Why Dunzo Couldn't Survive Despite Everyone Loving It

Ask a Bengaluru resident in 2019 about Dunzo and you would watch their eyes light up. The app could do anything. Get you a bottle of wine at 11 PM when the bars had just closed. Pick up your forgotten laptop from the office on a Sunday when the security guard wasn't answering. Deliver a birthday gift to your girlfriend across town with a handwritten note you had dictated to the rider. Buy you that specific shampoo from the store downstairs that you were too lazy to walk to yourself.

Dunzo was not just an app. It was a lifestyle. People in Bengaluru and Delhi literally said "I'll just Dunzo it" as a verb. The company raised hundreds of crores from Lightbox, STRIVE, Google, and a steady stream of investors who all saw the obvious future coming. Reliance bought a 25 per cent stake in 2022. The founders were on covers of business magazines. The future looked glorious — ordering anything, anytime, from your phone, with a rider arriving within an hour to your doorstep. An Indian everything-app before America had figured out what that meant.

By 2024, Dunzo was on the brink of collapse. Layoffs stretched across multiple rounds. Employees were going unpaid for months. Vendors were filing legal cases. Failed fundraising attempts were making news every quarter. The founder stepped down. The app, once beloved, had been reduced to a ghost of itself. What actually happened to the app everyone loved? The answer teaches one of the most important and most often ignored lessons in business — the difference between a must-have and a nice-to-have.

The brutal test every product must pass

Every product sold in the world falls into one of two categories. Must-have. Or nice-to-have. And this classification, more than any marketing skill or technological brilliance, determines whether the product will be around in five years.

A must-have is something you genuinely need. If it disappeared tomorrow, your life would get noticeably harder, or in some cases impossible. You would scramble to find a replacement within hours. You would pay significantly more to keep the same quality of service, because losing it is not an option. Examples — your phone connection, your bank account, your ration shop, your local chemist, the neighbourhood kirana that lets you take groceries on credit at the end of the month. These things are not optional. If a rival offers the same service at twice the price and the original one shuts down, you will grumble, but you will pay.

A nice-to-have is something that makes your life slightly better without being critical. If it disappeared tomorrow, you would shrug and move on. You would miss the convenience for a day or two, but you would adapt. You would not pay much more to keep it, because the value you get from it has a clear ceiling. Examples — a fancy newsletter you enjoy reading, that one café that makes good coffee, a design tool you use once every few months, a concierge service that picks up your laundry when you are lazy.

The test sounds almost insulting in its simplicity. And yet, a staggering number of Indian startups with hundreds of crores of funding never actually ran this test honestly on their own product. Dunzo is the single most vivid recent example.

What Dunzo actually was

Dunzo was a beloved nice-to-have with the subsidy economics of a must-have. At its peak, it was delivering items across Bengaluru with riders who were paid ₹40–60 per delivery, on orders where Dunzo itself was charging customers only ₹30–40 after discounts and promo codes. Each delivery, Dunzo lost money. The losses were covered by investor capital, on the thesis that once the company had trained Indians into the habit of "Dunzo-ing" anything, they would eventually pay full unsubsidised prices, and the business would flip to profitability.

The thesis was wrong in a specific, painful way. It confused love with dependence. Indians in Bengaluru genuinely loved Dunzo. They used it for everything. They bragged about it to visiting cousins. They complained loudly on Twitter when a delivery was delayed. All of this looked like intense customer engagement. All of this looked like a product people could not live without. But when Dunzo — under pressure from the reality of unit economics — started raising delivery fees to ₹50, then ₹80, then ₹120 on weekend evenings, users did exactly what nice-to-have users always do. They walked away.

A Bengaluru techie who had "Dunzo-ed" a shampoo bottle for ₹30 did not want to pay ₹120 for the same service. She walked to the store instead. The "love" that had looked like a business moat was really just rational appreciation for a heavily subsidised convenience. Remove the subsidy, and most of the love evaporated. The users were price-sensitive about this service in a way they would never have been about their phone bill, their Swiggy order when they were actually hungry, or their bank balance.

Why nice-to-haves die when funding winter arrives

Nice-to-have businesses can survive for years as long as there is cheap capital to subsidise the experience. In the easy-money era of 2019–2021, hundreds of Indian startups were essentially subsidising nice-to-have products into looking like must-haves. Quick commerce losing ₹25 per order. Fitness apps paying users to exercise. Content apps giving away premium subscriptions for free. Payment apps offering cashback of 20 per cent on transactions. The pattern was the same everywhere — investor cash was covering the gap between what users were willing to pay and what the service actually cost to run.

When funding winter hit in 2023, these businesses faced a brutal moment of truth. The capital was no longer available to fund the subsidies. So the subsidies had to come off. Prices had to rise to something resembling real unit economics. And the user behaviour changed overnight. A product that had looked like a must-have at subsidised prices suddenly revealed itself as a nice-to-have at real prices. The user loved it but would not pay for it.

This is what happened to Dunzo. What happened to several quick-commerce players. What happened to a generation of D2C brands whose entire model was built on discount-driven Instagram acquisition. Love does not pay salaries. Only repeat paid usage at unit-economics-positive prices does.

