With more people ordering online, the efficiency of deliveries across segments including food, grocery, pharma and ecommerce has improved significantly, taking logistics companies closer to profitability, although the earnings of riders have increased only marginally
June 24, 2021
9 Min Read
Doorstep deliveries became more efficient during the second wave of Covid lockdowns as more shoppers went online and more often to buy food, groceries, medicines, and other products—a habit logistics firms expect will prevail.
Online marketplaces, groceries, pharmacies, and restaurant aggregators have been able to pass on delivery costs to their customers, while increased scale, pre-payments, and contactless deliveries have helped improve fleet utilization.
This has allowed them to recover the money spent on doorstep deliveries—a metric investors closely track to benchmark the profitability of internet businesses.
As shoppers afraid of stepping out for purchases shed their reluctance to pay delivery charges, daily doorstep deliveries doubled from 5.1 million in March 2019 to about 10 million this year, show data from logistics platform Shadowfax shared exclusively with The CapTable.
This data was corroborated by three other logistics players, who estimate a 7-10% differential, at best, from their own projections. Compared with last year, daily doorstep deliveries spiked by one-third across segments, according to multiple logistics firms.
The 10 million deliveries milestone helps accelerate the profitability goals of logistics firms, allowing them to cover their fixed supply chain and operating costs as the density of deliveries improves, especially in large metro cities.
Delhivery, which says it has delivered over a billion orders in its decade of existence, is preparing to go public with its ecommerce business having turned profitable.
Companies such as Swiggy, Zomato, BigBasket, Amazon and Flipkart run large captive fleets as well as work with third-party logistics providers such as XpressBees, Delhivery Shadowfax, and Ecom Express.
Logistics companies The CapTable spoke with expect the change in consumer habit to be long-lasting and prevalent even as cities open up.
“This time the deaths related to Covid-19 have been far too many and people have been seriously impacted. So my view is (in the medium to long term) most non-essential shopping (such as for household goods and consumer electronics) will move online,” said T. A. Krishnan, founder of logistics company Ecom Express.
As the density of online orders increases, the overall cost of last-mile logistics, which is about 40% of delivery costs in ecommerce, is getting rationalized.