Daybreak - What happened to Dunzo?

Episode Date: September 4, 2024

Dunzo, the Reliance Retail-backed quick delivery company, let go off 75% of its workforce in fresh round of layoffs earlier this week. But for the longest time, Dunzo has been an anomaly. Its a small company that has managed to make its name a verb. Like Google but Google is a giant.  Its revenue was just $7 million dollars in the year that ended in 2022. For perspective, Zomato made more than 70 times that amount in the same period,  But it did not matter.  Because it changed our lives and it became the kind of consumer brand that tech companies who do anything for.   To understand the unravelling of Dunzo, we need to go back to two years ago when Dunzo was on a high.  Tune in.P.S Don't miss our brand new Thursday segment, DAYBREAK UNWIND, in this episode!This week's recommendations:From listeners: Ashish: The BearJoy: Panlong aka Coiling DragonIshan Sarkar: The Peanut Butter FalcomApurva: Blue Eye Samurai From hosts:Snigdha: Invisible Planets: 13 Visions of The Future of China edited and translated by Ken Liu                The Worst Person in The World Rahel: Sisters in SweatDaybreak is now on WhatsApp at [phone]. Send us a hello with your name and be a part of the Daybreak community. For next Thursday's Unwind, send us your recommendations to us as texts or voice notes. The theme is "comfort food from your favourite spot in town."

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the same. secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they managed to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into.

to the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert, as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcast. or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode.

To say that Danzo is in big trouble right now would be an understatement. The company that is quite literally synonymous with sending things to your people within your city, like, you know, I'll dunzo you, the chocolate cake that I made. Or I have this herbal tea you should have since you're down with the flu. I'll danzo it to you. Danzo is such an anomaly in so many ways.

It's a small company that has managed to make itself a verb, like Google, but Google is a giant. Its revenue was just $7 million in the year that ended in 2022. To give you perspective of how little that is, Zomato made more than 70 times that amount in the same period. But it did not matter. Because Danzo changed our lives and it became the kind of good. consumer brand that tech companies would do anything to become. And now it's come to a point where it has only 50 employees left in the company. In the latest round of layoffs that happened earlier this week, it led go of 75% of its workforce. To understand the unraveling of Danzo,

we need to go back to two years ago when Danzo was on a high. It was January 22 and Reliance retail had become Dunzo's biggest backer. Reliance gave it $200 million in funding in exchange for a 26% stake in the company. That year, Dunzo started running ad campaigns in IPL, which, as we all know, is super expensive. But it saw a boom in the number of orders as many as 3 to 4,000 per dock store. So it began expanding these dog stores across the city. But all of this costs the company. By the second half of the same year, 2022, the number and the volume of orders across cities began to rapidly fall.

By the middle of last year, Danzo was shutting down its dark stores. In April 20203, the startup cut its workforce by 30%. And now, after the latest round of layoffs a few days ago, Danzo just has 50 employees left. It cut off 75% of its workforce. So today, I thought, is a good day to take you back to the story of how trouble began at Danzo and what was its plan to get out of the slump. Welcome to Daybreak, a business podcast from the Ken.

I'm your host, Nickda Sharma, and I don't chase the new cycle. Instead, every day of the week, my colleague Rahil Philippos and I will come to you with one business story. that is worth understanding and worth your time. Today is Thursday, the 5th of September. 2018 was a year when Danzo blew up. The same year, sometime in November, Rohan Dharma Kumar, the Ken's co-founder, interviewed Kabeer Beswas, the co-founder of Danzo.

He told him that they looked at six months' worth of consumer data and they figured that people were mainly using Dunzo for six things. Apparently, people are very predictable. Even if you tell them that anything is possible, they will still stick to the usual stuff. So the first of the six things that people were using Dunzo for was to move stuff around and within the city. The second was for buying stuff from stores. The third was for multi-point logistics, which basically meant take this from me, go to the store and bring it back. These three formed over 90% usage of Danzo in its early product stage.

The fourth was government tasks like passport and Adhar formalities. The fifth was for home staff like plumbing, electricity and carpentry-related problems. And the last was for secretarial tasks, like book a table for me, book a flight ticket for me, etc. So you see how with these mundane everyday tasks, Danzo became a table. trailblazer of sorts. At the beginning of 2022, Donzo was on a role. Reliance retail had given it $200 million in funding. It was all set to advertise in the Indian Premier League or the IPL. And in the meantime, it was also expanding its dock stores into new areas such as New Delhi and the National Capital Region. The main driver of all the success was its quick commerce service

called Dunzo Daily. It promised the delivery of products from more than 200 dark stores and other local supermarkets in under 20 minutes. One employee who spoke to the Ken reporter Somijit Saha said that Dunzo Daily grew its average order value to as much as 350 rupees in early 2022. Another employee who worked in operations told us that it was getting a couple of million orders every month. Things were great.

