Delhivery to launch dark store network for rapid e-commerce deliveries

Logistics firm Delhivery is set to launch a network of shared dark stores to enable e-commerce firms and direct-to-consumer brands to fulfil faster deliveries, chief executive Sahil Barua told investors during the company’s first-quarter earnings call.

While the company already offers its warehouses to quick-commerce companies, the new network, coupled with last-mile delivery, will provide direct-to-consumer, or online-first, brands the chance to reach their products to consumers much faster, Barua said.

The Gurugram-based firm said it will provide dark stores along with delivery service to help ease operating costs for e-commerce companies.

However, Barua cautioned that the need for non-grocery items within minutes was “relatively narrow” in terms of category and geographical penetration.

“Certain categories like apparel don't necessarily lend themselves to the quick-commerce model at all. The fundamental tenets of quick commerce is that inventory has to be fast-moving. But the reality is that a lot of inventory in e-commerce is not fast-moving,” Barua said, adding that he does not believe that delivery timelines of 30 minutes or 1 hour will “massively disrupt” e-commerce.

In fact, the move is unlikely to be a significant driver of revenue in the short or medium term, according to the chief executive.

Instead, Delhivery will focus on ‘rapid delivery’, which refers to delivery of items within 2-4 hours, allowing for better route optimisation and consolidation resulting in better unit economics.

“I don’t believe the unit economics for low-value products in sub-one-hour or sub-30-minute deliveries without significant value density are going to work out,” Barua said.

Mint reported last month that many consumer brands, including Nykaa and Purplle, are looking to set up a dense of network of dark stores in collaboration with logistics players by cross-utilising warehouses.

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An express boost

Delhivery recorded a profit of ₹54.3 crore for the June-ended quarter, up from a loss of ₹89.4 crore in the corresponding year-ago period, helped by a boost in its express parcel delivery service.

Express shipments grew to 183 million in the quarter from 176 million a year earlier, driving up the company’s revenue by 12.6% to ₹1,276 crore, underscoring the growing demand for faster deliveries.

The express delivery vertical saw its EBITDA profitability improve by nearly 18% in the April-June period.

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Delhivery’s business-to-business (B2B) transportation vertical witnessed a 25% rise in revenue to ₹347 crore, with volumes surging to nearly 399,000 tonnes from 384,000 tonne in the previous quarter.

Revenue from the supply chain service—Delhivery’s offering to e-commerce companies, among others—rose 11% year-on-year to ₹259 crore, driven by the onboarding of new accounts and a strong season.

Delhivery touched a total of 18,783 pincodes in the first fiscal quarter, while the number of express delivery centres increased to 3,567 from 3,170 in the same year-ago period

The Gurugram-based firm also granted 166,000 employee stock options (Esops) on August 1, it said in a stock exchange filing.

Mini trucks

On the consumer-to-consumer shipping side, Delhivery plans to offer consumers the option to book mini trucks in select locations using its smartphone app, Barua said. Currently, users can send packages of up to 50 kg within some cities.

“This is a big driver of our brand perception, yield, and profit,” he said.

The company is also working on expanding its network of offline resellers across the country, allowing local entrepreneurs and courier shops to direct order volumes into Delhivery’s network. Currently, the business has been growing year-on-year, Barua said without revealing details.

The idea is to create delivery volumes in areas where Delhivery does not have a presence.

Delhivery’s shares ended Friday 1.81% higher on NSE at ₹414 apiece. The results were announced after the end of the day’s trading.