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Booming ecommerce seems to have put India’s logistics business in consolidation mode. Today, Delhi-based Shadowfax, an on-demand delivery service, announced that it has acquired smaller player Pickingo for an undisclosed amount.
With the new acquisition, it has taken on about 45 employees from Pickingo’s management and a few hundred delivery boys in a cash and stock deal, according to Economic Times.
Food tech behemoth Zomato too had reportedly been eyeing Pickingo, but eventually backed out.
Why consolidate
India’s logistics industry is estimated to be worth US$130 billion and may touch US$300 billion by 2020. It has seen a great deal of activity, especially as ecommerce picks up pace, but is still highly fragmented. According to Indian consulting firm Technopak, India’s ecommerce startups spend as much as 30 percent of their net income on logistics.
Flipkart and Snapdeal, two of India’s largest ecommerce companies, spend so much money on logistics that they don’t expect to be profitable for the next few years. India spends around 14.4 percent of its GDP on logistics and transportation as compared to less than eight percent spent by the other developing countries.
And that’s where consolidation can help, especially in a country as vast and as populous as India. “Consolidation helps cut costs by improving efficiencies. Weaker players and competitors are eliminated and good ones are able to further their efficiencies,” a financial consultant told Tech In Asia.
Logistics companies aim to enable effective and timely movement of goods from one place to another. DHL, TNT, Blue Dart and Gati are among the major players in India’s logistics industry. There is a huge demand for logistic services in the country, especially with the growth of the economy along with the influx of new companies in sectors that were otherwise unknown.
- In October, quick-delivery services company Grofers acquihired logistics firm Townrush. “(Townrush team) has rich experience in building and running early-stage tech companies, which allowed us to get hold of a large talent pool in one go,” Saurabh Kumar, co-founder at Grofers, said in an announcement.
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Delhivery, which provides ecommerce sites with end-to-end supply chain solutions, last month invested in door-to-door courier service Parcelled in a series A funding round of US$5 million, along with Tracxn Labs.
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It was the Delivery’s third strategic investment, having earlier put money into hyperlocal delivery service Opinio and in 2013, acquired cash collection service Gharpay.
The logistics space has seen a lot of funding lately.
GoJavas, an end-to-end logistics startup, raised two rounds of funding from Indian ecommerce site Snapdeal. Another logistics supply chain startup, Ecom Express, announced earlier this year that it was raising US$133 million from Warburg Pincus.
RoadRunnr, another logistics firm, raised US$11 million from Sequoia Capital, Nexus Venture Partners, and Blume Ventures earlier this year.
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