Thanks to the consistent growth of ecommerce, logistics has become one of the fastest-growing verticals in Bangladesh. The growth of ecommerce has created new opportunities in the vertical. Several local logistics players have raised capital over the past two years and have built meaningful businesses.
The consistent growth apparently led to increased attention from regional logistics startups. Three multinational logistics startups: Lalamove, Delhivery, and Ecom Express have expanded their operation to Bangladesh in recent years.
Of them, two are Indian logistics startups.
In January 2021, Indian logistics startup Ecom Express made its first outside India investment into Dhaka-based full-stack logistics startup Paperfly — a USD 11 million investment. The company followed up with a new investment this year.
Another Indian logistics startup Delhivery launched in Bangladesh early this year. Two companies are rivals in India. And they take very different approaches to expanding to Bangladesh.
Today’s story is about Delhivery and Ecom Express and their divergent approaches to expanding to Bangladesh.
“IPO-bound Indian logistics unicorn Delhivery (note: Delhivery has since got listed) has entered Bangladesh as the company looks to expand beyond its border, online activities of the company show. The company has appointed former Chief Business Officer of Grameenphone Kazi Hassan as Bangladesh Country Head in March this year, per social media posts. Delhivery previously said it plans to scale its cross-border business and enter Bangladesh and Sri Lanka.”
“Paperfly, the Dhaka-based logistics-tech company has raised nearly BDT 100 crore in new investment from Ecom Express, said a press release. Ecom Express, which is backed by Warburg Pincus and CDC Group, is one of the largest logistics companies in India having operations in over 29 states in India.”
The Daily Star reports:
“Logistics-tech company Paperfly has confirmed Tk 102 crore new investment from Ecom Express, one of the leading tech-based e-commerce logistics solutions providers in India, as it looks to digitalise the local courier segment. The start-up will use the funds to build digital and other infrastructures so that customers can make online requests to collect parcels from their doorsteps and deliver them to recipients. [...] Last year, the firm made a foray into Bangladesh, its maiden venture outside the home market, when it injected about Tk 100 crore into Paperfly. The latest fund injection takes Ecom's investment in Paperfly to Tk 202 crore.”
Logistics remains a major challenge for ecommerce in Bangladesh. There are multiple problems: reach, service quality, and cost. It means the vertical offers a huge opportunity to build large businesses. While several local players, as I mentioned before, have built excellent businesses in the vertical, the vertical remains in its early days.
Clearly, regional logistics startups see potential in the Bangladesh market and seek to take this opportunity.
Ecom Express is the first Indian logistics startup to invest in a Bangladeshi startup. The company made its first investment into Bangladeshi logistics startup Paperfly in early 2021. After investing US$11 million in Paperfly in 2021, Ecom Express followed up with another US$12 million investment this year.
In a press release sent to media outlets at the time the company explained its reasoning behind the investment:
“With more than 167 million inhabitants and over 90 million internet users, the e-commerce industry in Bangladesh is emerging and has become one of the fastest growing markets in the region. The increasing per-capita disposable income has fueled higher consumption from expanding middle classes. Moreover, greater mobile and internet penetration has led consumers to increasingly shop online and expect shorter delivery times.”
T.A. Krishnan, CEO, and Co-Founder of Ecom Express said in the same statement: “We see a lot of growth opportunities in adjacent markets and the current investment is one of the many things in the pipeline. We looked at multiple aspects before identifying Bangladesh for our first international venture. The market draws parallel with India in terms of growth and demography and we want to leverage our experience and domain expertise to enable high scalability growth and build a strategic backbone of e-commerce logistics in Bangladesh. Paperfly is quite similar to Ecom Express in its operations and we admire what the company has accomplished in the Bangladesh market. We look forward to enabling Paperfly to unlock new avenues for enhanced third-party logistics and home delivery in the country.”
Founded in 2012, Ecom Express works with many large ecommerce companies in India including Amazon, Flipkart, Paytm, and Udaan to provide express delivery and fulfillment services. It also works with telcos and banking and financial services players for e-KYC and document collection. The company has a pan India presence and operates in over 2650 towns across 27,000 plus pin codes.
Ecom Express, however, is not the only Indian logistics company looking to Bangladesh. Delhivery, another leading logistics player in India, doesn’t want to miss the opportunity either. And their playbooks couldn’t be more different.
Delhivery has been looking to expand to new markets for a while. As I mentioned before, the company previously said it plans to scale its cross-border business and enter Bangladesh and Sri Lanka. The company has finally followed it up with its launch in Bangladesh early this year.
Delhivery appointed former Chief Business Officer of Grameenphone Kazi Hassan as Bangladesh Country Head in March. The company is clearly doubling down on cross-border expansion bets.
Delhivery was founded in 2011 by Sahil Barua, Mohit Tandon, Bhavesh Manglani, Suraj Saharan, and Kapil Bharati. The company claims it is the largest logistics company in India. In May 2022, Delhivery launched its initial public offering (IPO) of US$660 million at a valuation of US$4.4 billion and got listed on the BSE and NSE.
In an interview with ET published in 2021, Delhivery’s Sahil Barua explained the reasoning for expansion to some extent:
“We are going to be more acquisitive than we have been in the past. It is because there is a mismatch on valuation. We are not going to buy anything for $100 million,”
Previously Delhivery acquired two companies: Spoton Logistics, for ₹1,600 crore (US$200 million), and California-based unmanned aircraft system company Transition Robotics Inc.
Delhivery and Ecom Express are two of the leading players in India’s logistics market. Before Delhivery went public, in their last two rounds, Delhivery raised US$ 377 million while Ecom Express raised US$ 270 million.
Both companies expanded to Bangladesh a year apart. Ecom Express in 2021. Delhivery in 2022.
The companies, however, take two distinct approaches to expansion. Delhivery, as the past examples show, has used acquisition as a path for expansion and growth. While Delhivery decided to slog it out alone in Bangladesh for now, the company may go for an acquisition in the future to strengthen its market position. The previous track record of the company speaks for that.
On the other hand, Ecom Express appears to be taking a different approach—investing in an existing local player. It is hard to predict which approach works the best. Each approach has its advantages. For instance, Paperfly, being a local player, enjoys certain advantages. The company already has an established business in Bangladesh. In order to build similar penetration in Bangladesh, it would have taken Ecom Express several years and meaningful investment. Moreover, we’ve seen in many markets before where local players, given access to resources, have done better than multinational competitors. To that end, the decision to invest in a local player makes better sense than slogging it out alone.
However, there are examples where doing it yourself worked best for a company. Lalamove, another multinational logistics startup, also decided to take this path in expanding to Bangladesh.
The companies must have their own reasonings. I’m looking forward to seeing the convergence in the logistics industry in Bangladesh and how this pans out in the coming days.