Delhivery to launch dark store network for fast e-commerce deliveries

Logistics firm Delhivery is all set to launch a network of shared dark stores to enable e-commerce companies and direct-to-consumer brands to deliver faster, Chief Executive Sahil Barua told investors on a conference call to announce its first-quarter financial results.

While the company already opens up its warehouses to quick-sale retailers, the new network, combined with last-mile delivery, will enable direct-to-consumer brands (primarily online) to get their products to consumers much faster, Barua said.

The Gurugram-based company said it will offer dark stores along with delivery service to reduce the operational costs of e-commerce companies.

Barua cautioned, however, that the demand for non-food products available within minutes is “relatively small” in terms of category and geographic reach.

“Some categories, like apparel, don’t necessarily lend themselves to a fast-trading model. The basic tenets of fast-trading are that inventory needs to move quickly. But the reality is that a lot of inventory in e-commerce doesn’t move quickly,” Barua said, adding that he doesn’t believe 30-minute or 1-hour delivery times will “significantly disrupt” e-commerce.

In fact, according to the CEO, the move is unlikely to have a significant impact on revenue growth in the near or medium term.

Instead, Delhivery will focus on “fast delivery,” which means delivering goods within 2-4 hours, allowing for better route optimization and consolidation, and ultimately better unit economics.

“I don’t believe the unit economics of low-value products delivered in less than an hour or 30 minutes without significant value density will work,” Barua said.

Mint reported last month that a number of consumer brands, including Nykaa and Purplle, are looking to set up dense networks of dark stores in partnership with logistics providers, using warehouses for this purpose.

Express reinforcement

Delhivery posted a profit of ₹54.3 crore for the quarter ended June, as against a loss of Rs. ₹89.4 crore as compared to the same period in the previous year, helped by the growth in express parcel delivery services.

The number of express parcels increased to 183 million in the quarter from 176 million a year earlier, boosting the company’s revenue by 12.6% to ₹1,276 crore, underlining the growing demand for faster deliveries.

EBITDA profitability in the express parcel segment increased by nearly 18% in the April-June period.

Read also | The Complicated Logistics of a Direct-to-Consumer Strategy

Delhi’s Business to Business (B2B) Transportation Division Sees Revenue Increase by 25% ₹347 crore, with volume rising to nearly 399,000 tonnes from 384,000 tonnes in the previous quarter.

Revenue from supply chain services — Delhivery’s offering to e-commerce companies and others — grew 11% year over year, ₹259 crore, thanks to opening of new accounts and a good season.

During the first quarter of the fiscal, Delhivery recorded a total of 18,783 postal codes while the number of express delivery centres increased to 3,567 from 3,170 during the same period in the previous year

The Gurugram-based company said in a filing with the stock exchanges that it also granted 166,000 share options (Esops) to its employees on August 1.

Mini trucks

On the consumer-to-consumer side, Delhivery plans to offer consumers the option to book mini trucks at select locations using a smartphone app, Barua said. Currently, users can send parcels weighing up to 50 kg in select cities.

“This has a major impact on our brand perception, performance and profit,” he said.

The company is also working to expand its offline merchant network across the country, enabling local entrepreneurs and delivery stores to direct order volumes to Delhivery’s network. Business is currently growing year-on-year, Barua said, without giving details.

The idea is to increase delivery volume in areas where Delhivery has no presence.

Delhivery shares ended Friday up 1.81% on NSE ₹414 per unit. The results were announced after the end of the trading day.