Plus, the success was a validation of sorts for Dunzo's leadership team. And that's because for a long time, the company had been thinking of moving away from its model of sourcing products from local supermarkets. They wanted to move to a dark store-led model. So when the boom in the demand for delivery came after the pandemic, Dunzo joined Swiggy and Blinkett in the race to acquire as many dark stores as possible. The idea was to have better control over the quality and availability of products. And it kind of made sense because it was becoming increasingly difficult for them to standardize products across partner supermarkets.

It would be much easier if they had their own dark stores. But this boom came at a cost. Stay tuned for the next segment. Dunzel was spending about 80 rupees on every order that it was shipping. This is called cost-per-task, or CPT. Turns out, as we discovered from a former employee, the CPT on dark stores was much higher. Because having their own dark store also meant that they would have to pay for rent,

inventory, electricity, but the CPT on the supermarket partner model, which Dunzo originally had, was just $30. Plus, let's not forget how the delivery market in India, India is so overcrowded now. And the kind of rise we saw in the demand for delivery too has kind of slowly slumped a little. Other delivery companies like Swiggy and Blinket are already cutting down on the number of their dark stores. So by October 2022, it was clear that there was no option left for Donzo. Scaling back was inevitable.

So earlier this year, it started shutting down its dark stores in cities, including Delhi, NCR and Hyderabad. And it also began laying off large sections of both its permanent and contractual employees. It began to transition back to what had proved to work for it in the first place, the supermarket partner model. Coming up next, high costs were not the only issue with dark stores. Former employees of Dunzo told Somerjit that the dramatic shutting down of dark stores was also because of certain systemic issues.

One of them said that Donzo's expansion plans was simply not good enough. For example, a lot of the early dark store operations in Delhi NCR were being carried out manually or through third-party software like ShopTree, which turned out to be quite glitchy for employees to use. The employee also told us how they would often be stuck filing the same task on multiple sheets. He told us that because of this optimization was. was really slow and bad. And not just that, when the IPL lead boom ended, many of the dark stores continued to either over-procure

or procure the wrong products. This obviously led to more costs. And there were other related issues as well, especially to do with seasonal and regional preferences. The same employee also told us that Dunso often ran experiments successfully in Bangalore, but it would fail in new geographies when expanding. So clearly, the plan to pivot to a dog store-centered model did not quite work out for Danzo. So what then is its plan B?

Stay tuned to find out. Dunzo Daily might have been the superstar, but the company also has an underdog. And it is called Dunzo for business, in short, DMS. It is Dunzo's business to business arm that provides last-mile delivery services to small enterprises. For example, local restaurants and direct-to-consumer companies like meat delivery company Lishes, bakery Theobroma and others. DMS came into the picture when Dunzo executives noticed something. They realized that some merchants were repeatedly using the platform to deliver products.

This courier service used by customers to ship things hyper-locally was one of Dunzo's earliest and most popular offerings. The firm then decided that it would be better to have a tailor-made service to facilitate this last-mile delivery for merchants. So in 2019, Dunzo for business took off formally and the dashboard put merchants first. But DMS was contributing under 10% to Dunzo's overall revenues in early 2022. It was, after all, meant to be a side business. But everything changed when Reliance entered the scene with its investment. DMS was the perfect fit for GeoMart.

Reliance sent its product managers and other executives to work closely with the DMS team at Dunzo. The idea was to provide last-mile delivery services for GeoMart. The division now offers services in various forms such as express delivery, same-day delivery, next-day delivery and so on, working with about 25,000 merchants. Suddenly, Dunzo was paying extra. attention to DMS. The refocus on DMS was all the more evident as the company scaled down half of its stock stores.

Danzo was betting on DMS to get itself out of the tough spot. The vertical was closing in on Danzo daily as the biggest revenue contributor. But the segment already had established players such as Shadow Fax and ExpressBs. Jumped to 2024 and what has made Dunzo's world. crashing down right now is that two of its most important investors, which we've been talking about, one of which we've been talking about, Reliance and the other one is Google. Google is a whole different story. We'll get to that some other day. But Reliance and Google have both decided not to help Danzo right now because Danzo was unable to meet some important

service level agreements. As of now, Danzo's losses have gone up four times between 2022 and 23. And the FY 2024 financials are still not available. So despite beating all of the odds for the longest time, Danzo seems to have finally started losing its edge. By the way, this episode is not over yet. The daybreak unwind segment is coming on. So stay tuned.

Hi, Dahl. Hi, Snickda. How was your weekend? It was quite good. What do you do? I went and watched this really great Korean movie and it was this open-air movie screening. So that was quite nice, except it started raining.

