Hyperlocal start-up Roadrunnr may exit e-commerce delivery business

Hyperlocal delivery start-up Roadrunnr may exit the business of delivering products for e-commerce companies and focus on a few select categories such as food, groceries and merchant-to-merchant, or first-mile, deliveries, three people aware of the development said.

The firm, backed by Sequoia Capital and Russian billionaire Yuri Milner, had ambitious plans for the e-commerce vertical that it had intended to ramp up to account for three-fourth of its business.

A slowdown in funding has prompted Roadrunnr, owned by Carthero Technologies Pvt. Ltd, to scale down the plan and consider shutting the e-commerce vertical altogether, said one of the people mentioned above.

“They were planning to scale e-commerce like anything. E-commerce deliveries were to be scaled up to 80% of the total deliveries, but with funding constraints, plans have been reset,” said the person.

Two of the three persons mentioned above said the e-commerce vertical, which counted the likes of Flipkart Ltd, Myntra and Snapdeal (Jasper Infotech Pvt. Ltd) among clients, hit a hurdle about four months ago when the firm misplaced products from Myntra worth about ₹ 30 lakh and ended up paying a hefty fine. It could not be ascertained if the decision to roll back e-commerce deliveries was an upshot of that incident.

“We are not closing down e-commerce deliveries. We are doing bit of realignment around doing more first-mile than last-mile and due to this we are closing some localities and opening others that make more sense in terms of first mile,” a company spokesperson said in an email statement, without commenting on the Myntra incident.

Roadrunnr is also exploring plans to launch bike taxis, said the three people, all of whom spoke on condition of anonymity. The company is yet to decide whether it will launch a consumer-facing platform or forge a partnership with other bike taxi start-ups by giving them access to Roadrunnr’s existing pool of delivery personnel.

The company did not comment on the bike taxis plan.

Roadrunnr has been in talks with multiple investors, including Milner’s DST Global, to raise funds to the tune of $25-50 million over the last four months, but failed to sew up a deal.

The firm has also started cutting costs, especially expenses towards delivery personnel.

While restructuring salary and incentives for the delivery fleet led to protests at its office in Bengaluru in November, the firm has also stopped providing the personnel with mobile phones and power banks.

Roadrunnr is looking to explore additional revenue sources through offline advertisements and promotions for its partner merchants, said one of the people cited above.

On 30 March, Mint reported that Roadrunnr’s rivals Shadowfax Technologies Pvt. Ltd and Opinio (Moonshots Internet Pvt. Ltd) are exploring additional revenue streams, such as advertisements and promotions, to try and mitigate the impact of losses incurred by their core offerings.

According to Tracxn Technology, a start-up tracker, at least 27 hyperlocal business-to-business delivery start-ups have been founded in India since January last year, with about $38 million being invested into the sector.

Hyperlocal delivery start-ups, especially the consumer-facing ones, have run into trouble of late. Food delivery start-up Dazo shut shop, hit by ebbing investor interest. TinyOwl restructured its operations and fired hundreds of people across multiple cities.

PepperTap and Grofers, too, shut operations in smaller cities.

According to industry experts, making unit economics work is the biggest challenge for hyperlocal delivery start-ups, which charge merchants anywhere between ₹ 20-50 while expenses incurred per delivery is higher.

“To make a business work at price points which merchants are willing to pay is very hard. There is still idle capacity, and that does not justify the amount of money you make and need to pay the delivery personnel. Initially, the hypothesis was that the businesses will be able to gain a scale where their costs will be lower, but they have not been able to do that,” said Rutvik Doshi, director of the India arm of Inventus Capital Partners.

According to one of the persons cited above, Roadrunnr is making efforts to cut the cost of delivery. Food delivery, as a category, accounts for close to 80% of the company’s overall orders. It handles about 12,000-15,000 orders a day.

The delivery start-up has so far raised about ₹ 101 crore from investors such as Sequoia Capital, Nexus Venture Partners, Apoletto Asia, the personal investment vehicle of DST Global’s partners and Emerging Markets Internet Fund, a subsidiary of Rocket Internet SE, according to documents available with the Registrar of Companies.