Sahil Barua, CEO of new-age logistics firm Delhivery, believes that the economics of 10-15 minute deliveries may not be sustainable beyond groceries and fast-moving consumer goods. In an interview with ET’s Pranav Mukul and Samidha Sharma, Barua predicts that delivery timelines will likely increase as the costs of quick deliveries become more evident. Delhivery, which returned to profitability in the April-June quarter, is launching a network of shared dark stores for brands and e-commerce players to enable 2-4 hour deliveries. However, Barua, who also serves as an independent director at IPO-bound Swiggy, emphasizes that Delhivery will avoid instant deliveries.
Delhivery has experienced slow revenue growth over the past year. Are you feeling any pressure on your top line?
Our e-commerce-linked express parcel business is indicative of current market conditions. We could have grown our volume a little bit further, but Meesho’s launch of Valmo, its logistics vertical, last year somewhat limited the overall quantities available to third-party players. Since we don’t rely on Meesho as much, we’re less impacted overall, but the total quantities accessible on the third-party side have decreased. Additionally, we are in the midst of commercial renegotiations with many of our clients at this time. Therefore, the volume uplift takes some time until it is completed.
What’s the focus going forward?
“Our primary focus over the last two to three years has been the PTL (part-truck load) business. As these segments grow, they become more efficient, including express shipments, which has led to improved profitability. Additionally, we’ve been capturing market share not only from organized competitors but also from the traditional market, as these are large yet unorganized sectors. However, the truckload business has faced challenges, primarily due to the impact of elections and rains.”
What’s the growth outlook?
The outlook for the next six to nine months is expected to be volatile, but we anticipate continued growth. So far, July and August have been more or less in line with our expectations. However, predicting the future of the e-commerce business is challenging.
Delhivery’s stock remains below its IPO price of Rs 487. What factors do you believe the market has taken into account?
As for the stock price, it’s difficult for me to offer any specific insight. My focus remains on steering the company steadily and prioritizing the best interests of all our stakeholders—employees, customers, and shareholders—regardless of the market’s perceived value at any given time.
The latest wave of startup IPOs is priced more moderately compared to their valuations in private rounds, unlike the IPOs of 2021. What’s your perspective on this?
IPOs for startups are necessary. I’m happy that more businesses can access public markets. This progression is essential to building more exciting enterprises, even if there will be some stumbles along the way. Sebi frequently receives only negative feedback, yet supporting businesses that want to go public is a very wise long-term move.
What’s your outlook for the holiday season?
I don’t anticipate that e-commerce will have a huge breakthrough in 2019. If that occurs, I will be very happy. It won’t be a 23-24% growth year, but the projected growth of 15–18% will be achieved. We concluded that cutting costs was the only way to create a firm that would be sustainable. All of these separate techniques do not affect me when I’m at my lowest cost.
Is the rise of quick commerce causing a slowdown in e-commerce growth?
Over 95% of the market isn’t suited for quick commerce. The D2C (direct-to-consumer) sector makes up about 15% of e-commerce today, with more than half of that being fashion—a category where only a small portion is involved in quick commerce. When you break it down, quick commerce is impacting only a small segment of FMCG and possibly some electronics, but it’s not affecting e-commerce as much as people believe. In reality, quick commerce is taking market share from Kirana stores, not e-commerce.
Others say otherwise.
They might be increasing volume to some extent. For instance, if someone is buying rice, atta, or dal, where did they buy these items before? They were not being purchased from horizontal e-commerce companies but from Kiranas within the extensive Indian market.
So what’s driving investors to pour in so much capital?
Considering the quick-commerce industry, it’s financed by around $40–50 million in monthly burn. We’re left questioning whether the situation is resolved. It will be interesting to see how things unfold once the true cost of the service becomes clear.
What are the plans for the shared dark store network?
We’re still developing this, but these stores will be limited to the top metros due to insufficient volumes in smaller towns. The number of dark stores will be relatively small, as we’re targeting a radius of around 8 km, which means we anticipate having around 35–40 dark stores at most. Additionally, we’re considering a format that differs significantly from the existing quick-commerce dark-store model.
Could consumer preferences evolve to products in the broader categories being available in 10–15 minutes?
Some customers may desire certain products within 15 minutes. While it is possible to build a supply pipeline for this, the question is: at what cost? As the economics shift to the customer, it will be interesting to see if the 15-minute delivery window becomes less common. In our opinion, there is little value in going below 2-3 hours. We don’t anticipate moving to 15 minutes, particularly for broader categories.
Is it relatively easier for Flipkart, Amazon, or other horizontal players to offer a wider range of categories in quick commerce, given their existing infrastructure?
The simple answer is that it is feasible. In my view, that is what they will and should do. They already possess extensive warehousing capabilities across 40–50 cities and have vast amounts of consumer data, allowing them to pinpoint where specific mobile phones will sell best. They have a natural advantage in supply chain management.
Are you past the drag of SpotOn’s integration into Delhivery’s operations?
We have completely moved past it.
The process was more complex than we initially anticipated. We learned that integrating companies is more challenging than simply acquiring them. This experience had two major impacts on us: it significantly accelerated our mid-mile expansion, as acquiring SpotOn was crucial for obtaining the large tractor-trailers we needed. If we had delayed the integration, we wouldn’t have been able to deploy as many trucks as we did. However, we did face some service issues during the first quarter of the integration, which set us back slightly.
Is there any intention of making more acquisitions?
The sector will undergo consolidation; this needs to happen. The country is not optimally served by thousands of logistics companies. What’s needed are a few large-scale players along with several SMEs. We continue to search, but currently, we haven’t found any acquisitions that make sense.
Are you planning something on the consumer-facing side?
People often claim that shipping is very unorganized and that there isn’t much demand for shipping between individuals, but what we’ve found is that there are many hidden needs where people do want to send or receive items, and this market is currently underserved. That’s why we’re developing a consumer app to connect with customers directly. Additionally, we plan to expand our franchise model, inviting individuals to open Delhivery franchises in their areas. This will help us bring more organization to the sector.