Oh, God. But it was a lovely movie. What movie was it? Past Lives. I loved Past Lives. It is so good. It is such a beautiful movie. It's so like, like, it captures like the, I sound so pretentious,

but like the complexity of relationships. Exactly. So beautifully. It reminded me a little bit of, you know, this movie called, I think it's a Norwegian film called the worst person in the world. Have you watched it? Haven't. It's also very good. You love it.

If you love Pass Lives, then you love it. It's a lot. We talk about this a lot. I think both of us really enjoy shows and movies that have characters that you wouldn't normally like. Like, unlikeable characters are our thing. Exactly. Exactly. Exactly.

The kind of characters that grew on you eventually. Yeah. Black and white doesn't work. Yeah. Give me grey. Boring. Yeah. Give me grey.

Right. Okay. On that note, welcome to the second edition of our brand new segment, Daybreak Unwind. And if you listen to Daybreak regularly, you will know that Rahil and I have been talking about this for a while now. The thing is, you know, both of us, when we're not working on episodes, serious episodes. We spend a lot of our time talking about books, movies,

you know, great TV shows, good places to eat, basically just what to do over the weekend. We love a good recommendation. Exactly. And last week, if you listened to our Thursday episode,

you would know that we actually decided that we wanted you to be part of that conversation as well. You know, we're kind of tired of just riffing off of each other's ideas each other's running out of recommendations. We're running out of recommendations very quickly.

So we decided that, you know what? Why not reach out to this incredible community of listeners that we have and figure out what they're into right now? Yeah, because I'm sure all of us have great, interesting, very interesting recommendations that come from all different spaces, right?

Like, why not share that with each other? And especially on a Thursday, as we plan the weekend. You know, what to do to unwind. So, yeah, join the conversation. If you have any great recommendations that, you know, the daybreak community will enjoy, send us a text or a voice note, ideally a voice note, you know, whatever your recommendation is and why you like it.

We are now officially on WhatsApp. You can message us at 897-118-379. And if you don't live in India, you can just add plus 9-1 before that number. So, to begin with, we had our lovely listener, Aashish, sent in his recommendation for this week. Listen to this. Hi, Snigda and Rahel. My name is Aish and I'm based from Bengaluru. I'm a big fan of the daybreak.

My recommendation for the unwind segment is the TV show called The Bear, which is about restaurants. It's a fun, binge-worthy show for the weekend. It includes tragedy, great storytelling and character building. It's portrayed so well that you can imagine yourself right in the center of the chaotic kitchen. I've been recommending this to a friend who exclusively watches K-Drama. Hopefully listening to this segment can help convince her to watch this show. I think that you're a big fan of the bear, no? Yeah.

It's a brilliant show, of course. I mean, the first two seasons were great. The third one, I was a little disappointed, I would say. It's still good. But I just think that it was unnecessarily stylized, but, but, but Jeremy Allen White. It's one of those things that I've just not gotten around to watching. But so many people have recommended it, I have to watch. But also, you know that he's super popular on Instagram, right?

the guy who's the main lead character of Berger, Jeremy Allen White. And he did this Calvin Klein campaign and he went viral on social media. And like, they're calling it the Year of the Rodent Man with Jeremy Allen White, Barry Kugin, who was in that weird film called Salt, was it? No, it was Salt Born. It was a strange film. Okay. Rahel, what is your recommendation this week? I'm very excited to hear.

Okay, so my recommendation isn't a film or a book or a song or anything like that. It's actually an activity, I think. Okay. Are you going to ask us to start running? Close. You are. Okay. Or it's like a community.

Okay, anyway, it's Sisters and Sweat. Right. It's honestly changed my life in many ways. So for those of you who are unfamiliar with what Sisters and Sweat does, it's this community that was founded by these. two very incredible women. One of them is a Nike coach. Her name is Shweta Subaya.

And the other one is a professional footballer. Her name is Tanvi Hans. And they started Sisters in Sweat with the sole objective of getting more women to do sports and creating kind of safe spaces for women to play sports. And basically this was the year that I really got into fitness, wellness, my health. And I've never really been,

and I've spoken to you about this before I'm not the most... I haven't grown up being the most athletic person and I convinced myself that I wasn't athletic I couldn't play sports I couldn't run somewhere...

You know, I was that kid that would fake and illness and skip PT class every single time. Me too, right? Yeah, but like something switched in my brain this year

I turned 27 and like I literally didn't do anything for my birthday in the morning I went for a run I absolutely hated it I ran for like one minute now. That's so strange because I know you love running. Now.

Yeah. But then I consistently did it and like also happened to coincide with my move to Bangalore where everyone is just like into some sports. All the time. But yeah, I discovered sisters in sweat and they organize a bunch of different kind of, you know, sports, things like that. So football, beginner football, they have a run club at Cabin Park every Sunday, that sort of thing. And just doing sports and being active with a bunch of women is amazing. Like, it's not at all intimidating. You know, you're not scared of looking silly or, you know, dumb.

