One peculiar problem of the logistics and freight industry in India is that the entire space of freight execution is driven through asset ownership. This asset ownership comes from fragmented owners. With less than 5% owners contributing to total supply in the country and goods being transmitted by large and small shippers alike, this fragmented industry is completely run by offline intermediaries. In fact, as per Rajesh Yabaji, founder of BlackBuck, an online marketplace for logistics transactions, any and all aspects of this industry is offline today.
“Even something as basic as cash disbursement is offline. Large sums of cash exchange hands in an offline fashion today. These are the basic problems that need to be addressed, which led us to look at this space from a business perspective.” The solution was finding an online marketplace along with Chanakya Hridaya and Ramasubramaniam B in 2015, in order to simplify this complex maze of full truckload (FTL) freight transportation in a vast country like India.
Today, this online marketplace works with 500 companies, both SMEs and corporates, boasting of some 120,000 logistics partners operating in over 300 locations.
The idea was fuelled by Rajesh’s work experience at ITC where he was able to look at the transformation of the entire supply chain vertical. That’s where he kind of fell in love with this industry.
Says Rajesh, “We solved lot of problems for ITC, for the truckers and the ecosystem during that stint. And I believed that these could be scaled nationwide or even globally. So, BlackBuck today is the accumulation of all the mini projects and the macro projects we did back at ITC, scaled into a business model. So, effectively it was the ITC experience that brought me closer to the problem statement, inspired me to establish a company which will solve these real problems in logistics.”
Today, BlackBuck has built technology, which integrates both demand and supply onto a single platform. At the click of a button, customers can track and analyse the shipments carried out on the platform. On the other hand, truckers across the country are empanelled on the platform through a mobile application, with a real time visibility of customers’ demands. More than 110,000 trucks on the BlackBuck are helping solve the problem of availability of demand/supply and fair and transparent pricing for both customers and truckers.
Building The BlackBuck Online Marketplace Model
Rajesh throws light on how things started, mentioning the ITC stint yet again. He says, “Back at ITC, we were taking a container empty from Chennai port to Mysore inlands, filling it with goods and then shipping out. Similarly, we were also transporting from Guntur to Saharanpur and Haridwar to Vijayawada.”
So, for instance in Saharanpur, the company tied up directly with these asset owners who were able to ferry their goods from Saharanpur, go to Haridwar, and then to Vijayawada.
To understand the kind of freight transportation on different routes, the BlackBuck team took to the ground. In Mysore, they stood at the toll gate, understood what kind of material is going into Mysore. It turned out to be a huge amount of newsprint getting carried into containers. Then there was a huge amount of packaged goods and import textiles coming from Chennai. So, they identified all the companies (some 15 of them), who were doing container movement, from Chennai to Mysore or Bengaluru.
After speaking to these companies about the kind of scale they had, the team shortlisted five target companies which fit the BlackBuck DNA, brought in the fleet owners who were doing freight from A to B and B to A and saved 80% of the cost for these companies.
Thus, through a technology stack, BlackBuck started addressing the same problems which Rajesh had encountered at ITC i.e. supply discovery problems, customer recovery problems, fleet owner discovery and deployment problems, and managing all these processes. Rajesh believes that these are problems not only in the Indian economy but also globally.
Today, due to its online marketplace model, BlackBuck claims to have improved the availability of trucks to 95%, as compared to the traditional transporters’ average of 70-80%. This, in turn, leads to improved predictability of the entire supply chain and effective inventory management. And that’s why he has plans of taking the platform global to solve similar local logistics problems.
BlackBuck : Battling A Market With Low Technology Adoption
When BlackBuck set to solve the problem for seamless freight execution, it was not a simple X of Y problem. Rajesh explains, “This was not like a problem solved in the US and I was replicating that same model in India. The proof of concept (POC) was a big challenge. There was also the challenge to find a market fit. There is a large market here but will it consolidate into the platform which I am trying to build?”
The second challenge is the lack of any technology adoption in this segment. Unlike the US, where 90% of the drivers have smartphones, or China where 80% of the drivers have smartphones, India is still an economy where feature phones are still the thing used largely by the bottom of the pyramid. So, technology adoption is a big challenge in the logistics space.
The third challenging piece was getting the first transaction done as to how do you convince the carrier that BlackBuck will help them to improve efficiency. Says Rajesh, “When I was at ITC, I had the ITC credibility. When I was outside of it, it was just me. I did not have any FTL load to give them, so these carriers would not necessarily trust me when I told them I could give you load. It was quite weird as I would wear formals and go in the trucking market where normally slippers and dhotis work! So carrier sign up, customer sign up both were big challenges to get the flag wheel moving. But, I guess, for any company, these would be similar challenges.”
BlackBuck’s Spread: 500 Companies, 120,000 Trucking Partners
Rajesh believes that anyone who needs a carrier is the right target segment for BlackBuck. So it could be a rice trader sitting in Karnal to a wheat trader sitting in a mandi in Indore to a corporate like Unilever which ships from a hundred different factories.
