How Shiprocket became India’s leading e-commerce logistics aggregator

It’s a ship… it’s a rocket… it’s a platform for small scale e-commerce businesses to manage their orders and shipments. It’s Shiprocket. We know about courier services such as Blue Dart, Delhivery, DHL and Ecom Express. Major platforms and businesses have tied up with them to fulfil their orders, but what about the SMEs that do not have the wherewithal to partner with say Blue Dart directly? 

They may not have huge volume every month and thus, shy away from subscribing to the courier service’s monthly, quarterly or annual package. 

Enter Shiprocket. The e-commerce logistics aggregator allows direct-to-consumer (D2C) businesses to flexibly choose their courier partner for every order, after comparing prices and assessing the track record of each service. Today, it is the largest aggregator with a network of over 85,000 sellers, servicing 26,000 pin codes. But, the road to adopting a successful business model has been a tough one for the founders — Saahil Goel, Gautam Kapoor and Vishesh Khurana. 

“We had worked through many business models, failed and finally bounced back. But, the core of our business remained constant: e-commerce, SMEs and technology,” says Goel, who is also the CEO of the company. 

Rocket launcher
Under BigFoot Retail Solutions, they first founded Kartrocket in 2012, a B2B e-commerce SaaS service provider to help small and medium merchants create their online shopping site, enable online payments gateway and sell their products — all at a cost of Rs.3,000/month. Then, when apps such as Facebook and WhatsApp became omnipresent, they launched Kraftly, a C2C marketplace for homepreneurs, in 2015. They had more than 1,000 sellers on the platform, but instead of being a savvy SaaS platform, they ended up spending most of their resources in assisting and advising small business owners. “Some sellers with just 50 products were asking us to build a Flipkart-like website,” recalls Goel. But, competing with Amazon and Flipkart would just not be prudent. They realised that most of their clients were anyway listed on those major e-commerce platforms, but were using Kraftly for its shipping feature. Unlike e-commerce websites, which shipped in bulk, Kraftly would allow small shipping orders from Tier-II and Tier-III cities. For instance, if 100 sellers chose courier A on Kraftly, the platform could aggregate the orders and thus offer lower rates for an individual seller. 

Kraftly’s founders realised there was big money and scalability here, in facilitating shipments. Thus, Shiprocket was founded in 2016 and Kraftly was rebranded as Shiprocket Social in 2018. Meanwhile, Kartrocket was rebranded as Shiprocket 360, which manages order and inventory, customer relationship and marketing and branding solutions.

Ashish Sharma, CEO, InnoVen Capital India, one of the investors in the start-up, says, “Shiprocket is a great example of founders pivoting the business model once they realised that the bigger opportunity was around solving pain points for SMEs and new age brands, as it relates to logistics.” 

Fuelling growth
Thanks to their experience of five years with e-commerce SMEs, they have built a platform that has a simple interface backed with powerful AI and machine learning to constantly upgrade the software. Anyone who wishes to sell something can sign up on Shiprocket’s website or app. Instantly, the user is led to a dashboard that has everything from — number of orders (today’s or historical), revenue details, average shipping cost, shipment details such as total shipments, in-transit, delivered and much more. Once a seller feeds in the details of a new package, they can choose from Shiprocket’s 17 courier partners that include Shadowfax, FedEx, DHL, Aramex, Delhivery, Ecom Express to name a few. 

The platform shows price comparison and delivery track record of all its partners and ranks the courier partners based on their services at each group of pin codes. It also includes data for pick-up, drop and last-mile delivery along with the pricing. The sellers, a few of which include Bodycare, Bira, Gillette, Mamaearth, The Beer Café, Cureveda and others, can also generate weekly reports on stocks and sales at various brand touchpoints. 

The founders claim that on average, each seller gets about 100 orders per month from its customers. By keeping in tune with the sellers’ feedback, the platform also built an open API to integrate other software that they use such as accounting apps and shopping carts. 

