Lumbering trucks transport goods across the country and usually are the lifeline of any economy. The lakhs of mini-trucks chugging away within a city function as the last mile agent. And as with any unorganised business, small truck owners form a local cartel. They dictate price and squeeze small and medium enterprises (SME) like those that sell electronics, furniture, paints and timber.
But even with this tilt in the balance of power, it is not like these truck drivers get any richer. There is no predictable way of anticipating demand. So after idling away in the local adda for more than half the working day, truck drivers overcharge the customers anticipating an empty return trip.
A lose-lose proposition all the way.
So naturally, it became a space that had to be disrupted and begged the attention of startups to try and ‘Uberise’ it, and try they did. The app gives a business owner an ETA on when a truck will be at his doorstep and at a price that is decided by an algorithm. The driver gets a promise that there will be more rides.
Given the scale of the problem (last mile logistics in India is estimated to be worth $15 billion, according to industry estimates) in 2014 and 2015 as many as 74 on-demand last mile trucking startups got $10.6 million in funding, according to Tracxn. Companies such as Porter, the Karrier, TruckSumo, Turant Delivery, Cargoji, LetsTransport, Shippr all set out to solve the problem for both drivers and SMEs using technology, and there it was the Uber for trucks.
When it all started, most of these companies chased SMEs because that is where the inefficiency was at its peak.
Large companies had contracts with slightly more organised logistic providers and fixed requirement. Here, too, there were inefficiencies as trucks idled half the time, but for companies, predictability scored over better utilisation and cheaper rates.
“For us, SMEs were the real business problem to solve. If you look at big clients they want a contract and they want trucks at their disposal. While it is profitable to do so, you are not creating great efficiencies there using tech,” says Aravind Sanka, co-founder of the Karrier, which was set up in 2014 and raised $225,000.
Logistic service providers, who watch the space hold a similar belief.
“Corporates tend to have corporate accounts with logistic companies and they tend to be more organised. But it is the smaller fraternity where there is a lot of demand for efficiency” says Anil Syal, CEO, Flywheel Logistics, a container transport company.
But cut to 2016, only a few companies remain an on-demand aggregator of last mile trucks. Companies found out the hard way that getting SMEs to change their habit and take to technology was a tough sell.
The common refrain that Aravind Sanka, co-founder, the Karrier heard from SMEs was “Ek seeti se driver mil jata hai saab, to mein appka app kyun use karoon.” (I can get drivers at the drop of a hat, why should I use your app?)
“We knew it was a tough market to convince but didn’t anticipate that selling to SMEs would be as tough as it turned out to be,” says Sanka. “There was not as much excitement about this among them as we expected initially and they weren’t excited about the value proposition of more efficiency,” he says.
Unlike Uber, which could subsidise the customer to a great extent, these companies could not dream of discounting to such a large extent with the cash that they had raised.
“SMEs have a lot of inertia to change because it involves trusting someone with cargo. Even though we were 15% cheaper, it was not enough of an incentive for SMEs to change their behaviour. We also needed to be available on-demand and provide the reliability of a known driver.” says Arun Rao, co-founder, TruckSumo, which had about 200 drivers on its platform. “We would have had to subsidise them a lot more to break the inertia and that was not possible with the funding we had.”
As a result, companies had to make some hard choices. Companies like TruckSumo, Shippr, Moovo dismantled the on-demand model in 2016 and moved on to cater to fixed demand from big businesses like e-commerce. Some others like Turant Delivery moved to inter-city transport after six months of trying to crack the intra-city space.