Giving in to our hunger pangs by ordering food at ungodly hours is something that most of us have done, but ever heard of a business idea being birthed by this simple act of ‘pick and drop’, that is now dominating India’s logistics sector? The inspiring story is about Gurugram-based Delhivery, which started its journey as a hyperlocal food-delivery start-up in 2011 and became the new-age logistics major.
Delhivery was the first one to perceive an opportunity in a restaurant delivery network and that’s how they ventured into the hyperlocal market in the first place.
A Midnight Conversation…
It was a midnight conversation with a delivery guy that struck a business proposition in the heads of co-founders Sahil Barua and Suraj Saharan. The duo had ordered food from a nearby restaurant in Gurugram at about half-past midnight. Soon they found themselves indulged in a conversation with the delivery guy standing at their front door. Upon learning that the restaurant was on the verge of shutting down permanently, the two set off to meet its owner, Balaji, who explained his dilemma of letting his staff down with this decision.
Barua and Saharan took it upon themselves to recruit all of the restaurants’ employees, which led to the inception of Delhivery. However, what the duo did not know then was that Balaji, who also ran a cargo business, was destined to indulge in a business with them in a few years time.
The company started off by attempting to provide a solution to restaurants and their problems in delivering food within a limited period. They understood the growing needs and limitations in the restaurant distribution network and got off in a hyperlocal environment with only 5 employees handling everything from accounts to product service to delivery hookups.
Even to their own surprise, the founders managed to carry out and complete delivery within 30 minutes.
Delhivery was the first one to perceive an opportunity in a restaurant delivery network and that’s how they ventured into the hyperlocal market in the first place. The duo was later joined by co-founders Mohit Tandon, Bhavesh Manglani (COO) and Kapil Bharati (CTO), as the start-up gained momentum.
They opened its first branch at Sushant Arcade in Gurugram, a 250-square-foot space that served as their corporate office, dispatch centre, call centre, and development centre – all in one.
It was when the start-up’s business started booming, with processing of over 100 local orders per day, is when one of their investors – Abhishek Goyal – got them started in the e-commerce market. The start-up had caught the eye of Goyal, co-founder of Tracxn, along with Prasant Tandon, ex-founder of HealthKart, who showed great interest in Delhivery and their ability to deliver packages under thirty minutes.
An entrepreneur always searches for change, responds to it, and exploits it as an opportunity. The start-up founders did the same. Spotting an opportunity to create an integrated, technology-driven solution in the e-commerce segment, they decided to move from local food delivery to e-commerce fulfilment.
A year down the line since Delhivery’s inception when the founders decided to venture into the e-commerce market, they realised that they needed cargo services and approached Balaji, who to this day continues to be one of their largest and most important vendors.
Taking the E-route
It was one of their early investors, Times Internet, who played an instrumental role in getting the start-up into the e-commerce market. They reasoned that if they could handle food delivery, why not expand into the e-commerce business and deliver parcels and packages as well? In short, monetise the existing resources and add new revenue streams.
By the end of December 2011, the start-up began to deliver over 500 packages each day in the Delhi NCR region for five e-commerce clients. Their team had grown to 25, and they had opened their second and third locations in Malviya Nagar and Janakpuri, respectively, to serve the entire Delhi-NCR region.
Despite being late in the segment, the founders saw the start-up’s requirement in logistics. During that time, e-commerce companies either had their own delivery arms or used courier companies (bulk cargo). However, neither of them focussed on rapid delivery. Delhivery cashed in on this problem to penetrate the internet space and therefore emerged as a third-party, last-mile logistics delivery firm to serve the e-commerce companies.
Hence the addition was made and eventually the transformation. Delhivery understood the massive scope of e-commerce delivery against traditional delivery right in time.
The B2B Approach
Delhivery follows a unique B2B business model. The platform offers services under three departments – warehousing, transportation and commerce – with the majority of operations specialising in transportation. The primary focus is on the delivery and distribution model, in which each organisation’s branch is run as a hub. This enables the parcels to be shipped to the customers in a hassle-free manner.
When a product is purchased online, it is obtained from the retailer and sent to a receiving facility, where it is stored to be sent to the destination. This is also known as a first-mile operation. Following that, a line haul is used to convey the goods from the manufacturing site to their desired location. The product is then shipped from the distribution system to the consumer’s home in what is known as the last mile process.
Delhivery aids in last-minute delivery and distribution, third-party and transit warehousing, reverse storage and logistical requirements, payment aggregation, vendor-to-warehouse and vendor-to-customer shipment, and much more.
Their proprietary network architecture, infrastructure, alliances, engineering, and technological skills are transforming and redefining India’s logistics industry today. The founders claim that the order cycle that previously used to take up to four to seven business days has come down to as low as 24 hours.
Furthermore, Delhivery’s business concept has a competitive advantage over its rivals. Unlike other players such as Rivigo and Blackbuck, who are primarily concerned with a relay-based transportation system for high-end commercial demands, the start-up employs delivery boys to provide services to small businesses and individuals. The fact that Delhivery caters to local requirements as well as those of giant organisations while remaining a unicorn is what distinguishes it from others.