While most of these services are free, Shiprocket charges an undisclosed commission on every shipment made through a pay-as-you-go model. “Indians don’t like to pay on monthly basis. Instead, they prefer paying per shipping or per transaction basis,” says Goel. But, they do have an option for subscription as well. While in the free version, sellers have to pay approximately Rs.29 to ship a 500-gram package, if they subscribe for the advanced version, the average cost comes down to Rs.23/500 grams. This also comes with added features such as managing inventory or catalogue on the platform. Goel claims these rates are 30-40% lower than regular postal charges of similar packages.   

But pricing, according to Goel, is not the sole USP of the platform. It’s the entire package, especially for the bigger sellers amongst their clients (such as Mamaearth) — the analytical tools and the courier ranking software.   

Last year, they also added an ‘advance COD’ feature to help sellers with their working capital needs. For instance, in a typical cycle, courier partners collect money from consumers, which is paid to Shiprocket on the sixth day of every week. In turn, sellers would get their money on the seventh day, which was a pain point as most of them are small sellers with limited cash flow. Instead, the founders devised a strategy that would allow them to pay sellers in advance by charging them an interest rate of 0.5%. Within a year, almost 50% of its sellers started availing this short-term loan, with average ticket size of Rs.40,000-50,000.  

Shiprocket clocked revenue of Rs.1.67 billion in FY20 and raised $13 million in May from Tribe Capital, InnoVen Capital and Bertelsmann India Investments. As of December 2020, Shiprocket has over 85,000 sellers shipping more than three million packages on a monthly basis. InnoVen’s Sharma says, “It is not a consumer business that requires a lot of capital. They have been able to drive growth in a very capital-efficient manner and the company is already profitable.” 

Seller’s darling
Just like Shiprocket’s investors, analysts also see merit in this segment. According to Saurav Chachan, senior consultant, RedSeer, the number of total shipments in India grew from 800 million in CY18 to 1,200 million in CY19. “In the next three to four years, we expect 30-40% CAGR, which will be primarily driven by growth in e-commerce,” he says. 

Despite the COVID-19 disruption, the company emerged stronger. When the lockdown came into effect, demand declined by 95% with most courier partners also shutting services temporarily. So, Goel and his team wasted no time in going hyperlocal to deliver medicines, masks and food supplies. They onboarded Dunzo, Shadowfax and WeFast as partners and built a pin code tracker to allow sellers to identify ‘COVID zones’ and provide speedy intra-city deliveries within a radius of 50 kilometers. Even when the country eased restrictions, this hyperlocal service called Shiprocket SARAL continued.  

It has also leased five warehouses across major cities like Delhi, Gurugram, Bengaluru, Kolkata and Mumbai, where sellers pay per cubic feet, according to the number of products left at the end of the 30-day free period. Goel reveals, for the fulfilment centre, storage fee is about Rs.2-3 for a product/month only if it remains in the warehouse after the first 30 days. 

Anand Ramanathan, partner, Deloitte India, points out that although service and timely deliveries form the core of e-commerce logistics, the key deciding factors will be the cost structure, warehousing and backend technology. Many legacy courier companies such as DHL or Gati lack these, he believes. “They have already invested a lot in their ground operations. Only new-age companies have the luxury of being agile. Hence, older players have partnered with aggregators such as Shiprocket, which are technologically adept,” he adds.  

However, RedSeer’s Chachan adds a note of caution to Shiprocket’s ambition. D2C brands prominently ship through marketplaces such as Amazon. Their independent shipping needs account for only about 5-20% of total deliveries. “Once these D2C companies gain scale, they can directly partner with logistics players instead of partnering with third party aggregators like Shiprocket,” he says. Moreover, even though the start-up has the first-mover advantage in being a logistics aggregator in the country, Chachan adds “technologically-based services are easily replicable unlike infrastructure logistics models like that of Shadowfax”.  

Yet, the space has seen limited competition in India, with the only other name Shipkaro still struggling to make its mark. Players such as Amazon and now JioMart are giants in their field and many SMEs might always choose them over Shiprocket, but Goel reminds that there are certain aspects that will help them stand out. For instance, the bigger players don’t share consumer metrics and information with the sellers, which for a small-time business owner is crucial. But, it might not even take a flick of a wand for a player like JioMart to build a platform exactly like Shiprocket’s and Goel is cognisant of that. For now, he is confident that their USP is agility and constant upgradation of tech capabilities for small-time sellers.