India’s second-largest logistics player is hurting after putting all its eggs in one basket
Dec 12, 2024
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India's third-party logistics sector faces turmoil as Meesho shifts gears, launching its own logistics arm, Valmo. This transition puts immense pressure on partners like Ecom Express, who have relied heavily on Meesho's success. The podcast delves into Ecom Express's stagnating growth amid fierce competition and operational challenges. It reveals how dependence on one key player can destabilize business models in the fast-evolving e-commerce landscape. The future is uncertain as logistics companies scramble to adapt.
Ecom Express's over-reliance on Meesho for revenue has left it vulnerable after Meesho launched its own logistics service, Valmo.
Efforts by Ecom Express to diversify its services and reduce dependency on Meesho have yielded minimal success amidst a competitive landscape.
Deep dives
Misho's Shift to In-House Logistics
Misho's decision to launch Valmo, its own in-house logistics service, has created significant tension in the third-party logistics industry, particularly impacting Ecom Express. Previously, Ecom Express relied heavily on Misho for a substantial portion of its revenue, with over half of its operational income linked to this single client. As Misho transitions to managing logistics internally, it has already moved over a third of its order volume through Valmo, putting Ecom Express's core business model under threat. This development comes at a critical time for Ecom Express, which is preparing for a second attempt at an IPO amid increasingly challenging market conditions.
Ecom Express's Dependence and Challenges
Ecom Express's narrow focus on serving Misho has left it vulnerable as Misho's logistics demands shift. Despite Ecom Express once managing the bulk of Misho's shipping, the company's consistent failure to meet Misho's targets for returns has accelerated the need for Misho to take control of its logistics. With its revenue growth stagnating over the past two years and increased competition from rivals like Delivery, Ecom Express's strategy of reliance on a single large client has proven detrimental. While trying to appease Misho through enhanced services like early morning deliveries and improved logistics processes, Ecom Express has, unfortunately, not been able to secure its position.
Ecom Express's Attempt at Diversification
In an effort to mitigate its risks and reduce dependency on Misho, Ecom Express has explored various diversification strategies that have met with limited success. The company has ventured into services such as warehouse management and modular services, aimed at connecting with other segments of e-commerce logistics. However, these new initiatives collectively contribute only a fraction to Ecom Express's revenue, making it difficult to shift the overall financial picture. A leadership transition at the company is also underway, with hopes pinned on new management to foster growth and agility, but it remains to be seen if these changes will stabilize earnings in a rapidly shifting logistics landscape.
For a while now, some of the biggest players in India’s third-party logistics industry have been riding on the success of e-commerce unicorn Meesho. As of 2023, it accounted for over half of the 2.5 billion shipments that were being handled by third-party logistics players. Companies like Delhivery and Ecom Express happily rose to the occasion and partnered with Meesho to handle all its order deliveries.
For logistics companies this was a dream come true because most of the other major e-commerce players in India – like Flipkart and Amazon – take care of all their logistics in-house.
But earlier this year, Meesho announced the launch of Valmo, its own in-house logistics arm. Naturally, third party logistics partners are nervous. But no one is more shaken up than Ecom Express.
Tune in.
**This episode was first published on September 2, 2024.
P.S The Ken’s podcast team is hiring! Here’s what we’re looking for.
Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.Listen to the latest episode of Two by Two here
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