Transporting cargo between cities sounds deceptively easy – organize the goods, identify a shipper, and notify the recipient. Hidden beneath this are a surprising number of inefficiencies on both the shipper (demand) and trucker (supply) side, ranging from tracking to utilization. In the Indian context, it is further exacerbated by the abundance of technologically unsophisticated small fleet owners and individual owner-operators. Started in 2015 Blackbuck evolved from a freight matching marketplace to a logistics technology ecosystem offering productivity enhancement solutions to both shippers and truckers. The platform hosts more than 10,000 customers (typically small/medium enterprises) and over 250,000 trucks and brought in $135mn of revenue (FY19). Arguably this is insignificant relative to the $100bn surface logistics sector in India but I believe Blackbuck can provide sustainable value to a market that is ripe for technological disruption.
Everybody loves efficiency
Efficiencies across the board are Blackbuck’s key value proposition – to both sides of the platform. Blackbuck evolved from a “Uber for trucks” for shippers to a more holistic shipping management solution providing price transparency, granular shipment tracking, and guarantees. It also provides flexible shipping services – contract based vs. on-demand, a key feature that is critical to incentivizing shippers to use the platform and thereby attracting fleet operators.
On the other hand, truck owners and fleet operators constantly run into the possibility of returning empty-handed after finishing up a delivery. The current model which involves working with local customers means that their services are unheard of outside their particular city.
On the other hand, Blackbuck’s efficient freight matching model allows for the cargo to be transported by the “right” truck owner potentially increasing their utilization and revenue – a service for which Blackbuck charges a commission ranging between 15-20% of the value. In addition, Blackbuck also provides financing services including early payments and fuel cards – incentives that keep fleet operators on the platform, and alternative sources of monetization for Blackbuck.
The transport and logistics sector in India attracted a plethora of startups and, chasing them, huge amounts of funding in recent years. In addition to multiple platforms competing directly with Blackbuck (still the largest and best-funded), a range of alternatives has grown, each carving a market for itself.
On the one hand, catering specifically to the burgeoning e-commerce sector in India is Delhivery which recently raised $400mn in funding from Softbank providing both market validation and easy ways to attract customers and partners. While Blackbuck’s primary focus is full truckload cargo between cities, Delhivery operates across the entire value chain including warehousing, express services, etc.
Another well-funded threat is Rivigo, which plays in the intercity transport segment but by owning a fleet of trucks and improving performance, utilization and driver welfare through a technology-enabled relay operating model. Rivigo is betting its future on an entirely different thesis – where Blackbuck sees the fragmented market sustaining into the future, Rivigo is hoping that consolidation will become the mainstay. Rivigo is also focusing heavily on drivers (who are its employees) welfare whereas Blackbuck aims to be relatively hands-off and only provide a layer of trust and allow all players their own freedom to choose.
Highway to Heaven?
It is inevitable that Blackbuck will be forced to choose how it competes with either of these firms and I think it should resist the temptation to expand its target segment or change its operating model.
Instead, it should work towards onboarding larger fleet operators and large shippers by providing superior technological services for the logistics operations. The key to sustaining a platform business model will be stakeholders on both sides who can continuously generate value for themselves – large fleet owners can leverage Blackbuck’s technology offerings for their operating efficiencies and also diversify their customer base at the same time. Similarly, large shippers would also benefit from diversifying their logistics vendors.
Another reason Blackbuck should resist bring its own trucks onto the platform is a recent regulatory action in India that frowned upon the likes of Amazon and Flipkart selling their own products through the marketplace. While Blackbuck is yet to demonstrate sustained profitability, the uncertainty of the future would favor companies with strong economics – something that it can achieve, scale, and sustain through its hybrid product/platform model.