Zepto’s Retention Play: Fewer Discounts, Premium Carts & A Paid Club

Before we turn the talk to Zepto’s IPO delay and how the company is looking to address the one problem that’s been chiefly highlighted in the run up to the IPO, we need to perhaps revisit one key claim made by Aadit Palicha almost exactly two years ago. 

After raising more than $1 Bn in 2024 at a valuation of $5 Bn, Palicha said investors are backing Zepto’s execution. 

That was August 2024 and since then we can argue that Zepto has vindicated that backing to some extent as its revenue more than doubled to ₹22,623.6 Cr at the end of FY26 from ₹11,109.9 Cr in FY25. But consolidated net loss jumped 26% YoY in FY26 to ₹5,905 Cr from ₹4,699.7 Cr in FY25, which is the other side of that VC balance. And today, it’s arguably the heavier side as Zepto’s IPO plans were put on hold.  

In the weeks since Zepto deferred its $1.2-1.3 Bn public issue, speculation has emerged about the reasons. 

Some put it down to the valuation Zepto was seeking through the IPO. Reports suggested that major mutual funds felt the startup’s $7 Bn private market valuation was not justifiable given the trading multiples for Eternal and Swiggy, the parent companies of Blinkit and Instamart. 

Plus, Zepto’s losses are significantly higher than those two major rivals, so there was some rationale behind this feeling of Zepto asking for a premium valuation without the basis for it.  

What we cannot know is whether these reports based on unnamed sources are necessarily the reason behind the deferment. There could be multiple factors, and in any case, Zepto says it remains committed to listing soon. 

Zepto is now in the process of raising a ₹1,000 Cr round ahead of the proposed listing, which it intends to complete within the timeframe provided by SEBI when it approved the updated draft red herring prospectus in June 2026. 

Nevertheless, the concerns over the rich valuation persist. What is Zepto doing to allay these fears? 

The Zepto Profitability Factor

While Zepto relied on a jump in order volumes, crossing an average of 2.33 Mn orders a day through 1,139 dark stores as of March 2026, it also reported the industry’s lowest average order value (AOV) of ₹387 compared to Blinkit at ₹665–669 and Instamart’s AOV of ₹700 in FY26.

Sources say that discount-fuelled scale in volumes and revenue of Zepto had proven to be a bottleneck in getting the institutional investors to agree on its profitability path and milestone.

Despite a clear improvement in unit economics compared to previous years, Zepto has failed to curtail its losses as we highlighted above. Diving deeper, we find that the startup reported a free cash flow deficit of ₹4,330 Cr in FY26. 

One can surmise that dark store additions, customer acquisition costs and operational investments proved to be a drag. 

As per its current cash reserves and FY26 cash burn levels, Zepto seems to have a runway of roughly 1.3 years, which is not a sign of great health in an industry that’s relatively underpenetrated outside the metros.  

And compounding that issue, Zepto also witnessed a small drop in its annual transacting user base. The startup’s UDRHP revealed that its user base declined from 49.54 Mn in the December 2025 quarter to 47.97 Mn in the March 2026 quarter. 

We’ll come to why that may be the case, but the biggest reason is that Zepto has curtailed discounts as new players such as Flipkart Minutes, Amazon, JioMart have relied on discounts to acquire new users. 

Free Delivery & Discounts Out?  

Sources say that in response to these potential concerns, the quick commerce startup has pulled back discounts further, paused its aggressive dark store expansion in the metros and is focusing on customer retention rather than new customer acquisition. The new goal is profitability in more orders and across more dark stores, which will boost the overall bottom line. 

Backing this, a Bernstein Research report accessed by Inc42  says India’s quick commerce industry is expected to enter a slow expansion mode by 2027. Major platforms such as Eternal’s Blinkit, Swiggy Instamart and Zepto had already reached a milestone of 1,000 dark stores across top cities which drive a majority of the total demand and order volumes, the report said. 

It summarised that there is a likelihood that these key players will take a cautious approach towards the opening of new stores, which are the most detrimental to the unit economics in the quick commerce space. 

But there are other things that Zepto is doing. 

Over the past several weeks, it has raised its free delivery threshold twice and pulled back on blanket cashbacks. It has also revived a paid loyalty programme that moves discounts and cashbacks behind a monthly subscription rather than offering it to every user who opens the app.

“Blinkit and Instamart had been steady on pricing and delivery fees since last year, with their performances under public markets review and focus on profitability. Zepto, on the other hand, introduced free delivery on orders above ₹99, removing surge, handling charges, etc., which almost forced the industry to revive its discount strategy by November 2025,” an operations head at a top quick commerce platform stated.

This practice may well be on the wane now, at least for Zepto. Whether it forces others also to change the tune is yet to be seen. 

Zepto’s minimum order value for free delivery has moved from ₹99 to ₹149, and now to ₹199 in normal hours, rising as high as ₹299 during peak demand, bringing it in line with Blinkit and Instamart, both of which already sat at ₹199.

Kotak Institutional Equities has interpreted the move as an attempt by Zepto to bring down its quarterly burn, while analysts have also pointed to the possibility of higher net order value and better economics on smaller orders.

