<article>Logistics start-ups are adding new services to serve traditional businesses to maintain revenue flow as their e-commerce clients struggle.</article>

Logistics start-ups are adding new services to serve traditional businesses to maintain revenue flow as their e-commerce clients struggle.
Logistics service provider <a style="color: #000080;" href="http://www.dealstreetasia.com/?s=gojavas">GoJavas</a>, 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 <a style="color: #000080;" href="http://www.livemint.com/Companies/R5JLRgwsXKrL4VEmz1ZvAP/Delivery-startups-explore-additional-income-streams.html" target="_blank">reported</a> 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.
“If somebody asks me if there is a need for somebody to offer such services, yes. This segment is highly unorganized. But unit economics may not work out. If the start-ups can do it by using the existing infrastructure at a much lesser cost, it makes sense. Anyway, they need to look out for different avenues so that they are not dependent on the ups and down of one sector,” said Rutvik Doshi, director at Inventus Capital Partners, a venture capital firm.
According to Abhishek Bansal, co-founder and chief executive at hyperlocal delivery start-up Shadowfax, the firm is running pilots with banks for Know Your Customer (KYC) checks.
Shadowfax has also expanded its reverse pick-up services beyond e-commerce companies through partnerships with reverse logistics firms such as Greendust and Attero. Reverse pick-up is collection of returned goods from consumers.
The delivery start-up expects these new verticals to account for about one-fourth of its revenue in the next 12 months from 3%-4% currently.
“Charges for such services are significantly higher than usual food delivery. This will increase your revenue to a great extent,” said Bansal.
Similarly, Opinio is adding mini-trucks and vans to its fleet of two-wheelers to facilitate bulk movement of goods from manufacturers and wholesalers to retailers, said two people aware of the development.
Opinio founder and chief executive Mayank Kumar did not respond to an e-mail seeking comment.
For GoJavas, which is backed by <a style="color: #000080;" href="http://www.dealstreetasia.com/?s=snapdeal">Snapdeal </a>(Jasper Infotech Pvt. Ltd), the move to diversify was necessitated by the need to reduce dependence on e-commerce. The company has created new verticals, such as value-added services and new business development, said a senior company executive.
While the company is eyeing KYC checks for banks among some of the services under value-added services, the new business development vertical will focus on non-e-commerce clients. “We are looking at diversification beyond e-commerce. Investors are becoming more and more demanding of their investments in e-commerce companies. The crazy discounts have come down, and that has impacted sales of most e-commerce platforms. Hence we realized that we need to diversify and we can thus hedge our risks as well,” said Maanvi Prasad, chief customer experience officer at GoJavas.
Prasad declined to name clients or additional business verticals.
E-commerce in India is poised to reach $48-60 billion by 2020 from $4.47 billion in 2014, according to financial services company UBS AG.
But online retailers such as <a href="http://www.dealstreetasia.com/?s=flipkart">Flipkart </a>Ltd,<a style="color: #000080;" href="http://www.dealstreetasia.com/?s=amazon+india"> Amazon India </a>Ltd and Snapdeal may face some headwinds following recent regulations. The government has disallowed discounts by e-commerce firms and mandated that no single seller can account for more than 25% of a firm’s overall sales.
According to industry experts, while e-commerce-focused logistics companies may feel the need to diversify, for hyperlocal delivery start-ups, diversification is a function of achieving better fleet utilization and higher margins.
“In hyperlocal start-ups, there is a keen intention to enhance gross margin for the basket of services on offer. That is one factor that is changing the focus to services. The expected realization for hyperlocal delivery in food moves in a very small band, and the market is very well established. So, you have to find avenues to ensure two things happen: one, you have better utilization for fleet and secondly, you are driving up the realization per delivery,” said Vinod Murali, managing director at InnoVen Capital India.
“For conventional guys (e-commerce-focused logistics companies), their focus will still be e-commerce largely and may be the segment they will look at will be a little bit of conventional business-to-business delivery,” he added.
Also read:
<a style="color: #ff0000;" href="http://www.dealstreetasia.com/stories/41924-41924/">Logistics solutions startup OpenPort closes Series A, to push into Indonesia</a>
<a style="color: #ff0000;" href="http://www.dealstreetasia.com/stories/flipkarts-logistics-arm-ekart-to-launch-courier-service-41475/">Flipkart’s logistics arm Ekart to launch courier service</a>
<h4 style="text-align: justify;">This article was first published on <a style="color: #000080;" href="http://www.livemint.com">Livemint.com</a></h4>

Logistics start-ups are adding new services to serve traditional businesses to maintain revenue flow as their e-commerce clients struggle.

India: Hyperlocal logistics startups explore new routes to deliver revenues

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