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Flipkart is banking on Indian B2B logistics startup Shadowfax to deliver grocery

Shadowfax works with a network of mom-and-pop stores to reduce its delivery cost by 20%.

Photo by Wonderlane on Unsplash

Bengaluru-based logistics company Shadowfax, backed by high-profile investors such as Qualcomm Ventures, Mirae Asset Naver Fund, World Bank-backed International Finance Corporation, among others has found a new admirer in e-commerce giant Flipkart.

The online marketplace major Flipkart recently led a funding round of USD 60 million in the last-mile delivery company that is known for working with mom-and-pop stores (kirana stores) to enable faster deliveries.

Global e-tailers in India, including Amazon and Walmart-owned Flipkart, have been trying to partner with mom-and-pop shops which rule three-fourth of the overall retail market, hoping it will help them grab a bigger share of the world’s second-most populous country’s retail market poised to reach over USD 1.2 trillion by 2021. By successfully forging a delivery partnership with these stores, Shadowfax has piqued the interest of the Indian e-commerce giant.

This is one of the reasons, that despite having its own delivery platform E-kart, Flipkart wants to leverage Shadowfax’s delivery fleet to help it with specific use-cases, most importantly for grocery delivery—a space in which it recently entered. It hopes to disrupt the USD 1.05 billion online grocery sector that already has two leaders—Bigbasket and Grofers—with a few new entrants such as Amazon and Swiggy.

“Flipkart is already working on the grocery segment and wants to leverage our kirana network. We will be growing much deeper with them as it is also exploring the hyperlocal delivery segment,” Vaibhav Khandelwal, co-founder of Shadowfax told KrASIA.

He said although the funding will help the company grow its business and create more products, the investment is more from a perspective of alignment of capabilities. Khandelwal said there are some specific use-cases that his company enables, like the network of kirana stores it works with to optimize deliveries, specifically in hyperlocal, food, and grocery space.

“Some of these capabilities are relevant for Flipkart for their scaling-up plan. The investment is more of a reflection of their aspiration to target these sectors, as they want to have a strategic investment in a company that enables them to realize those dreams in the long run,” Khandelwal said.

According to Khandelwal, there are lots of other “arenas to work together,” but to start with Shadowfax will closely work with the Flipkart team to enable its grocery and hyperlocal deliveries.

To be sure, the company works with other e-commerce, grocery, and food delivery companies as well, which include Snapdeal, Amazon, Paytm Mall, Grofers, and Bigbasket. Apart from online companies Shadowfax also delivers products for physical retail such as More, Spencer’s, BigBazaar, and Star Bazaar, among others.

“The Flipkart investment, in no way mandates us that we will not work with other players. In fact, our value creation comes up more when we work with multiple players in multiple categories,” Khandelwal said.

A Shadowfax delivery person on a busy road in Bengaluru. Photo by Avanish Tiwary

Shadowfax is the third company in which Flipkart has invested. In 2015, Flipkart put in USD 25 million in a Bengaluru-based B2B logistics company Blackbuck that is a marketplace of truckers connecting companies with truck operators for former’s inter-city logistics needs. In the same year, it led an investment round of USD 9 million in a locker company QikPod that operates automated lockers to reduce re-delivering of products, a problem that e-commerce companies regularly deal with when the person is not at home or office during the delivery time.

The kirana connection

In the 300 cities where Shadowfax operates, it partners with local neighborhood stores, often called kirana stores to enable last-mile deliveries in the range of 500 metres to a kilometre. Since the distance is small, the company claims it can ensure faster deliveries compared to other players. Khandelwal said the platform is built in such a way that anyone with a bicycle or a two-wheeler can join to start making deliveries and earn extra income.

According to him, working with kiranas is a low-cost model, ensuring the company saves 20% on each delivery every time it outsources its job to the neighborhood stores. Moreover, it provides an additional fleet force to Shadowfax, which is flexible and can be used according to the demand.

Typically, one kirana store receives 20 to 45 shipments in a day to deliver in their neighborhood. According to a Techcrunch report, the B2B logistics firm processes more than 10 million deliveries a month.

The company trains and engages the in-house staff of these stores to make the deliveries in e-commerce, grocery, and food space. One of the challenges of this model, Khandelwal said, was making the delivery person understand how their technology works. The company was also cautious and took some time to understand the right type of kirana stores it would want to partner with. “This stems from the fact that we can’t give bad customer experience by outsourcing the delivery mechanism to someone else,” Khandelwal said.

Shadowing new spaces

With the recent fund raise, the company plans to reach 1,000 cities in the next couple of years, plans to engage in pilot programs and has even begun a few experiments. It wants its network of neighborhood stores to be utilized as flexi-warehouses for better optimization and faster deliveries. It is already running the pilot for this in Bengaluru.

“We are running a few pilots but it’s not big enough for us to comment on that as of now,” Khandelwal said. He added, “We want to build an ecosystem that enables anyone with a kirana space to be able to make more money. That could be in a perspective of using them to do the last-mile delivery and use them as pick-up and drop-point as well.”

He said the company is working on launching other services as well. These could be using these neighborhood stores for cash deposits when a customer opts for cash-on-delivery.

“The delivery partners in our network and other partners as well, they collect cash from the end-customers. For example, a delivery person collects money from a customer and has to deposit it to a Shadowfax account. That’s not easy to do it physically, so they can deposit that cash to our partner kirana stores,” he said.