Coolest Start-ups: Supply-chain enabler Delhivery is rising rapidly

E-commerce companies at that point either had their own delivery arms, such as Flipkart, or they used courier companies more geared towards document delivery or bulk cargo. Neither was designed to deliver parcels rapidly and where handing payments was an imperative.

"It was the most interesting problem we could think of in the Internet space," says Barua, Co-Founder and CEO of Delhivery. As the name indicates, Delhivery started as a third-party, last-mile logistics delivery firm in Delhi to serve e-commerce companies alone.

Barua, a tall, lean 29-year-old with a stubble, graduated from IIM Bangalore and then worked as a management consultant at Bain & Company. Two of the other founders, Saharan and Tandon, also came from Bain while Manglani and Bharati joined from other organisations. "Bhavesh and I met at Hard Rock Cafe in Mumbai in 2009. We were sloshed and he was introduced to me by a common friend as a tech stud," Barua recollects. So when he wanted to start the company, he dialled Bhavesh, who agreed to be part of the venture.

Watch video: 'Delhivery offers real-time status of orders to consumers'

"We spent the first six months bootstrapping with our own money," says Barua. "We expanded to all parts of Delhi, and Chennai was the first city outside Delhi. We were doing about 600 orders a day at that point."

The founders, however, were just not happy being a delivery company. In 2012, one of their customers, Times Internet, invested Rs 6.6 crore. That got the company into an adjacent fulfilment centre business - warehouses where companies can stock goods and where Delhivery would test products, package and label them before shipping. The company now has warehouses in Delhi, Bangalore and Mumbai, and will open new ones in Surat and Kolkata soon.

The order cycle used to be four to seven days for customers before Delhivery's fulfilment centres became operational. Today, after stocking with Delhivery, it can be as low as 24 hours, Barua claims. "Retailers have the front end, which is the website, and the order management system. That does not always link up to a good warehouse management system. That led to delays," he explains.

The company has invested in a technology platform that has allowed differentiation even in its delivery business. It routes packages faster via different flights throughout the day as well as using multiple modes of transport - whenever a package needs to be delivered, the backend system plots its fastest route automatically, including which flight it should take.

The company also does not use the traditional hub-and-spoke model for delivering parcels. In this model, products ordered within a city are always routed through the hub before it reaches the spoke, leading to delays. "We use a distributed model where every branch can function like the hub and is a processing centre by itself. They can route packages directly to the customer, avoiding parking it in the hub," Barua says, explaining how Delhivery delivers faster than other logistics companies.

In 2013, Delhivery added yet another business unit - it sells technology that controls the supply-chain for an online retailer, like an order management system. "So we are now a supply-chain enabler and not just a logistics company," Barua says.

Delhivery seems to have positioned itself well on the pricing front as well. "We are cheaper than Blue Dart and FedEx but more expensive than some of the smaller players," the CEO says. Like other courier companies, Delhivery charges a flat rate based on weight, volume and distance. Besides, there is a rent for storage, and an extra fee in cases where cash-on-delivery is involved.  

However, Delhivery is not alone in this space. Other players in the e-commerce logistics game include Ecom Express and DotZot, a DTDC company, implying that conventional logistics firms are also gearing up to meet the specialised needs of e-retailers.

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The market, therefore, is no easy ride. E-commerce logistics start-up Chhotu.in shut down last year because it could not raise enough funds. The word of caution comes from Rajesh Sawhney, Founder of Global Super Angels, and an investor in Chhotu.in: "It is a difficult business. E-commerce is capital intensive and so is logistics. It requires a deep supply of capital, and patience."

On why Chhotu.in failed, Sawhney says: "There was a lot of consolidation in the market last year and outsourcing of logistics reduced. VC funding did not happen either."

Delhivery, as of now, seems to be chugging along well on the funding front. The start-up raised its second round, a funding of Rs 35 crore, in August 2013 from Nexus Venture Partners and Times Internet. It may now close a third round in three months. The investors are betting on its huge growth potential - the company has already demonstrated some scale. Today, it delivers 40,000 to 50,000 orders a day and has customers such as Flipkart, Snapdeal, eBay, Amazon, Myntra, Jabong and Healthkart, among others. Employing 3,000, its delivery business is in 135 cities. Delhivery is launching international operations in Dubai and Sri Lanka around June this year.

Revenues have rocketed too - from Rs 17 crore in 2012/13 to Rs 62 crore this year. The company is currently clocking a monthly revenue run rate of Rs 8 crore to Rs 8.5 crore. The company expects to break even by September this year.