Siddharth Agarwal, Chief Strategist at seven-year-old logistics start-up Ecom Express can bet anyone to name a street or even a paan (betel leaf) shop in the congested lane of a small town where his firm cannot deliver a packet. If someone were to name Jhumri Telaiya or Pulwama to put Agarwal in a spot, he is going to lose the bet. The start-up covers over 26,000 pin codes in the country.
Most start-ups have been growing at breakneck speed, multiplying their revenues year-on-year. The common factor is that they all leverage technology to achieve scale and efficiency, issues that have been plaguing the highly-fragmented logistics sector for decades.
"As you move into the future there would be even more investments in technology. There will be newer channels and ways of delivery. If I talk about last-mile delivery, although it is still at an experimental stage there are countries like China which are trying to leverage drones," Agarwal said.
Agrees Ashim Sharma, Principal and Division Head, Business Performance Improvement (Auto, Engineering and Logistics), Nomura Research Institute Consulting & Solutions. "Compared to developed markets, technology application is still at a nascent stage in India. These start-ups have realised that this is the gap in the logistics sector. Each one of them is focussing on technology solutions. That forms the backbone of the logistics sector," he says.
With gaps in the supply chain offering business opportunities to start-ups, private equity and venture capital have chased them. Around $3 billion has been invested in tech start-ups and third-party logistics (3PL) service providers in the last five years.
Flushed with cash, tech-powered logistics start-ups such as Delhivery, Rivigo, Ecom Express, BlackBuck and GoBolt are set to drive consolidation in the $200-billion logistics sector.
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The sector is a laggard when it comes to adopting new technology, and this gives the newbies an edge over incumbents. The road transport sector, the main freight mover, is dominated by mom and pop truckers, with almost 80 per cent operators having a fleet of less than five trucks.
Even top logistics players such as Transport Corporation of India (TCI) and Mahindra Logistics have annual gross revenue of less than $1 billion, suggesting scope for consolidation in the market.
Since the transport sector is dominated by small players, the freight market has had a large number of middlemen connecting shippers with carriers. Start-ups such as BlackBuck, Rivigo and FR8 are fast eliminating the role of such agents through the freight e-marketplace. More participants on the platform ensures competitive pricing for shipments, while real-time updates on apps improve services and help avoid empty run by truckers. Not surprisingly therefore, BlackBuck, launched in 2015, has on-boarded almost 400,000 trucks to date.