The logistics industry is the backbone of every economy. The growth of the Indian ecommerce sector enabled startups dealing in logistics to expand their businesses and tap into other services through technology. It allowed them to thicken the existing supply chain solutions and fill the otherwise unorganized and fragmented Indian logistic sector gaps (1).
It is worth highlighting that there are more than 9,000 startups in the logistic tech sector across the globe. It includes companies offering intracity food and parcel delivery, intercity freight movement, software solutions for businesses, and logbooks for drivers.
Logistics tech is also one of the most active sectors for investors, with overall funding of more than 60 billion USD in over 2,000 companies. It is also interesting to note that these companies have secured nearly half of these fundings in recent years (2).
Total logistics startups funding has witnessed a dramatic increase over the past few years, growing at a 75% CAGR from 2014 (3)
Y Combinator, Plug and Play Tech Center, Sequoia Capital, TechStars, and 500 Startups are among the most active investors in the segment (by the number of investments).
Some of the top business models attracting major funding include hyperlocal, delivery services, trucking, and warehousing.
By the year 2020, the sector also observed the rise of more than 25 unicorns, including DoorDash, Rappi, and Deliveroo. Moreover, we have seen nearly 57 companies going public with Gati, Traquer, and Element Fleet, to name a few in the recent past (4).
Indian Unicorn Startups in Logistics
India is among the largest startup ecosystems across the globe, with more than 7,500 startups incepted between 2013 to 2018.
The Indian logistics and transport startups (making up about 5% share of the ecosystem) offer logistics services and supply chain management. It includes logistics and distribution platforms, warehousing, IoT platforms for logistics, IoT platforms for goods transportation marketplace, etc. (5).
Year Founded: 2011
Founders: Bhavesh Manglani, Kapil Bharati, Mohit Tandon, Sahil Barua, and Suraj Saharan
Incepted in 2011. Delhivery one of India’s leading supply chain services. It is a Gurgaon-based shipping startup and one of the last mile delivery startup companies in India.
Delhivery business model only deals with e-commerce orders, making it easy for the company to pick up, connect, and deliver shipments on time.
According to Crunchbase data, since its inception, it has secured about 959.6 million USD total funding amount over five investments round.
Year Founded: 2015
Founders: Chanakya Hridaya, Rajesh Yabaji, and Ramasubramaniam B
BlackBuck, since its inception in 2015, has become India’s largest trucking network through a combination of logistic services and data science to build a smart supply chain.
BlackBuck is one of the few online trucking logistics startups in the country, and it is a pioneer in bringing the offline operations of trucking online. The startup is committed to making truckers’ lives easier by allowing them to book a load and move at capacity. They also enable shippers the right truck access at the click of a button.
According to CrunchBase data, BlackBuck has secured over 297 million USD total funding amount from about 13 investors.
Year Founded: 2014
Founders: Deepak Garg and Gazal Kalra
Rivigo is a technology venture building in the material movement pipeline of the country. While making logistics faster, safer, and cost-effective, Rivigo services multiple industries, including e-commerce, automotive, FMGC, and others.
It has also launched a RaaS, Relay-as-a-Service, to offer a relay trucking model to fleet owners and truck drivers across the country. It is an operating model wherein drivers change over after every few hundred kilometers of driving through a relay pit-stops network and then rostered back to their home base.
Moreover, the company also launched the National Freight Index in 2019, enabling unrestricted, real-time freight pricing sharing with a potential to unlock immense value for the Indian logistic industry.
Last-Mile Logistics Market in India
We all know how the coronavirus pandemic accelerated the shift towards digitization and led to the exponential and overnight growth of online services dependency.
The Indian population was largely acquainted with the last-mile delivery or doorstep delivery concept over the past few years. However, the pandemic largely emanated the situation and boosted the mass adoption of these services.
However, it is also worth highlighting that small businesses that make up the Indian economy’s backbone still have a limited digital presence. There is an estimation that only 20% of overall small businesses offer their services online. It has left a largely untapped market with infinite possibilities for the growth of the logistics sector.
We expect that the demand for last-mile delivery services will grow significantly in the upcoming years as more businesses’ digitalization occurs (6).