The single best validation test you can run

Here is the single sharpest test any founder can run on their own product, to figure out whether it is a must-have or a nice-to-have. Do not ask customers whether they like the product. Do not count downloads or engagement time. Run this one test instead — if you doubled the price tomorrow, how many existing users would keep paying?

If the answer is more than 80 per cent, you have a genuine must-have. Users are paying for value that dwarfs the price, and a doubling is painful but acceptable. If the answer is 40–60 per cent, you have a strong nice-to-have with some must-have characteristics for a subset of users. If the answer is below 30 per cent, you have a pure nice-to-have, and your business is living on borrowed time the moment subsidies end.

Most founders never actually run this test because the answers are uncomfortable. They would rather read vanity metrics like daily active users and download counts. Those metrics are often meaningless in a nice-to-have business, because they are being inflated by subsidised pricing. The only metric that tells the truth is what happens when the price goes up to the level it would need to be at for the business to be profitable without external capital.

How to price-test without destroying the business

Founders get nervous about price-testing because they are scared users will abandon the product. Fair worry. There is a smarter way to run this test without blowing up your business. Do it to new users, in small, controlled segments. Launch a parallel pricing tier at 2x the current price to a cohort of new customers — say, users signing up from a specific city, or specific demographic. Measure conversion. Measure retention at the 30-day and 60-day mark. Compare against the control group at the old price.

If the 2x price cohort has conversion or retention that is dramatically worse than the control group — say, 20 per cent as much usage — you have discovered that your product is not worth 2x the current price to customers, which means you were subsidising hidden losses. If the 2x cohort is at 80 per cent or more of the control group, you have genuine pricing power and your product is closer to a must-have than you thought.

This is the kind of experiment that disciplined consumer-internet companies run constantly. The ones that do not run these experiments — that assume customer love translates automatically into willingness to pay — are the ones that discover the truth the hard way, when the funding runs out and reality arrives all at once.

Why Indian customers are especially nice-to-have-prone

There is an uncomfortable reality about the Indian consumer market that every founder has to internalise. Indian consumers, on average, are highly price-sensitive, even in the middle class. This is not a criticism of the market — it is a structural fact. In a country where disposable income is tight for most households, consumers optimise carefully. They will love a subsidised product, but the moment the price moves toward unsubsidised reality, they show their price sensitivity clearly.

This is why so many Indian startups that look like engagement powerhouses end up struggling with monetisation. JioCinema, Hotstar, Amazon Prime Video India have all had to navigate how much Indian viewers are willing to pay for content — and the answer, honestly, is "less than equivalent Western markets." It is why food-tech delivery has struggled for years to turn high usage into high profits, because Indian customers will walk to the restaurant if the delivery fee crosses a certain level. It is why fitness apps, dating apps, and dozens of other consumer-internet categories have found that their Indian monetisation economics are harder than their Western counterparts predicted.

This is not a reason to avoid building for Indian consumers. It is a reason to be extra rigorous about the must-have test before scaling. If your product is borderline nice-to-have in a Western market, it will almost certainly be a pure nice-to-have in India once subsidies come off.

💡 Insight: Love doesn't pay bills. Only repeat purchases at unsubsidised prices do. Everything else is borrowed time.

That sentence is the obituary for half the high-profile Indian startup failures of the last five years. Dunzo. Cars24 in several segments. Certain quick-commerce experiments. A long list of D2C brands that never crossed profitability. They were all loved. They all had engaged communities. They all had real product differentiation. None of that mattered once the unit economics were exposed, because under the noise of love, most of them were nice-to-haves in disguise.

What a student should take from this

If you are in college thinking about starting something, the single most useful thing you can do is the must-have test on your idea before you build anything. Describe the product in one sentence. Then ask yourself — if this disappeared tomorrow, would my target customer scramble to find a replacement, or would they simply move on? If the honest answer is the second one, you are probably designing a nice-to-have. That is fine; plenty of nice-to-have businesses survive. But they need very different economics than must-haves — they need low costs, almost zero customer acquisition spend, and careful pricing discipline from day one. They cannot afford the subsidised growth strategy that must-haves can sustain on investor capital.

When you evaluate your own idea, also think about substitution. How many alternatives does your customer have? If the answer is "lots," you are in nice-to-have territory. If the answer is "very few, and all significantly worse," you may be building something that leans toward must-have. Uniqueness of problem, not uniqueness of product, is what keeps customers paying when subsidies end.

That small, honest moment of watching beloved convenience turn into "not worth it" is the story of many Indian consumer businesses over the last five years. The lesson is not that the founders were lazy. Several were brilliant. The lesson is more uncomfortable — love is an unreliable metric for a business. Only paid repeat usage at real prices tells you the truth. Every founder who has watched their own beloved product quietly die when subsidies ended has learned the same lesson in retrospect. Learning it in advance is worth years of wasted capital.

🎯 Closing Insight: Build must-haves. Nice-to-haves live on borrowed money. Only must-haves survive winter.