Zepto vs. D2C Brands: Contentious Ad spends, Non-compliant Debit Notes, Legal threats, and more

Since past few months, I've been getting requests from D2C founders to write about their fights with Zepto. Some of them are even at the verge of going legal. Here's an interesting case.

A founder with a ₹50 Cr revenue brand was urged to commit ₹50 Lakhs on Zepto Ads platform. The founder agreed, but then found out that the ads don't work. Not at all.

Now this is not a brand who doesn't know how to run ads. It's a well grown, mature brand working across platforms. They know ads, and quite well. But somehow their ads on Zepto fetched them nothing, and the platform itself seemed terribly inadequate. "In December, I ran ₹15L of ads and did ₹38L in sales. But in January, I ran no ads at all, but did ₹38L sales anyway. The portal doesn't work at all!", she told me.

Now I've been hearing a lot about how "Ads are the real high-margin vertical for Q-Comm companies". But there's always more than meets the eye, right? And the story here is that a lot of ads revenue which the companies (in this case, Zepto) are showing, is basically forced down the brands' throats. ("They begged us to go for those ads saying they're going for an IPO and what not", said a founder.) And when things don't go as promised, what follows are more promises for future, finally leading to a bill that nobody understands.

"For a long time, they said they'd adjust our mishap in the form of credits for future ads, but nothing happened. They just kept dilly-dallying on their word and ignoring our requests".

Now ads are high margin revenue, sure. But what about the integrity of that revenue? What about the transparency of performance and the quality of conflict resolution? What about all that?

How can you hype up the ad revenue when your employees are literally begging brands to commit money on ads, then promising to "adjust" their clear failings in the form of "future credits", which is all eventually leading to legal notices flying from all directions? What exactly is going on?

But this is not the only issue.

The bigger issue is that the brands aren't getting paid. And their payments are getting stuck for reasons that are incredibly hard to believe.

Articles about Zepto not paying brands even after 6 months past due dates were all over the news. But that's nothing. In one of the cases (I saw the mail trail), a brand got a Debit Note of ₹3L labelled as “Brand Funded Discount”. But there was no SKU-wise breakdown. No order-level mapping. No explanation of how that number was calculated. Just a note with a number on it. And the brand's got to pay?

Even more bizarre: In one of their mails, Zepto explicitly stated that going forward, Debit Notes would be GST-compliant. But then came an actual Debit Note - without GST. Haha!

The brand chased Zepto for months with 132+ mails asking for a simple reconciliation of their account. It was critical. But that clarity never came. What came instead was a threat of a legal notice by a lawyer. The actual lawsuit, however, also never came...

Zepto vs. Brands

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After this article picked up on Linkedin, I got approached by Zepto’s PR Team. They said they’d like to “investigate” these issues. When I conveyed this message to the aggrieved parties, they were pretty amused.

Nevertheless, I’ve tried my bit to build bridges in this episode of Zepto vs. Brands. Let’s see how the situation develops.

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