Blackbuck – Hauling the future
Blackbuck is attempting to solve the inefficiencies in the Indian surface transport sector through a marketplace and technology-enabled services. Its impressive growth and recent funding have attracted various competitors – including one that questions the logistics platform business model itself.
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.
Roadblocks ahead!
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.
A super unorganized and an interesting space to venture! Given so many uncertainties in regulation, insurance, leakage – to what extent can tech and optimizations solve this issue with an asset-light model? Would this company be valued at online company multiples or offline? What prevents someone like Amazon and Flipkart who would arguably reach pinnacle of customer delivery get into this space given they have the tech prowess to dominate?
Answers to these questions would be crucial to determine the future of Blackbuck! Thoughts?
Thanks for reading and the comment! Blackbuck insists it’s a tech platform and I imagine is valued as such given the kind of investors they’ve raised capital from and their portfolio.
I’m sorry I wasn’t clear in the post about the kind of cargo that trucks on Blackbuck usually carry – these are the ones that carry raw material, industrials, food grains, coal, iron ore, etc., around the country. Delhivery, on the other hand, is looking to build out a logistics chain specifically for e-commerce. I think Amazon/Flipkart would first be competing there.
Blackbuck did start an insurance product for guaranteeing deliveries etc. so I imagine this can extend to solving the leakage problem as well but I also wonder how much of a liability that would be – somehow when platforms take on too many guarantees/liabilities, there is a chance they diverge from their core business!
Very interesting view into India’s trucking platforms! I like the way Blackbuck discourages multi-homing through the contracts required of shippers, and also has started to build up an ecosystem of services for shippers. How do you think about the risk of disintermediation, once a trucker is able to connect the various parties on each side of the delivery? The competitors are taking an interesting model of higher integration with services that shippers and truckers need, and that may be more defensible in the future — how has this played out vs. Blackbuck?
I agree with you that disintermediation is definitely a risk in this business but the fact that the supply side is fragmented to a certain extent works in their favor. As far as disintermediation in the case of large shippers and fleet owners goes, I think this is where they really need to incentivize both sides to “create value” in the platform. For example, their other products i.e. the suite of shipping management tools would potentially work only when the shipper and truckers book a deal through the platform
Partnerships with players in other parts of the value chain, such as the recent one with Maersk, the shipping line, to build a marketplace for container shipping can also be effective to increase stickiness. I think with this partnership they’ve effectively pivoted into becoming some form of a “vendor manager” service for Maersk, which would be less likely to source customers/suppliers from another source now given their investment into the partnership.