India’s booming quick-commerce sector saw a major casualty earlier this year.

Dunzo, the first Indian startup to receive a direct investment from Google in 2017, shut down in January, leaving hundreds of consultants, vendors, employees, and delivery workers unpaid. Rest of World spoke to Dunzo’s former employees, investors, and industry experts, who revealed how mismanagement, operational challenges, and fierce competition led to its demise.

Indeed, there are flaws embedded in the very concept of fast commerce that have taken down many players. “Most of these models such as quick commerce are thriving due to investor funding and cheap labor,” Yugal Joshi, partner at global tech research and advisory firm Everest Group, told Rest of World. “Though they have a revenue model of charging delivery fees, most of their value is through loss leadership.”

Dunzo’s CEO, Kabeer Biswas, declined to comment. Rest of World also reached out to other Dunzo founders and its key investors Reliance and Google, but received no response.

Dunzo was launched in 2014 as a WhatsApp-based, concierge-style pick-up and drop-off service. Its agents would, for instance, collect laundry, buy and deliver ingredients for a meal, or bring the wallet a user forgot at home to their office.

The company’s steady growth in a country where 90% of startups fail earned it a distinct reputation: Customers would simply “Dunzo it” when they needed something.

By 2020, the quick-commerce sector in India began gaining significant traction and Dunzo decided to jump on the bandwagon. It launched Dunzo Daily, a service that delivered goods from the company’s “dark stores” instead of other retail outlets.

Dark stores is something of a misnomer for neighborhood-based warehouses owned by quick-commerce companies, where supplies are stocked and accessed only by gig workers who pick up online orders and deliver them to customers.

This shift pitted Dunzo against deep-pocketed rivals such as Swiggy Instamart, the Zomato-backed Blinkit, and the Y Combinator-backed Zepto, which had started ramping up their warehouse expansion.

Dunzo’s strategic misstep was shifting from its core strength — connecting buyers and sellers online — to aggressively scaling quick-commerce operations through a network of dark stores, Sandipan Chattopadhyay, Dunzo’s early-stage investor, told Rest of World.

“Some of the elements of what we [Dunzo] started off with … was to empower the local stores. A dark store is the antithesis of that,” Chattopadhyay said.

Dunzo expanded to 15 cities and operated 120 dark stores, but remained at half the capacity of its rival Blinkit.

The company also struggled to run these stores, Manmeet Kaur, a former brand safety and escalation desk officer at Dunzo’s New Delhi office, told Rest of World.

“Customers were screaming at me and riders were screaming at me,” she said. “There were no offices for riders where they can go and file a complaint.”

Other former employees told Rest of World the company encountered new problems: battling rivals in price wars, maintaining higher app user retention, and balancing operational costs with the company’s pan-India expansion.

Dunzo “started off with some certain selected products and they didn’t extend their assortments,” Karan Taurani, vice president at investment firm Elara Capital, told Rest of World. “The app experience was kind of mixed. They didn’t create that impact of branding. … On the other hand, other players came in pretty aggressively.”

The expansion and financial setbacks went hand in hand — the company’s losses were pegged at $88 million in 2021.

In January 2022, Reliance Group, headed by India’s richest man Mukesh Ambani, invested $200 million in Dunzo for a 25.8% stake, becoming its largest shareholder.

Reliance may have “wanted to compete aggressively in [the] quick-commerce segment,” making Dunzo a strategic ally, Joshi from Everest Group told Rest of World.

Flush with funds, that October, Dunzo reportedly spent 400 million rupees ($4.6 million) to run a viral 20-second ad campaign during the Indian Premier League (IPL) cricket competition — the second most-valued sporting league globally after the NFL. In the immediate term, traffic to the app skyrocketed. But the fervor was short-lived.

Meanwhile, Reliance’s investment added a new dimension to the company’s daily operations. Dunzo staff were tasked with providing back-end support and delivery services for Reliance’s e-commerce platform JioMart, straining resources and blurring mandates, at least three former employees told Rest of World.

“The company’s package drop services, which were still valuable to customers, also suffered as it expanded to quick commerce,” said Joshi.

By 2023, signs of trouble began to emerge.

At least four former employees told Rest of World Dunzo started missing salary payments, delayed appraisal cycles, and did not pay the government taxes that the company had deducted from workers’ salaries starting mid-2023. The company, which used to answer employee questions and post revenue numbers in Slack channels, did an about-face on transparency. It started muting people on Zoom calls, and picking and choosing questions posted in the chat.

The same year, Dunzo owed over 114 million rupees ($1.3 million) in unpaid ad dues and vendor payments to Facebook, Google, marketing agency CupShup, tech cooperative Nilenso, and others.

Dunzo entered a state of flux — the employees said it could neither commit fully to quick commerce nor maintain a competitive edge over its original model, which was to act as a marketplace aggregator.

Dunzo warehouses grappled with pricing discrepancies, expired products, and slow order fulfillment, while delivery workers struggled to get uniforms and bags from the company, Kaur said.

Until she was laid off in August 2024, Kaur had merchants reaching out to her on LinkedIn, asking about their back pay. She is still waiting on her own unpaid salary, amounting to 250,000 rupees ($2,860).

When the first round of layoffs happened in January 2023, Sarthak Gandhi, then a lead developer at Dunzo, saw it as a routine restructuring. But in April, “a lot of senior folks went, like whole verticals were shut down and in the All-Hands [meeting], we got to know they even reduced the number of dark stores,” Gandhi, who had joined Dunzo as a consultant in 2020, told Rest of World.

After the next round of cuts in July and September, Gandhi and most of his peers and managers were let go. He was only a month away from his wedding. Naveen Meka, a Hyderabad-based supply lead who joined Dunzo in 2019, was laid off around the same time. He wrote WhatsApp messages and emails to the company’s leadership, begging for his unpaid wages so he could pay his children’s school fees, but nothing came of it.

“It’s a big, big pain during that time for multiple employees, not only me,” Meka told Rest of World.

By August 2024, a skeleton crew of 50-odd employees was retained just to keep things running, reports suggested.

In early January this year, Reliance wrote off its $200 million investment. Soon after, Biswas reportedly joined the Walmart-owned Flipkart to head its new quick-commerce segment, Minutes.

Meanwhile, Blinkit, Zepto, and Swiggy Instamart — the three market leaders that control 80% of India’s burgeoning quick-commerce industry — have each set up more than 1,000 dark stores.

“This business is all about the execution. [It] has to be top-notch,” Elara Capital’s Taurani said. “You need to have the best people, best technology offering, best assortment. It’s not only about the investment.”

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