Besides, there is already a surge for on-demand and instant delivery services across the country’s urban space.
There is a strong requirement for technology-based instant last-mile delivery models to improve delivery speed and offer efficient resource utilization as logistics and delivery service providers are brimmed with orders.
Today, efficient last-mile delivery has also become a key factor concerning customer satisfaction, and all kinds of businesses are looking to offer last-mile delivery.
The on-demand delivery space is already disrupting the traditional markets through adopting a full-cycle approach to three essential delivery experience components; ordering, pick-up, and delivery. It would further receive a boost as businesses adapt to the pandemic-induced changes.
Emerging Requirement for Last-mile Delivery
Undoubtedly, ecommerce was among the most notable beneficiary of the coronavirus pandemic and the induced economy transition. As more people preferred the safety of home delivery over personal purchasing, ecommerce platforms witnessed floods of orders.
In the country, where most of the population still had not adopted online purchases, the lockdown period witnessed a rise in first-time ecommerce users. The initial months of 2020 were so overwhelming that leading ecommerce platforms such as Amazon, Big Basket, and Grofers had to prioritize orders and request customers to bear with delays.
According to Forrester Research, a market research company, ecommerce sales rose by 7 to 8% in India in 2020 (7). Even though the surge was much less compared to the US or Chinese markets, it does indicate a shifting change in consumer behavior.
The growing ecommerce industry is also creating more intra-city logistics opportunities and changing customer preferences concerning delivery and shopping.
According to a KPMG report, 80% of the customer today are looking for same-day shipping. At least 50% of shoppers are also willing to pay extra money for faster delivery (8). As consumers are becoming more accustomed to the extremely quick delivery experience, offering shipping options would become a requirement for most retailers.
Last-mile Delivery Efficiency
As the phrase suggests, last-mile refers to the final delivery stage to the consumer, which mostly happens from a point to another within a city. In India, inter-city delivery is often efficient; however, the final stage delivery is still a challenge.
It is where efficient intracity logistics and last-mile delivery services are gaining prominence. It is not only about delivering parcels within 30 minutes; it is about solving the actual business challenges. It is more about building capabilities to seamlessly execute the goods movement irrespective of the size and scale.
Today, major ecommerce players and even small businesses are looking to improve their delivery time and experience. They are looking at it as a critical tool to gain new customers and satisfy their existing ones. Hyperlocal firms are increasingly seeing a surge in express delivery, next-day delivery, and two-day delivery.
Another new focus area that is gaining more prominence these days is instant on-demand delivery services. However, executing such express and on-demand deliveries need highly sophisticated logistics and last-mile delivery capacity.
The Indian logistics sector is still nascent, and hence it needs to grow at a rapid speed to meet the surging requirements of a digital nation. All of it is a clear indication of infinite opportunities in last-mile delivery services, a sector rapidly emerging in India.
Challenges in Intracity Logistics
Intracity logistics companies and service providers mostly deal with instant and on-demand delivery needs and have a high commitment degree to ensure deliveries within the same day. It makes their entire operations chain subjective to demand variability.
There could be times when orders may suddenly rise from one part of the city, asking for quick identification and connectivity with an available delivery agent. That’s why these providers need innovative technologies that provide a bedrock of a system that can efficiently match demand and supply requirements and ensure a seamless function. It would also ensure resource optimization and positive unit economics.
Such innovation-focused last-mile delivery startups are rapidly filling the void by harnessing technological innovation to make algorithms and systems that optimize resource usage to the fullest and ensure a high degree of customer satisfaction (9).
Big Opportunities in the Indian Logistics Market
The Indian government reforms and expenditure supports the country’s logistics sector. According to the Ministry of Commerce and Industry, there are expectations that it would reach 500 billion USD annually by 2025 (10). Moreover, the logistics-related infrastructure development such as logistics parks, container freight stations, and free trade warehousing zones would also improve the sector’s efficiency.
As we have discussed, with growing retail and ecommerce sales in India, last-mile delivery is an attractive and underserve opportunity. B2B logistics startups offer technologies and solutions to meet large supply chain and logistics organizations’ requirements. It includes everything from warehousing operations to demand to forecast, indicating a wide scope for technological disruption.
