merchant. So it is trying to build a merchant network. For products where users don’t specify a store, if Dunzo directs traffic to a store, merchants pay it anywhere between 4-9%. Today 7-8% of the transactions are through Dunzo’s partner merchants. Biswas wants to take that up to 35%. This is something its closest competitors, like Delhi-based DoneThing, have already done. Karan Saharan, a co-founder of DoneThing, says, today nearly 50% of its tasks are routed through its partner network. While Done Things charges a base fee of Rs 100 for any task, Dunzo wants the user to pay as little as possible.

“As a business model, we don’t want to make any money on logistics. Because if we can price logistics optimally, it can increase our targetable audience,” Biswas says. Today, Dunzo does not lose money on logistics, adds Biswas. But it still loses some on fixed costs like support costs. It is hoping to recover all costs by focusing on bringing in revenue from merchants.

Its obsession with getting its riders to do more tasks is also making it look at different use cases. For instance, bike-sharing.

If GoJek, as a bike-sharing company, also delivers goods, why can’t a company that delivers goods bike-share? After all, Biswas says people keep asking whether Dunzo can ferry them from point A to B. To that he says that cost-wise all it needs is taking insurance for the rider.

Today, a rider does an average of 1.1 tasks an hour and that earns him about Rs 55. At peak times, a rider does close to 1.5 tasks. Biswas sees ride-sharing as a use case that can increase the number of tasks per hour. But this is a step in a very new direction.

“If you get into bike-sharing too, what do you stand for as a business? Getting stuff or getting to places? It is too early for a business like Dunzo to get into bike-sharing without seeing its core business scale. Two challenges at the same time may be tough,” says Murthy.

Expanding the firm

There is a third challenge, which is the expansion to new cities. Breaking ground here will need a different approach because there will be different unit economics and different usage patterns at play.

“This is a high touch business. Unlike just shipping a product, there are different levels of service associated with every product delivered. Although Dunzo has done a spectacular job in Bengaluru, maintaining that across many cities may be challenging,” says Murthy.

Users now want Dunzo to get more intuitive. Gautam John, a strategy consultant, who is one of the top users of Dunzo says that while it has freed him from mundane tasks, he needs it to be more intelligent in predicting his orders from looking at his order pattern and order history.

While tech can help address many of these challenges, for the heart of Dunzo to keep beating, it needs the money. And fast.

 

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