However, there are also apprehensions raised that although maximising the free delivery limits has the potential to increase basket sizes, it can also result in the loss of small-ticket-size order volumes for Zepto. This falls in line with the user attrition as many users would shift to other newer platforms that may be offering a lower threshold for free delivery. 

The same tension is playing out in discounts.

Zepto’s aggressive discounting over the past year was part of a broader fight for market share, especially against Flipkart Minutes and Amazon Now. Discounts are a relatively straightforward way to persuade Indians to switch from one app to another.

But insiders at Zepto say the unit economics have become increasingly difficult to manage with discounts. 

“The problem is that the customer is not merely being acquired at a discount, but more or less wants this incentive for every subsequent order,” a Zepto supply chain manager said, not wishing to be named.

This meant many users broke up their orders into multiple orders and increased the utilisation of the delivery fleet without necessarily adding positively to the unit economics. 

Industry analysts now expect to see a moderation in this behaviour.

Bernstein foresees a broader reduction in discounting across quick commerce. Bernstein’s report published in August 2026 stated that discounts on Zepto have come down heavily from 18-20% of the MRP of products at the time of IPO filing to roughly 14-16% now.

“The platform-led discounts are going to slow down further with moderation in new customer acquisitions and in fact the focus will be heavily now tilted towards retaining the existing customer base by improved services,” Bernstein says in its report.

It further highlights that if the discounts wave sustains through the festive season, it may indicate a shift in focus towards sustainable economics across the industry. 

Zepto Club: Moving Discounts Behind A Paywall

Discounts are still around but they have shifted from the overall customer base to loyal users, a clear sign of a focus on retention over new acquisition. And this is where Zepto Club comes in. 

In July 2026, Zepto introduced an invite-only paid membership programme called Zepto Club at ₹99 per month. The programme marks Zepto’s return to subscriptions after earlier offerings such as Pass and Daily.

Members will receive 5% cashback, redeemable Zepto coins and priority service, along with exclusive discounts. So now discounts are targeted towards its most engaged customers. The appeal for a Zepto Club membership will also come from faster deliveries, offers with bundling of services, SKU assortments and potentially early access to premium products — more on this next.

This is Zepto’s attempt to become more disciplined about incentives, replicating Amazon Prime membership, Swiggy One or Flipkart’s SuperCoins loyalty programme. Incidentally, despite running Zomato Gold for food delivery, Eternal has stayed away from a similar programme for Blinkit. 

Sources inside Zepto said that this is a priority for Zepto leadership now as subscription fees directly improve EBITDA — an area where the quick commerce company has struggled even with reducing cash burn. 

Having an exclusive membership allows Zepto the possibility to extend benefits into new verticals it launches. It can also become a new customer acquisition lever, if the company intends to broaden its business lines. 

Will Premium Push Pay Off?

One area that Zepto has been tentative about is premium grocery. 

This could be the next lever, since it is about increasing basket size and bringing in more profitable orders from metros in particular. In fact, a premium play done right can be a profitability bulwark for businesses that need to invest heavily upfront, such as Zepto, Blinkit or Swiggy Instamart. 

Data assessed by Inc42 from various brokerages tracking the quick commerce industry signals that grocery items have seen a steep decline in the discounts and there’s also a simultaneous push for premium and gourmet products.

Zepto’s Select offering, launched in July 2026, joins an increasingly competitive segment that is attracting other quick commerce players as well.

Blinkit and Instamart’s gourmet push, Flipkart’s Pykd play and FirstClub’s subscription-led model which is seeing adoption in Bengaluru are counterparts for Zepto Select. The industry as a whole is betting that the next phase of basket growth will come from taking the existing consumer base towards the more premium parts of its funnel. 

While Zepto’s earlier attempts seemed to be focused on moving every quick commerce customer to the platform through the Super Saver vertical, with Select, focus is on a cohort which agrees to pay higher fees, avails subscriptions and isn’t price-sensitive while comparing products.

In stark contrast, Zepto’s updated DRHP compared its Super Saver model to the Walmart-like ‘Everyday Low Prices’ philosophy. This was central to the pitch for its fundraising in the run up to the now-deferred IPO, but it’s no longer the biggest focus.

That was the strategy at the time given that this category was being created. 

The initial goal is to spread a wide net and Zepto, Blinkit and Instamart did that through rapid dark store additions and bringing in discounts and creating the habit of quick commerce. 

That was a strong growth metric for the quick commerce industry then, but now the focus is on monetising this user and dark store volumes through value-added upselling, cross-selling, subscriptions and premiumisation. 

At one time, Zepto thought the answer would come from Cafe or Pharmacy, but it’s less easy to make those into habits than feed the habit that’s already created. 

Now, the expectation is that Zepto will follow Blinkit and Instamart’s path to find sustainable means of growth and not just growth at all costs. But that will be a hard expectation to fulfil especially because Zepto does not have a safety net like Zomato and Swiggy which Blinkit and Instamart enjoy.  

Before Zepto and CEO Palicha set out to test market appetite again, they will have to essentially prove that its execution is once again the one thing that sets it apart. 

[Edited By Nikhil Subramaniam]

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