That is so nice. Yeah, and I've absolutely loved it. So if you're in Bombay, Gurgao, Bangal, and you haven't checked out sisters in sweat, I would 100% recommend following them on social media, looking up their website and just going for a session. And if you're a man listening to this, tell your friends. Yeah, all the women in your life. Yeah. Amazing.

That's so cool. I love that. All right. Thank you, Rahir. And now we'll move to our next recommendation, which is from Joy, who is from Sam. Joy, thank you so much for your text message. Also, I have to tell you that my recommendation this week is in the same realm as yours. I'll get to it after this.

Hi, this is Joy. from Assam. I would like to recommend reading web novels in wixieowl.com. It is, it has translated Chinese and Korean web novels and it's interesting seeing how these different cultures have their own version and interpretation of fantasy and sci-fi compared to what it is in India and other mainstream Western media. I've been reading novels there for like 10 years now and my first one was called Panlong, aka Koi. dragon. It's a very nice novel and still one of my all-time favorites. That's so nice. That's very cool. I'll definitely check it out. Thank you, Joy. And that brings

me to my recommendation for this week. Rahil, you know, I love short stories, right? So I was at Chumpaka this weekend. And okay, for those of you who are not from Bangalore or who haven't been, It's the loveliest bookstore. And if you ever come here, you have to have to check it out. So I was there and I found this very interesting collection of contemporary science fiction short stories from China, which have been translated into English. And the collection is called Invisible Planets, 13 visions from the future of China. And it caught my attention because it's compiled by this very famous science fiction Chinese American writer called Kemp. Ken Liu, and he's won like a whole bunch of, you know, awards for science fiction writing Nebula and Hugo and all that.

Like, you should check him out. Very cool. So I read the first story and it's called The Year of the Rats by this writer called Chen Kufan. Sorry. Snika, I don't want to interrupt you. But there seems rats and rodents seem to be a running theme in this segment. Running theme. Running theme.

But, yeah. So, yeah, this writer called Chen Kufan, I am quite sure I'm pronouncing that wrong. But I'm sorry about that. But, yeah, he also goes by the name Stanley Chan and he's also very well-known writer. And he actually works for Baidu. Oh. Yeah. Wow.

That's so crazy. And his writing stands out because, you know, he combines science fiction and realism. So, like, when you're reading, like, for example, this book, right? It's the perfect example of that. Like, you start reading it, you never, if it was not written like science fiction anywhere in the book, you would not be able to put it in a category. Like, you know, it's a bit jorn or defying science, sort of. So it's the story is about a bunch of college students.

They get conscripted to hunt down these genetically modified rats. Okay. Okay. And these rats were meant to be exported to other countries for whatever reason. but they have escaped from the labs and they are breeding like crazy. And so these men, they're part of the rodent control force

and it's basically a bunch of losers. So whoever joins the rodent control force, it's like they have nothing else left. Okay. They didn't make it in life. So this is what they have to do. So basically it's this army of losers. They're hunting down these rats

and somehow, some of them are still trying to find meaning even in this, you know. But the interesting thing here, the twist, is that even the rats, you know, they are evolving. So they are building, like, they have birthing rooms and they are doing agriculture and all of that. And they think that the humans are committing genocide on them. So it's very interesting. But, yeah, that was my recommendation.

That is such a good one. Yeah. All right. what's the next one that we have. Okay. So we have a listener named Ishaan Sarkar who sent in his recommendation last week. So my movie recommendation is Peanut Butter Falcon. And it's a, you know, amazing movie.

And it's a comedy-based movie in which Down syndrome character runs away from, you know, like the institution he is kept at. And being on the way, she wants to become a wrestler and for that he follows something and he goes out to meet his you know icon in wrestling and on the way he meets an outlaw and the time they spend you know like the movie's name peanut butter falcon peanut butter is actually a thing which has a significant role in the movie and Falcon is also something which you guys will see if anyone watches a movie it's a very light felt feel good movie and I think everyone should watch that thank you Ishaan we will

be checking that one out too lovely and the last one we have is from Apulva and she recommends watching blue-eyed samurai which is an anime show on Netflix and she says you should watch it even if you're not into anime. So maybe it's a great first anime. Are you into anime? Not really but I do love all the studio Jibbley stuff. Yeah, it's lovely.

Okay. And before we wrap up, you know, for the next unwind segment, we have a theme and it is comfort food from your favorite spot in town whichever town you're in.

Send us your recommendation as voice notes ideally. And if you're not comfortable, that's okay. You can send us a text message. All on WhatsApp, you have the number. We'll put it in the show notes. Tell us about it, what it is and why you love it, and how it makes you feel.

I'm actually very excited for this one. Me too. Right? All right. On that note, that's a wrap. Thank you for tuning in, waiting to hear from you on WhatsApp.