On a Sunday afternoon, the 1,600 square feet showroom of a leading fitness fashion brand in upmarket Indiranagar is crowded. Not with customers, but with over 200 stacks of cartons containing old stocks. These are all goods waiting to be taken to a warehouse on the outskirts of Bengaluru, but the truck from a local logistics company is late by over six hours.
Hong Kong-based Lalamove that claims to deliver products within an hour through its network of truckers promises to solve this very problem in India, where the logistics business amounts to USD 160 billion in what continues to be an unorganised industry. Lalamove, that is present in 140 cities across China and Southeast Asia, launched its services in Mumbai early in February.
Talking to The Passage, Blake Larson, international head at Lalamove, said users can think of them as Uber and Ola, but for trucks. An on-demand logistics company, Lalamove matches truck drivers with SME businesses to enable them to meet same-day deliveries.
“After talking to truck owners and drivers in India, we realised there is a lot of inefficiency as they get only one to three trips in a day. We think there is a lot we can do to help the truckers,” Larson said. “We use a crowdsourced model similar to ride-haling companies such as Didi, Uber and Ola.”
In the nine countries where Lalamove is present, it uses trucks and two-wheelers registered on its platform to deliver products within an hour. Larson said the company has on-boarded over 2,000 truck drivers and has already got 20,000 registered users in India within a month.
Although, Lalamove will mostly target SMEs in the country, a small portion of its business is also B2C, with which it will deliver parcels under 20kg on two-wheelers and also help people when they are moving houses. A company executive who did not wish to be named said there are already 8,000 two-wheelers registered on the platform.
The company has imported the idea of using two-wheelers for running errands from its Southeast Asia market as it is a considerably big trend in that part of the world. In China, it only uses trucks and vans for delivery, while in Southeast Asian countries such as Malaysia, Indonesia, and Vietnam, it uses a variety of vehicles, from cars, vans and trucks to motorbikes. The company said it will use mini trucks, three-wheelers and motorbikes in India to ensure their goal of one-hour delivery.
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Santosh Pai, who is an expert in cross-border investment between Indian and China, and in the past has advised Chinese VCs on their India investments, said as logistics has matured in China, they (Lalamove) can definitely contribute to Indian companies in terms of know-how, experience, technology and funding, but if they do attempt it themselves, it will be interesting to see how it turns out.
“Maybe it is a good time for them to try and learn, because the India market is still growing. Sectors such as e-commerce, food delivery, grocery, etc., are still growing very fast in the country. I don't see why Chinese companies cannot succeed,” Pai said.
However, Pai said that to be able to thrive in the Indian logistics space, Lalamove will need to thoroughly familiarise themselves with the Indian market.
Charles Brewer, former CEO of DHL, is bullish on Lalamove starting its services in India. According to him, although there are many logistics companies in India, there are very few that focus on same-day, one-hour delivery.
“Lalamove is not going to compete with Delhivery, ecomExpress, Blue Dart or other domestic carriers who are doing next-day or two days deliveries across India. They are really focused on the rising urban consumer that wants everything delivered and wants it now,” Brewer said.
Bengaluru-based Shadowfax is one of the few logistic companies that claims to be able to deliver products on the same day, within a couple of hours. It works with several e-commerce companies as well as online grocery companies. With Amazon India making two-hour delivery and same-day delivery a norm, customers now have similar expectations from other e-commerce platforms as well.
“Five years ago, the same-day delivery market was very small globally. But the market in e-commerce space is moving very quickly. That is what Lalamove is capitalising on,” Brewer said.
Lalamove is already in discussions with Indian e-commerce players to handle their deliveries. “It (e-commerce) is of course a fast growing market across the globe. A lot of Indian companies are already doing e-commerce deliveries, so we will be selective with choosing the e-commerce partner we want to work with, but inevitably we surely will do some e-commerce deliveries,” Larson said.
