Groceries in 30 minutes. Food delivery apps that filter restaurants based on the delivery time. Milk deliveries on the dot in the morning. A new pair of shoes, that book you’ve had your eye on. You want everything cheap and you want it yesterday. The convenience of online shopping is here to stay. But with prices already at rock bottom, increasingly, the differentiator for e-commerce and food-delivery firms is cutting delivery costs.
Especially in last mile delivery, or the leg where a product travels from the nearest hub to your doorstep. “It is a very dirty problem, day in and day out, it’s just a pure mess,” is how Abhishek Bansal put it. Bansal is the co-founder and chief executive of Shadowfax Technologies, a Bengaluru-based startup that specialises in last-mile delivery.
The last-mile delivery conundrum is one that has plagued e-commerce companies for reasons ranging from gridlocked areas to orders spread across a wide area and from inefficient one-package drops to the stifling logistical problems outside Tier 1 cities. Then there are hyperlocal orders, mainly of fresh produce like milk or groceries, which are typically low-value and difficult to predict, leading to inefficient utilisation of manpower. It is also the most expensive part of delivery services, sometimes going up to nearly 40-60% of the average cost of delivery per order.
So, while the likes of Amazon India and Walmart-owned Flipkart have their own in-house logistics operations, they prefer to pass on to some of the burden to Shadowfax and its rivals like Delhivery and Ecom Express. What sets Shadowfax apart from its larger rivals is a frugal mindset, with the sole aim of slashing costs. Unlike at Amazon or Flipkart and other online sellers, Shadowfax’s delivery agents are not employees, but partners, like the drivers on Uber. An on-demand fleet, Bansal claims, that not only means better utilisation, but one it acquires at a third of the cost of its rivals.
Besides Amazon and Flipkart, Shadowfax has this customer-cum-rival relationship with food-tech firms Swiggy and Zomato and grocers such as Big Basket and Grofers. And while Shadowfax handles end-to-end logistics, it is their last-mile expertise that sets them apart. So much so that last week Walmart-owned Flipkart led a $60 million funding round in Shadowfax, which valued the startup at about $250 million.
The business-to-business logistics industry (B2B) itself is seeing hefty investments. B2B logistics players have attracted $997.3 million in funding so far in 2019, according to data from startup data platform Tracxn. That’s nearly double the $491 million the sector got in 2015, when Shadowfax was started.
The funding will help Shadowfax plough ahead with what Bansal thinks will be a “gamechanger” as far as last-mile deliveries are concerned—tapping into an unlikely network.