Mumbai: Hyderabad-based LastMile Delivery Pvt. Ltd, a logistics firm largely catering to rural and remote locations, is looking to expand its network to 6,000 pin codes by December 2017 and is targeting a ten-fold growth in revenues, a top company executive said.
LastMile has built a franchise-based network for deliveries and tied up with other e-commerce logistics companies—Inlogg Internet Pvt. Ltd and Gati Ltd—to service areas where they do not have their own network.
The company, which expects to clock Rs10 crore in revenues by December this year, is eyeing a ten-fold jump in revenues by 2017 end, according to founder Suresh Kumili.
LastMile plans to expand to 120 districts in the five states it currently operates in—Andhra Pradesh, Delhi, Karnataka, Tamil Nadu and Telangana. It is also looking to launch services in Maharashtra.
As an e-commerce-dedicated logistics company, LastMile has four city-level hubs where it receives shipments from its e-commerce clients. But, instead of having delivery staff on its rolls, LastMile identifies them as last-mile partners who can operate as an independent franchised unit to be paid on a per-packet basis.
“By outsourcing the pick-up (from the warehouse of the e-commerce company) through its last-mile partners along with servicing the last-mile deliveries, we are able to set up a logistics network by only investing in a hub and sorting facility that is 4% of the total cost that any logistics company would incur,” said Kumili.
To achieve its daily target of 100,000 shipments by 2017 end, LastMile is currently running pilots with two e-commerce-focused logistics companies—which Kumili declined to name—and aims to partner with the top five firms by next year, he said.
“We want to become the last-mile partner for other logistics companies instead of competing with them. LastMile will provide its excess capacity to deliver their shipments at almost half the cost they would otherwise spend on delivering the package themselves in a rural area,” explained Kumili.
“The industry is still evolving and rural e-commerce is also at a very nascent stage. The two risks in this kind of model would be how cash-on-delivery is being handled and the number of orders per delivery boy that will come from rural areas, to ensure that each delivery person is getting sufficient orders to make it sustainable,” said Sreedhar Prasad, partner, Internet commerce, KPMG.
Kumili said that most logistics companies do not have access to rural areas. “Any logistics company would have to invest in setting up physical infrastructure such as first-mile pick-up, sorting facilities, and then last-mile. This comes at a very high fixed cost. And 50-60% of the total cost goes towards last-mile alone. By partnering with us (LastMile) these logistics companies are able to convert their last-mile fixed cost into variable cost (by paying per packet),” he explained.
On an average, a last-mile partner is able to earn three to four times more than he would on a fixed salary, said Kumili, declining to share how much LastMile pays per packet.
Founded in 2015, LastMile plans to raise $1 million in its next round to fund its expansion in Andhra Pradesh and Telangana. Last year, the company raised an undisclosed amount from Corpus Investment Group as seed funding.