For FY 2020, Delhivery claims to have a turnover of Rs 2800 crore; with further ambitious plans to grow to Rs 6000-7000 crore in the next two years.
The start-up has raised a total of $934.5 Million in funding over 9 rounds since inception. Its first round of Series A funding of $1.5 million came in April 2012 from Times Internet Limited, which bought a minority stake in the venture in June 2019. This marked the beginning of Delhivery’s success.
The start-up later got its ticket to the prestigious Unicorn Club following a Series F funding of $413 Million led by SoftBank, Fosun International, and Carlyle Group in 2019. This was coupled with an investment of $265 Million from the Canada Pension Plan Investment Board (CPPIB) in two rounds. The platform’s growth and progress is accelerated as a result of this and in the coming years, it hopes to raise Rs 220 crore.
The company faced initial losses owing to the sheer scale of creating a logistic infrastructure and the basic framework (Fixed cost). However, the long term vision was positive, as for any infrastructure-based company.
The investors placed their bets on Delhivery as they believed that the demand and volumes produced by the supply chain would eventually pay off and when that happened, Delhivery would make a comfortable amount of profit. With Delhivery emerging as a unicorn, the investors’ hopes and beliefs were eventually met.
Since the financial year 2015, Delhivery claims to have grown at a pace of 65% every year, with the firm delivering 25% of all e-commerce orders. This unicorn in the foreseeable future is expected to grow to 20,000 pin codes and also start investing in growing its supply chain network to small and medium-sized enterprises using its new funding.
Delhivery follows a unique B2B business model. The platform offers services under three departments - warehousing, transportation and commerce - with the majority of operations specialising in transportation.
Key to always being Ahead: Facing Competition
With the introduction of GST, the country’s logistics sector, which is currently worth about $160 billion, is expected to grow to $215 billion in the next two years. As a logistics-based business, Delhivery is bound to face more competition in the industry than it already has been.
Over the years, its notable competitors include Ecom Express, DotZot, FSC (Future Supply Chain), BlackBuck, Delex, Delivery.com. The customers have a variety of options because of market competition, many of which deliver almost equal quality.
However, Delhivery in the process of selling its services emerged as a business that is marked by a very distinct and unique service because it was one of the first of its kind to realise the importance of e-commerce.
Delhivery as a start-up faces competition from two different segments. One is the simple logistics industry where it faces competition from big players like Rivigo (Unicorn) and Blackbuck (Soonicorn) and the other is a specific e-commerce logistics industry where it challenges start-ups like Ecom Express, Xpressbees, etc. Delhivery has the advantage of having a strong funding pool, which is used in strengthening the infrastructure at the early stage itself. Hence, it’s an already established strong and vast framework to work upon in comparison to other start-ups.
In 2020, Delhivery collaborated with Volvo to add tractor-trailers to the express network and will continue to invest in the same with a corpus of around Rs 300 crore to increase its fleet capacity.
According to Barua, this merger is the first huge deployment of tractor-trailers in express trucking. It is believed to be a significant move for Delhivery in terms of gearing up for the future, extending its network base, and strengthening the firms’ dominant position in the industry.
According to reports, Delhivery presently delivers 1.5 million orders a day in over 17,500 pin codes across 2,300 towns and cities in India. Its network of almost 7,000 drivers and over 5,000 trucks play an instrumental role in its achievements. Besides, the firm is also constructing some of the country’s largest trucking terminals in Delhi, Mumbai, Bangalore, Hyderabad, Kolkata and Chennai.
Dodging the Lockdown Bullet
With the onset of the pandemic, the logistics sector in the country was met with both challenges as well as opportunities, particularly for start-ups. Everyday necessities such as e-grocery, food distribution, and e-commerce sites emerged as the biggest gainers out of sheer necessity besides indulgence.
The ability of businesses to be able to provide these services gave them a positive picture in the eyes of their clients and helped them find a position in the market.
In order to meet the increased demand for more structured companies in the sector following the pandemic, Delhivery is now looking to invest Rs 300 crore in 18-24 months on extension, which includes growing fleet size and building trucking hubs.
IPO Dreams, Going Back to Food and more…
The logistic start-up has recently raised $277 Million as a part of its final funding round, prior to its IPO launch later this year. The new round valued the 10-year-old startup at about $3 billion.
Furthermore, Delhivery has re-entered the food delivery market, collaborating with cloud kitchen businesses and taking direct restaurant deliveries. It is also looking for acquisitions in the B2B area. This time, the business has chosen to collaborate with food businesses and restaurants that have been seeking alternatives to Swiggy and Zomato due to their alleged hefty commissions.
What started as a simple hyperlocal express delivery service for boutiques and restaurants in Gurugram has grown into one of the leading e-commerce logistics platforms. With the current need for more efficient and well-organised logistics players on the rise, the platform holds tremendous promise for future development and expansion, whose only aim is to keep their clients happy and satisfied and resolve any problem that arises relating to the product or service.