No B2C company does surface transport like we do: Ashish Shah

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May 13, 2015 12:04 AM

Our packaging and shipping cost is about 10%, which is the least in this business. Our shipping cost is roughly 6.5%, which is unheard of in the furniture business

Pepperfry.com, an online marketplace for furniture, has perfected a logistic model for itself through a trail-and-error method. Going against the outsourcing trend, the company packs and ships products directly to the consumer, in a highly cost efficient way. The company aspires to be the largest ‘large item’ logistics player in the country. Its founder and chief operating officer Ashish Shah spoke to FE’s Verghis Chandy recently about the company’s logistic model. Excerpts:

You have chosen to develop the entire processes in-house and do the shipping yourself instead of outsourcing. Aren’t you reinventing the wheel, considering that best practices are available elsewhere?

It’s important to invent things on our own. Take the, say, Flipkart or Domino’s model. They cannot deliver a dining table on their bike. The two-wheeler-based delivery model has been in existence for over two decades now. But transporting a 400-kg wardrobe over long distances is a different game altogether. In India, no B2C (business to consumer) company does surface transport like the way we do. In our model, our average shipping cost for any item is R600. So for R600 we’re able to shift a wardrobe from, say, Jodhpur (our main hub) to Kolkata. The nearest that a reputed transporter charge for that would be R4,000.

Why such a big difference in charges?

Let’s understand how a third party would take care of logistics for a wardrobe for the same destination. They would ship out the wardrobe in LCL (less than container load) quantity from Jodhpur. In Jaipur, it will be loaded to a truck to Delhi, along with, say, 50 more items. The same way from Delhi to then Kolkata. When you have four transhipment, chances are 20% of the items would come back to us as damaged. Also for LCL quantity, you’re charged at volumetric (by size, or dimension) rates. We used to spend R6,000 for Jodhpur-Kolkata initially. Again, after a product reaches our fulfilment centre in Kolkata, it has to be delivered to the buyer and assembled at his premises. If the product is found damaged, there is a cost for bringing it back then. You will not find a single company doing large item distribution in India. We’re not re-inventing the wheel. We’re pioneering. I assure you that by the end of this year, we will be the largest logistics company for large item distribution in the country. I will have 400 vehicles on the road on any time of the day, distributing furniture in 400 cities. I am already doing it for 150 cities.

But large item distribution is anyway done in other countries. Couldn’t you have adopted those models than opting for a trial-and-error method?

In other countries, the infrastructure is amazing. Logistics and infrastructure are fairly evolved in the West. Moreover, their consumption level and population concentration are also very high. In the US, any given time a trailer is moving from New York to New Jersey. But a truck will move from Jodhpur to Kolkata in a month! I’m talking only about the corridor, not about 24 Parganas.

Okay. There is no comparison. But why do you want to make the corrugated boxes yourself?

For every 8,000 item that we have, we need a different kind of packaging. Nobody was willing to make corrugated boxes of such different sizes for us. Many a time, even we won’t be knowing what kind of packaging we will require. It’s not like selling mobile phone where packaging and quality are already taken care of by the maker. In furniture, before packing, we’ve to do the quality check as well. So the best option for us was to do the entire packaging operations ourselves.

That must have reduced the packaging cost for you?

Yes. Our packaging and shipping cost is about 10%, which is the least in this business. Our shipping cost is roughly 6.5%, which is unheard of in the furniture business.

How could you achieve that?

We keep optimising the load. When you’re sharing a load, the cost of shipment goes up considerably. So we ship a full truck load directly from a large hub to a mother hub. That reduces the shipment cost per item for us. The larger the truck, the lesser is the per item cost. Moreover, direct shipment, without any detour, reduces the distance and makes shipping faster. We’re able to do this because of our scale. From mother hubs, our small commercial vehicles, like Tata Ace, does the last mile delivery.

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