A supply chain-focused Fund and Accelerator in India, Supply Chain Labs, supported by Lumis partners, highlighted subsegments of interest in the country (11).
Logistics startups use technologies such as data analytics, automation, and IoT. They have the potential to disrupt the Indian logistics market.
Here are several opportunities we have discovered in the logistics market
Same-day Delivery and Amazon Unbundling
An on-demand logistics and delivery company based in Hong Kong, Lalamove, closed a massive 1.5 billion USD funding round.
The company offers same-day delivery services and is operating in Asia and Latin America since 2013. Last year, the company launched another branch in Dallas, the US, to empower SMBs with the ability to provide fast and on-demand deliveries to customers.
After that, the company also expanded to Chicago and Houston to offer services to multiple industries such as catering, restaurants, retail, ecommerce, construction, and manufacturing.
It confirms that companies that empower small businesses and independent retailers to compete with giants like Amazon stand to win big.
According to a trendsetter, Saeedreza Abbaspour (12), different services now offer every segment of Amazon. Bolt offers fast checkout, Affirm provides payment solutions, and ShipBob offers a fulfillment center for ecommerce brands. He further added that it is only a matter of time before a company would start offering parcel lockers for small retailers.
SaaS and E-forwarding
The logistic industry is well aware of billion-dollar deals. In 2019, Flexport secured 1 billion USD at a 3.2 billion USD valuation, and since then, venture capital funding in logistic software has boomed.
Another logistics tech startup, Freightos, an online freight shipping platform, and marketplace, has secured about 70 million USD since 2017. According to the company, more than 10k small businesses used their portal to compare, book, and manage freight.
Their platform includes SMB-centric features like FBA, integrated fulfillment by Amazon destinations, instant quotes, and facilities for infrequent shippers and low volumes.
It is also worth highlighting that digital forwarders such as Flexpost and Freightos are the future of logistics. The low-touch and self-service digital model is perfectly suitable for the SMB market.
According to a recent McKinsey report, by 2030, e-forwarding or crowdsourced delivery would turn the new normal (13). There is an opportunity for e-forwarders and startups to emerge and offer complementing services for SMBs.
Moreover, as any industry grows and becomes fragment with numerous players, there will be another opportunity for online marketplaces that match sellers with qualifying distributors.
Packaged Consolidation and Mail-box-as-a-Service
Several companies such as Shipitto and Stackry offer package consolidation services for people. They offer consumers a mailing address inside the US and then repack and consolidate all their packages before shipping them to consumers wherever they are based.
There are several companies like these that make it easier for brands to reach their far-flung customers. One such startup called Passport raised 12 million USD last year and shipped millions of packages across the globe for various D2C companies. The company has claimed that it has helped its customers grow their international shipping volume by 43% YoY.
India has several business opportunities considering its strong economic growth, relatively young population, high internet penetration, and rapid ecommerce market growth. However, India’s delivery infrastructure level is quite low, something unique for emerging nations.
Overall, India still needs an effective last-mile distribution to the final destination like traffic congestions and air pollution issues in urban cities and distribution networks in rural areas and smaller cities.
According to the available data, the country’s last-mile logistics firms don’t make at least 15% of deliveries because of unsuccessful receiving citing general reasons (14).
Regardless, India’s last-mile transportation network is not fully developed. It needs startups that can take a fast-paced business strategy, such as offering a platform that utilizes IT technology and matches customers and individual drivers.
It would help to improve inefficiencies and meet the requirements of both sellers and customers. In addition to improving transportation efficiency, the country needs more startup companies that focus on making truck driver occupation more human-like and attractive.
There is plenty of room in the Indian and international market to offer package consolidation and forwarding services focused on the fast-forwarding D2C sector. There are also opportunities to offer the same package consolidation services in markets like Dubai and South America, where ecommerce growth is particularly high (15).
Indian startups can focus on digitalization of supply chain, logistics, and transportation through core technology modifications like IoT, blockchain, AI, Machine Learning, control towers, learning enabled demand forecasting, self-adjusting book allocations, autonomous devices like drones, and AGVs, and others. It would power the supply chain sector with intelligence, agility, and visibility.
It would be crucial for stable transportation and logistics in the country.