The global on-demand logistics market is projected to grow at a compound annual growth rate of 20.8 per cent to reach $480.6 billion by 2031 from $412.4 billion in 2021, driven by a fast-growing ecommerce industry and increasing demand for faster delivery of goods. Bengaluru-based intracity logistics startup Porter has emerged as a significant player catering to this burgeoning market. In a conversation with DH’s Lavpreet Kaur, Pranav Goel, CEO & Co-Founder, Porter touches upon the startup ecosystem in the on-demand logistics space, challenges to startups in the space, gig workers' concerns, the company’s expansion plans and financial performance.
What is your reading of the first-mile and last-mile delivery space that you are operating in?
There are two types of deliveries that happen in the first and last mile. One is contractual, which is more scheduled and customer sets are large like FMCG and ecommerce companies and this has been a well-oiled machinery. On the other hand, the on-demand market, despite constituting 60 per cent of the last-mile logistics, has always been a broken market. Here, customers (particularly the medium and small industries) do not find good service levels and often end up paying higher prices. Drivers, on the other hand, complain of not having customers, not getting return trips and having high idle time between two trips, leading to highly inefficient asset utilisation.
What kind of customer composition are you catering to?
SMEs contribute 80 per cent of our revenue, followed by non-business customers, which has grown from 8-9 per cent to 15 per cent in a couple of years The bigger ecommerce and FMCG companies contribute around 5 per cent of our revenues.
What is your current market share and how do you plan to expand?
Cities where we have been present for the last 8-9 years, including Mumbai, Bengaluru and Delhi, we would have around 15 per cent market share. Then there is the next rung of cities where we have launched in the last 3-4 years, including Pune, Kolkata, Jaipur and Lucknow, where we currently have 2-3 per cent market share. We believe in the next five years we will get to a 40 per cent market share within the on-demand space.
Over time the on-demand market has consolidated and we represent over 80 per cent of the organised market. The biggest competition now is the unorganised market.
How has Porter fared pre and post-pandemic?
During the pandemic, two things happened - we did a lot of these category and geography expansions that helped us grow and the natural adoption of digital platforms became a tailwind for us. We went from ~Rs 328 crore in 2021 to ~Rs 862 crore in 2022. Last year, we made around Rs 1800 crore, maintaining a 2X year-on-year growth but our losses have not grown at the same rate. The current year is when our losses would start declining. This financial year’s target is Rs 3,000 crore of annual revenue and a loss of about Rs 140 crore.
What are the major challenges for startups emerging in this space?
Logistics is a tough system to do. The operational complexity and low margins make business harder. The reason why a lot of startups fail in our space is bad timing. Typically high networked businesses have space for just 3-4 people. And those who are not in the top 2-3, will be unable to attract capital. So, the timing (in terms of entry into the market, fundraising etc) is one big reason startups get left behind. The second would be certain execution missteps. The third important reason is giving up too soon.
There are concerns about the safety of delivery persons. How are these to be addressed?
There are a lot of issues which largely come on the back of extreme on-demand nature services. A lot of people in the gig economy follow ladder incentivisation where a driver gets some amount as a bonus for completing a certain number of trips. This pushes recklessness.
Regulation of the gig industry is a very complex issue that needs deliberation for the right balance to ensure the industry is not killed while all the players get benefits.
What does Porter's network look like as of now and what are your expansion plans?
We have more than 5 lakh driver partners on the platform across India and have serviced more than 1.3 crore customers so far since our inception. We are looking at a 3X growth in our user base in the next five years and a 5X growth in our revenue and scale in the next five years.We are launching in 4-5 cities each year and we will be in the top 30-35 cities by 2025.
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