How ElasticRun is redefining commerce in rural India

A Billion $ Idea

When Sandeep Deshmukh saw all of India’s major telecom providers offering 4G mobile networks in 2016, he knew it was the right time to execute his idea.

The engineer-turned-entrepreneur, along with partners Shitiz Bansal and Saurabh Nigam, founded a crowdsourced logistics network that focuses on rural markets, offering merchants goods directly from India’s prominent brands.

4G internet was available “in the length and breadth of the country”, Deshmukh said, giving them the confidence to make the idea a reality.

Fast forward to 2022, ElasticRun aggregates supply from over 300 brands in over 80,000 villages across 28 states.

The business-to-business e-commerce platform, which joined the unicorn club this year, connects some of the largest consumer brands to rural businesses through its crowdsourcing engine and mimics traditional logistics networks on virtual cloud.

“These rural markets have remained underserviced till date because of lack of reach to those markets and we have built a technology that provides low-cost, high-reliability connectivity,” said Deshmukh, the chief executive of the firm that counts XpressBees and Rivigo as its rivals.

Logistics refers to the overall process of storing and transporting goods from the point of origin to the point of consumption. It involves investment of time, resources and finances.

Traditional logistics firms keep distribution networks with fixed assets with the aim of having a steady capacity to serve throughout the year despite demand fluctuations.

ElasticRun thinks differently and has a distribution network of variable capacity that looks to adjust itself depending on demand, helping to optimise asset-cost utilisation.

That approach has helped it achieve four times the capital-effectiveness and five times the employee-efficiency compared with a traditional logistics network, the Pune-based firm claimed.

On a peak day, over 10 lakh shipments are delivered to rural customers, an employee at the startup revealed.

“We’re essentially building the railroads of Indian rural consumption,” Deshmukh told DH.

Operated by Ntex Transportation Services Pvt Ltd, the startup raised $300 million in a funding round led by SoftBank Group, Prosus Ventures and Goldman Sachs at a valuation of close to $1.5 billion earlier this year.

Opportunities and challenges

ElasticRun aims to increase its customer base by 20-25 times and broaden its wallet share of existing stores by four to five times.

“We have a net opportunity to grow almost 100x from where we stand today,” Deshmukh said, adding that its immediate focus was to deepen its network in the 28 existing states.

The opportunity certainly exists.

Logistics costs in India are pegged at 13-14 per cent of GDP, while the figure stands at around 8 per cent in developed countries, according to World Bank data. The National Logistics Policy launched in September aims to bring the cost at par with global benchmarks by 2030.

A growing middle class, advanced digital payment systems and significant government support are the other reasons behind a strong growth outlook for the logistics sector, according to Ankur Mittal, co-founder of Inflection Point Ventures.

The biggest challenge for the logistics unicorn is the struggle to turn profitable.

ElasticRun’s loss widened to Rs 373 crore in the financial year that ended in March 2022 from Rs 101 crore in the year earlier, due to a significant rise in the cost of procuring goods and expenses tied to employee benefits.

An ElasticRun employee played down the profitability concerns, saying it was “only six years old” in the logistics ecosystem. Rising competition to grab rural market share and issues tied to data and network security are the other threats facing the logistics firm.

(This is the ninth story in the “a billion $ idea” series focused on startups that joined the unicorn club in FY2021-22)