In an earlier interaction with The Passage, Vaibhav Khandelwal, co-founder of Shadowfax had said, “With time, people are going to demand quicker delivery. Buyers who order 5-10 products want quicker delivery from a nearby grocery shop. Being able to deliver grocery within 30-90 minutes will be the breaking point.”
According to the domestic rating agency ICRA, Indian logistics sector is expected to grow at a rate of 8-10%. The Economic Survey 2017-18 said with implementation of GST, the sector is expected to grow to USD 215 billion over the next two years from the current USD 160 billion.
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Whereas in 2017, the same city cargo logistics market in China was about 1,000 billion RMB (USD 158.8 billion), and was mostly occupied by Lalamove. Larson believes, although the China market is growing, it’s moving towards its maturity now. On the other hand, India has multiple cities that are home to over million consumers. This growth rate mimics the rate in Southeast Asia.
For Lalamove, SMEs account for over 97% of its business in Southeast Asia. “Our primary target is SMEs really, but we are also in talks with enterprises. The top-most priority for SMEs is timely delivery. We ensure to have the driver when they need the delivery. We do all our deliveries in 30 minutes,” Larson said.
Last month, the company raised USD 300 million in Series D round led by Hillhouse Capital, Sequoia China, Eastern Bell Venture Capital and PV Capital. According to media reports, this round of funding, which will come in two tranches, makes Lalamove a billion-dollar company.
Local competition and challenges
The fact that the India market is huge doesn’t take away the challenges that any new entrant will have to deal with. People working in the logistics space with whom The Passage spoke to, mentioned two big problems: infrastructure and a price-sensitive market.
“The infrastructure in India is incredibly challenging. One of Lalamove’s value propositions in Southeast Asia is to be able to deliver within the hour. If they want to continue one-hour delivery, it’s going to be a challenge because of traffic, state of the roads, rains and the volume of people. It will be an exciting opportunity for Lalamove but not without these challenges,” Brewer said.
According to Brewer, Lalamove should broaden the market for itself in India and along with same-day delivery, it should also offer next-day delivery.
In India, Lalamove will face competition from existing players such as Porter, Shadowfax and Lets Transport in the B2B space, while Dunzo, one of the fastest growing delivery companies, will also give stiff competition to Lalamove in its B2C model. In fact, according to Mint, the Google-backed task management company Dunzo plans to foray into B2B space as well.
While Dunzo hires delivery executives to run tasks, Lalamove uses technology to bring errand runners and customers to meet on its platform. This ensures Lalamove doesn’t burn much money.
“One of the reasons Lalamove is a leading player in Southeast Asia is because of its asset-light model. Majority of the volume is handled by people like you and I who choose to become courier boys on certain days. That’s a very interesting business model,” said Kishan Mishra, who has worked with Delhivery in India and with a global logistics company in Southeast Asia.
Larson agrees there might be a little bit of overlap between Dunzo and Lalamove, “but they focus more on individual customers, while most of our focus is going to be on SMEs,” he said.
Pushkar Singh, co-founder at Lets Transport, a marketplace of trucks, said there is ahuge difference between a Chinese SME and an Indian SME.
“They run factories and do around 20 deliveries a day, while an Indian SME is essentially a mom-and-pop store or a furniture store that will need just one to three trucks a week,” Singh said. According to him, it’s going to be difficult for a newcomer to break the decade-old relationships between the SMEs and truckers.
“Today, if you were to look at the relation between truckers and SMEs, it’s fairly deep, as they have been working together for decades. Now to make a space of their own one has to give heavy discounts to the businesses,” Singh explained.
Lets Transport largely works with enterprises in sectors such as FMCG, e-commerce and organised retail, and counts companies such as PepsiCo, Marico, etc., as its clients. It claims to have a network of over 25,000 trucks and at any given time Singh said 7,000-8,000 trucks are out delivering goods.
“Having seen what it has achieved in other markets, Lalamove will be a great competitor to have. As logistics in India is fairly primitive, we need more new-age companies to help people adapt to new technologies,” Singh said.