In February of this year, Meesho, a Bengaluru-based ecommerce platform, introduced Valmo, its own logistics marketplace. The goal was to democratize third-party logistics and alleviate delivery costs, particularly for smaller players.

Four months down the line, analysts observe that significant repercussions are being felt by major third-party logistics providers.

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“In India, the sector is largely unorganised, with local and regional entities operating within specific regions. With Valmo, Meesho aims to eliminate entry barriers for these players and establish a nationwide logistics solution,” stated a knowledgeable source regarding the new initiative.

Rapid Expansion and Operational Statistics of Valmo

Indeed, Valmo has rapidly expanded its operations to handle an average of 900,000 orders per day, representing approximately one-fifth of all third-party ecommerce shipments in India.

Its reach now extends to over 6,000 postal codes spanning across more than 20 cities.

The marketplace hosts at least 3,000 micro-entrepreneurs.

With Valmo, Meesho reduces delivery expenses, already achieving a 5% decrease. The company anticipates a further reduction of around 10%.

According to a report by Kotak Institutional Equities, Meesho has the potential to generate revenue from logistics, as it has significantly increased the proportion of insourced operations beyond 20%, affecting the growth of third-party players. The report states that Meesho represents approximately 20% of Delhivery’s Express Parcel business and captures 45% or more of the revenues of other major ecommerce players such as Flipkart, Amazon, and others.

Elara Capital said in a note, “While the ecommerce sector is projected to grow at 15-20%, Meesho, handling 24% of total shipments in India in FY23, has expanded its captive logistics share, resulting in reduced reliance on third-party logistics providers. This shift could potentially constrain segmental growth in the future.”

However, Delhivery refutes any suggestion of such impact on its operations.

In a conference call with analysts following the company’s fourth-quarter results, Sahil Barua, the co-founder and CEO of Delhivery, stated, “Neither do I expect significant volatility coming any further from here from various players deciding to experiment with various logistics models in terms of volume nor do I anticipate it having a material impact on our EBITDA.”

It’s tougher to establish a logistics company than it is to grow one past a certain point, he noted. And that Delhivery’s primary business was logistics. “Part of what enables us to provide the margins that we do is our ability to operate a fully integrated and a part truckload system, which even lowers our costs in the Express Parcel sector. To be sure, things would be difficult if we were currently a parcel-only business, depending on a single supplier for a significant portion of our volumes, launching self-logistics, and applying price pressure. However, thankfully for us, that isn’t the situation, Barua stated during the analyst call.

In a statement last December, Meesho announced it had attained profitability for the July-September quarter of FY24.

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