Logistics start-ups are adding new services to serve traditional businesses to maintain revenue flow as their e-commerce clients struggle. Logistics service provider GoJavas, which counts more than 400 e-commerce companies as clients, and other start-ups such as Shadowfax Technologies?Pvt.?Ltd and Opinio (Moonshots Internet Pvt. Ltd), which generate close to half of their business from thin-margin food and grocery deliveries, are now exploring additional revenue through?partnerships?with?banks, reverse logistics companies and manufacturers to shore up revenue. Both Opinio and Shadowfax are also exploring additional revenue streams such as advertising to try and mitigate the impact of losses incurred by their core offerings, Mint reported on 30 March. Hyperlocal delivery start-ups have been struggling to build a sustainable business model because of poor unit economics, given that commission from merchants barely pays for the cost of delivery, which could be as high as Rs.60-70 per delivery. With the investors becoming increasingly cautious about pumping new funds into start-ups, these companies are seeking to conserve cash and shore up revenue. Even so, the attempt to diversify revenue streams will succeed only if logistics start-ups manage to keep their costs low, experts say.
E-commerce has seen an unprecedented rise in business in the past year, with Paytm joining Flipkart and Snapdeal in the eight-member unicorn club. A report by Bank of America Merrill Lynch in 2015 stated that the e-commerce market in India will be worth $220 billion by 2025. Yet, e-commerce is beyond just sales and GMV numbers. Speed of delivery is as important as the product quality for a customer. It would not be wrong to say that logistics could be the defining factor for success of e-commerce companies in retaining their customers. At present, the country
Eyeing a larger market share, logistics solutions provider Rivigo is banking on 'drivers relay system' for faster delivery of goods and is looking to take its trucking fleet to 3,000 this fiscal. The firm, which has a fleet of 800 trucks, claims that based on its innovative 'drivers relay system', truck loads are delivered to Chennai from DELHI in two days instead of conventional eight days. "Logistics is one of the largest industries with more than $ 100-billion size and there is enough to do in this market. We started working on the 'Driver Relay Model' wherein we change over the drivers after every few hundred kms.This improves the turnaround time and service levels," Rivigo CEO Deepak Garg said in a statement. Garg, who is an alumnus of IIT Kanpur and IIM Lucknow, is a former McKinsey & Co. consultant. He said the company is eyeing to occupy the top slot in logistics market as its innovative relay model for drivers has not only facilitated their return to home the same day but ensured the truck kept on moving, resulting in a faster and efficient delivery of goods. By drivers relay, the company made sure drivers got back home on the same day (or within 24 hours) and thereby, saved 50-70 per cent of the turn-around time on long-haul routes. He further said to tap the opportunities in the sector, Rivigo plans to ramp up current network of 41 trucking pitstops and a similar number of processing centres to over 200 across the country over the next 12 months. "We also expect to expand our trucking fleet size from its current 800 to between 2,500-3,000 over the same period. In the next three years, we definitely want to see Rivigo as a mainstay logistics service provider, a leading logistics platform in the country," he said. He said Rivigo has already won major deals from players such as Abbott, Hero MotorCorp , ITC and Lupin for transporting their products, it has also started transporting spare parts for Hero MotoCorp from Neemrana factory to all across India, Garg claimed. India's logistics sector is poised for accelerated growth, led by GDP revival, ramp up in transport infrastructure, e-commerce penetration , impending GST implementation and other initiatives like 'Make in India', he said. He further said the company had launched several new services like part-load and cold chain, which will be scaled up. "The company has raised about $ 40 million in largely equity financing till date, from SAIF Partners, with a small component of venture debt funding from specialty debt financing firm, Trifecta Capital ," he added.
Headquartered in Mumbai, Global Ocean Group offers door to door delivery solutions like Sea Freight, Air Freight, Custom Clearance, Warehousing and Pickup & Transportation across all modes of transport; both international and local. India's logistics sector has seen a major growth and has emerged as a growth driver year by year. It is expected to increase in size and become an integral part of the Indian economic development. Although it is still at a very nascent stage, it needs to be more organised and fragmented better to sustain the upcoming competition. Specific segments like the logistics and warehousing have received attention from a wide range of global investors. With e-Commerce sector booming in India, the increase in logistics demand has turned the tables around now. The sudden growth of this sector has brought a dynamic twist to the changing environment. With e-Commerce growing at a fast pace,it looks like we are about to see a bigger leap when it comes to logistics.e-Commerce, as compared to traditional retailing is much faster, and keeps on changing, hence the demand in logistics sector increases. Therefore, there is a dire need of the logistics changing according to the changing times because this is how we see business growing. Also, with the rolling out of GST, the warehousing and logistics industry is happily engaging itself into more business because of which we see a sudden boom in these two sectors. Internet is a marketplace now, customers demand for goods at a click. They want their products to be delivered at a light speed. Today nobody has got the patience to wait for the items they have ordered, at least not more than a day or two. It is not an easy task to keep up with the pace as the pressure to make the customer happy while keeping up with the logistics is like juggling.
Logistics companies have rallied in a weak market late last week as the BJP's win in Assam and gains in vote share in other states have bolstered hopes of the passage of the much-awaited Goods and Services Tax bill in the monsoon session of Parliament. In the last two sessions of the market, shares of Patel Integrated Logistics and Allcargo Logistics gained around 8% each. Gati gained the most, rising nearly 11%. Snowman Logistics and VRL Logistics gained 1.4% and 2.1% respectively. However, the low delivery volumes, in the range of 16% to 47%, indicate the speculative nature of the upswing in these stocks. The delivery volumes in these stocks were lower than the average delivery volumes of 21% to 53% during the last six months. "These are just momentum trades. If investors go and buy logistics stocks solely based on this event they could lose money as well as hope of GST being passed has been there for many years," said Sadanand Shetty, senior fund manager, Taurus Mutual Fund. Market participants said the euphoria is these stocks could fizzle out soon as the BJP's performance in the assembly elections will not do much to aid the passage of the GST bill. In a note to clients, CLSA on Friday said the House math to enable the GST's passage is still tough as it remains hinged on the Congress party's approval. "I don't expect a re-rating to happen in these stocks. The possibility of GST coming has led to some excitement and those who have missed the initial rally may jump to buy these stocks but eventually investors will scrutinise and profit booking will happen," said Phani Sekhar, fund manager-PMS, Karvy Stock Broking. The GST bill, which has received the Lok Sabha's approval, is pending in the Rajya Sabha due to opposition by the Congress over some proposals.