To put it in perspective, he reveals that the 800 member team of BlackBuck works with 500 companies (including SMEs and large corporates like Coca-Cola, ITC, HUL etc.), boasting of some 120,000 trucking partners, operating in 300 locations. He claims that BlackBuck is the largest FTL player in India today, though he did not disclose the exact revenue numbers. However, as per the company’s latest MCA filings for the financial year dated March 2016, total revenues posted were $12.7 Mn(INR 81.25 Cr) with losses of $2.57 Mn (INR 16.48 Cr). Monetisation, meanwhile, is done from both sides-vis-a-vis customer side margins and supplier side margins.
Hence, the first transaction, getting that first set of revenues on the platform was an important milestone for the startup. And then followed the heavy scaling, driven by huge customer confidence.
But Rajesh believes that all this is just the tip of the iceberg. “We are still to become the dominant player in this space, which sort of decides what freight execution in India has to do with. Those moments which will drive me further are still yet to come,” he says.
BlackBuck And The B2B Logistics Market
BlackBuck aims to differentiate itself to both customers and suppliers on the following three counts – truckload availability, fairest price ever in the market, and a never-before-seen kind of experience on the platform, in terms of execution. To this effect, the startup has raised about $100 Mn in funding from the likes of Tiger Global, Accel Partners, Flipkart, Apolleto Asia LTD, IFC and Sands Capital among others.
But it is not alone in this quest. Another big logistics player in the space who can be considered direct competition for BlackBuck is Rivigo that, till date, has raised close to $125 Mn funding in equity and debt finance. Rivigo reportedly has a fleet of 2,100 trucks and a pan-India network across 150 cities. Additionally, SoftBank is looking to infuse $200 Mn in the Gurugram-based logistics startup which is likely to take Rivigo’s valuation to about $1 Bn, crowning it a Unicorn. Other prominent players in freight logistics include Locus, Locanix, ElasticRun, 4tigo Network Logistics, among others.
In fact, the B2B logistics market is being eyed by giants like Mahindra and Mahindra, who launched SmartShift in 2015, a digital marketplace for intra-city, cargo logistics. SmartShift acts as an exchange platform for cargo owners and transporters, enabling them to work with each other.
Bengaluru-based truck network platform 4tigo Network Logistics raised about $10 Mn Series A funding from existing investors Accel Partners and Infosys co-founder Nandan Nilekani, in May this year. In April 2017, Kalaari Capital and Norwest Venture Partners led a $7 Mn funding round in ElasticRun, a Pune-based stealth startup in the logistics space.
Angel investor Sanjay Mehta, who has himself invested in the sector believes that logistics in India is broken.
“We are in need of breakthrough solutions in every aspect of the logistics industry. Logistics industry is expected to grow over 10% year-on-year. Seaway and Railways are still untouched areas where there is enough headroom for growth. There will be multiple players in these markets solving point problems & are poised for growth,” he says.
And Sanjay is not off the point. As per Inc42 Datalabs funding report for H1 2017, in terms of the amount being invested, transport and logistics took the third and fourth spots, respectively, with $528 Mn and $271 Mn in funding. In total, the logistics sector received over $271 Mn over 18 deals in H1 2017. Delhivery, Ecom Express and Rivigo received the maximum funding during this period.
Rajesh, however, is unfazed. For someone who considers five years a long time, he reveals in the next six months, BlackBuck’s plans are to aim to establish how it can rule the world of freight in the next two years.
Factors Shaping The Future Of Freight Transportation
As per Rajesh, the future of this industry is driven by two things – macro factors and micro factors. Macro aspects, which are more economy-driven aspects such as GST have kicked in but one is yet to see the full realisation of the benefit of that kicking in.
“Systems and processes are yet to be established, volumes are still down. So once volumes pick up we will get a clear idea of how GST will affect logistics of the country,” he adds.
Some of the other macro factors which will further shape the sector is how India progresses into managing freight and how can it be as digitised as much as possible in every element of it. Rajesh believes it is more a matter of how the economy treats freight; if that maturity comes in it would really be helpful.
In the micro aspect, the sector is influenced by the user behaviour or the trucker behaviour and the degree of fragmentation in the industry. While macro is evolving really fast, which is good for the country, micro will get influenced by shifting the user behaviour online and by helping truckers in finding better ways of doing things and running their businesses.
For now, Rajesh believes that GST will prove one of the most disruptive trends for the industry.
According to Novonous market research, road freight is the largest transportation segment in India, constituting around 63% of the total freight movement. The sector is currently valued at $140 Bn. Inter-city logistics accounts for a massive 95% of road freight movement and, by 2020, freight transport market in India is expected to be worth $307.70 Bn.
But this billion dollar logistics industry works in a fragmented way, with little or no information flow between different stakeholders. This makes it tough to move goods from the point of production to the market. While startups like BlackBuck are doing their bit to address this fragmented market through their tech integrated platforms, but the fact remains that only greater digitisation will bring effective change in this space.
With GST in place, increasing internet penetration, logistics startups stand a better chance to change the freight transportation economy in India. The question is how BlackBuck will differentiate against the rising tide of competitors in this segment and scale to greater heights.