Start-ups leverage a dedicated fleet of delivery personnel to ensure timely pickup, offer intra-city services
New Delhi/Bengaluru: Selling convenience is the name of the game for consumer Internet start-ups. There are a whole bunch of them offering to take away the bare minimum effort required to go to the nearest courier agency.
Companies such as Pickrr, Shipsy, Parcelled, DaakNinja, ShipTickr and Pigen—at least 15 such start-ups have emerged in the last nine months—offer to pick up a parcel, pack, ship and track it till it lands at its destination, at times at half the cost of courier service providers such as DHL, DTDC or Bluedart, effectively working as courier aggregators.
These companies, which have a dedicated fleet of delivery personnel to ensure timely pick-up, also offer intra-city courier services by leveraging this fleet.
On-demand home pick-up of parcels for retail customers is not a service aggressively promoted by the traditional courier service providers, who focus more on business establishments for driving volumes.
Besides, the courier service providers charge retail customers a premium. The start-ups offer a better deal to consumers as they have tie-ups with courier service providers for bulk order at an enterprise rate.
“Their model rests on aggregation. If they give us some amount of volume, we will give them a package which is for aggregators, which is at a reduced cost," said Sanjeev Kathuria, chief executive at Dotzot, DTDC’s e-commerce focused arm.
According to Kathuria, the start-ups help bigger courier service providers to reduce work, but are yet to kick in big volumes. “If I have to deal with 100 people, I will have to raise 100 invoices so on and so forth. Here, I will have to deal with just one company to get bulk volumes," he said.
All these conveniences aside, the consumer-facing business is not taking giant strides, prompting the start-ups to tap into first-mile logistics for small and medium enterprises, transporting goods from the merchant to a customer or the warehouses of e-commerce companies.
Some of them have also started handling reverse pick-ups for e-commerce companies.
And the bulk of the business at present comes from the business-to-business (B2B) operations. For Parcelled, reverse pick-ups account for about half of its approximately 3,000 daily orders. Shipsy has partnered with about 50 enterprises and Pickrr has roped in about 18 across Gurgaon and Delhi, which account for close to three-fourths of the about 170 orders they handle daily.
According to these firms, the B2B segment helps them maintain a steady stream of orders and keeps revenue trickling in.
“Small and medium enterprises help us give bulk orders to our partners. This, in turn, increases their business and helps us cut the cost of service," said Soham Chokshi, co-founder of Shipsy.
According to Xitij Kothi, founder of Parcelled, an individual consumer avails of a courier service barely once or twice a month, which makes the acquisition of retail customers a challenge. Besides, consumer behaviour is yet to evolve for extensive use of intra-city services, for which popular use cases could be the delivery of a wallet or a file left at home to office or a book from one location to the other.
However, in the B2B business, the start-ups are squeezed on margins. “B2B gives you a steady load and utilization of your fleet goes high. But the only challenge is they have very low margins," said Kothi. “We have the consumer service which is a premium product, and we work with small businesses and entrepreneurs for larger volumes. So, even if prices go down, fleet utilization goes up and it balances out."
If the funds raised from institutional investors is a benchmark for validation of business models, these start-ups are yet to take the logistics services segment by storm.
According to Tracxn, a company which tracks start-ups, Parcelled and Shipsy have received angel investment so far.
E-commerce logistics firm Delhivery is a strategic investor in Parcelled. In contrast, San Francisco-based Shyp has raised $62 million, while five of the 10 start-ups to have emerged in the last two years have been funded.
According to experts, B2B is the way to go for these companies. More so because India does not have thriving consumer-to-consumer (C2C) businesses, barring Quikr and OLX, which could make the first-mile logistics services more useful. About 12 peer to peer renting start-ups such as YBuySell, NextRead, Mesh, RentSher have come up recently, but none of them have gained significant scale.
“There is a market for the B2B segment. In future, if there are C2C marketplaces in India, which exists in the US, the consumer business will pick up because such businesses can only happen if a first-mile logistics infrastructure is present," said Rutvik Doshi, director at Inventus Capital Partners.
According to Manish Saigal, managing director at consulting firm Alvarez and Marsal, inter-city logistics will add more value to the businesses, given the higher margins. Rates for B2B first-mile logistics could be as low as ₹ 8-10 per package since these are essentially local pickups, whereas for handling movement from an e-commerce firm’s warehouse to a consumer, the average rate could be as high as ₹ 80-85.
“Hence, the cost structure becomes unviable if you do only pickups. It makes sense if there is a delivery attached," Saigal said. “First mile on a stand-alone basis is a difficult business, even intra-city delivery. Even if you make ₹ 30-40 for an intra-city delivery and require to deliver in a couple of hours, with the number of people you have to station within the city, it becomes hard to break even."