Start-ups in e-commerce logistics gather pace

India’s e-commerce industry is growing rapidly and creating a huge demand for logistics services. Mint profiles four start-ups in the logistics space that provide support, delivery and warehousing services to e-commerce companies.

COMPANY: SSN Logistics Pvt. Ltd (Delhivery.com)

ENTREPRENEURS: Sahil Barua, Mohit Tandon, Bhavesh Manglani, Suraj Saharan and Kapil Bharati

EDUCATION: IIM-Bangalore, IIT-Kanpur, IIM-Calcutta, IIT-Bombay, IIT-Delhi

LOCATION: Gurgaon

FOUNDED: 2011

Inspired by the value that Zomato Media Pvt. Ltd, an online restaurant search and information company, was creating, Delhivery began as a food delivery firm, but within a few months of its launch, it starting expanding the scope of its business model. “We realized that it was a very early time for food delivery. We started with shipments in Delhi and nearby regions, and soon expanded to Chennai,” said Bharati over the phone.

The company works with more than 150 vendors to provide shipments across 175 cities. It averages about 9,000 deliveries daily. “We not only provide for shipments and deliveries, but also warehousing facilities where the company stocks and racks the products for the vendors,” said Bharati. In addition, Delhivery provides all kinds of retailers, even small businesses, technology solutions to integrate all channels of sale. These include offline, online, social media, mobile and voice solutions that allow sellers to manage stores and integrate delivery with market needs.

The company raised $35 million in the third, or the so-called series C, round of funding in September from private equity firm Multiples Alternate Asset Management Pvt. Ltd, Nexus Venture Partners and Times Internet Ltd.

“We are currently looking to raise a series D (fourth) round of funding,” said Bharati. The company is looking to strengthen its technology solution for its delivery operations and warehousing. “We want to put in place a fully automated process,” he added.

Delhivery is looking to expand to 250 cities, 30 delivery centres and targeting revenue of ₹ 250 crore for the fiscal year 2015-16. International expansion is part of its future strategy.

ENTREPRENEURS: T.A. Krishnan, Sanjeev Saxena, K. Satyanarayana and Manju Dhawan

EDUCATION: MBA, Bharatiya Vidya Bhavan; computer applications diploma, Delhi University; MBA, FORE School of Management; Master’s in public administration, Delhi University

LOCATION: Gurgaon

FOUNDED: 2013

The founders were former employees of Blue Dart Express Ltd with over 25 years of experience in logistics before they thought of starting their own company.

“I had helped in launching the e-commerce logistics division at Blue Dart,” said Krishnan over the phone. The founders started the company with an initial investment of ₹ 1.5 crore with a focus on making deliveries only for e-commerce firms. The company makes over 100,000 deliveries each day through its network of 200 delivery centres in 212 cities.

“We charge the company a freight charge which differs upon the distance of shipment, weight, type of good that is delivered. This typically falls between ₹ 85 and ₹ 110 on an average,” said Krishnan.

The company raised a series A (first) round of funding worth ₹ 75.5 crore from private equity firm Peepul Capital Llc in September. It is looking to raise a series B (second) round of funding in the next two months to fund its expansion plans.

“We are looking at providing warehousing services which require a lot of capital, and expanding coverage to 8,500-10,000 pincodes and 500 cities by 2016,” Krishnan added.

ENTREPRENEURS: Albinder Dhindsa and Saurabh Kumar

EDUCATION: IIT-Delhi, IIT-Bombay

LOCATION: Gurgaon

FOUNDED: 2014

Dhindsa was heading the international operations at Zomato for over two years before starting the company.

“A simple item from a local grocery store was what I wanted to order and that’s what led to the business idea,” said Dhindsa over the phone. The founders started the company with an initial investment of ₹ 1 crore and launched delivery operations in Delhi last year. The company lists vendors and carries out deliveries across three categories. The first is vendor-customer deliveries where consumers order through a mobile app and Grofers delivers the goods in 90 minutes. The second is where bulk, wholesale deliveries are made across vendors and the last carries out deliveries of documents for companies.

“Most deliveries that we do are for pet food, medicines, and other non-food and grocery items,” said Dhindsa. The company charges the vendor a commission on the total value of the order. Cakes and pastries comprise a bulk of its deliveries. “We operate only as a mobile application because it is easier to pick up the customer’s location and get point of delivery information,” he added.

The company currently has 300 delivery centres in Delhi, and one in Bengaluru. Each delivery centre has a network of not more than 10 employees and does about 100 deliveries a day.

Grofers, which raised an undisclosed amount from Sequoia Capital in 2014, received $10 million jointly from Sequoia and Tiger Global in February this year. The company is looking to expand to most metros like Chennai, Hyderabad and Pune by the end of this year.

ENTREPRENEUR: Vijay Ghadge

EDUCATION: London Business School

LOCATION: Gurgaon

FOUNDED: 2011

Even as Ghadge was handling operations at Xerion Retail Pvt. Ltd that owns and operates Jabong.com, he had a firm belief that the e-tailing segment would become a huge market.

“We also saw opportunities of innovation in the way these orders were being served—be it in fulfilment centres or in logistics,” said Ghadge in an email response. The areas where he thought opportunities existed were speed of shipping, visibility and accuracy of tracking information, fewer and quick returns, and refunds and quick cashback to clients of cash on delivery collections. The company today provides such services daily to over 100,000 customers in 107 cities. GoJavas, according to Ghadge, has online retailers such as Jabong, FabFurnish, HealthKart, Yepme and Lenskart as its clients.

“We deliver anywhere between 1.25 and 1.5 lakh deliveries per day for over 400 clients. The company is looking to clock around ₹ 200 crore in revenue for the fiscal year 2015-16,” said Ghadge. The company had acquired the logistics arm of Jabong in February 2014. It was one of the first firms that allowed customers to open and check the packet delivered before making a payment. This February, Snapdeal, owned by Jasper Infotech Pvt. Ltd, acquired a 20% stake in GoJavas for ₹ 120 crore.

EXPERTSPEAK

The logistics industry is the backbone of any economy and India being one of the fastest-growing economies, offers great potential for growth in every sector. Currently, the logistics industry is estimated to be around $200 billion (around 12.5 trillion) and is growing at a healthy rate of 15%. However, the spending on logistics is quite high compared with developed countries and it is the inefficiency in the system that offers a great scope for start-ups. Companies that offer better solutions at a lower cost would certainly have an edge over others in the sector, and start-ups have the potential to do so as they can adopt to newer technologies and solutions to address the need. Overall, there is scope in every sub-sector like warehousing, cold storage and shipping. Major challenges for the start-ups would be poor infrastructure, trade regulations hindering the creation of national networks, lack of trained manpower, low deployment of technology and poor infrastructure—both for warehousing and storage. E-commerce is the main driver of growth in the logistics sector and it has come up with many solutions such as handling the last-mile delivery, third-party logistics or cash-on-delivery model. Since India is a large country, hence many companies would adopt to geographic-specific solutions and offer good opportunity for consolidation. Whatever may be the condition, the sector offers a good scope for growth and I am confident of seeing many newer companies coming up with some disruption to existing solutions.—Anil Joshi, managing partner, Unicorn Venture Partners