Meesho’s Logistics Arm Valmo Disrupts Market, Impacts XpressBees, Ecom Express

Meesho‘s newly launched logistics unit, Valmo, is significantly impacting the logistics sector by handling a third of the e-commerce platform’s shipment volumes. 

This shift is diverting business from established delivery companies such as Delhivery, Ecom Express, XpressBees, and Shadowfax. These companies have historically relied on Meesho, which operates with a base of 1.5 million product sellers, for a substantial portion of their revenue.

Data obtained by The Arc reveals that Valmo offers a 9-15% lower price for deliveries and returns compared to its competitors. Sellers on Meesho, who typically list items priced around Rs 350, find these cost savings crucial. Meesho, which fulfills between 3.2 million and 3.5 million orders daily, now routes up to 1.1 million of these through Valmo. The company plans to increase Valmo’s share to 50% within the next two years.

Valmo, presented as a new logistics brand on Meesho’s platform, uses software to select the most suitable partner from a network of small local operators for each delivery stage. This model contrasts with full-stack logistics players that own physical assets.

The rise of Valmo poses a challenge for third-party logistics providers, who have seen Meesho orders constitute up to 30% of their volumes. A senior executive at one of these firms expressed concern, noting that if Valmo continues to expand without a corresponding increase in overall demand, third-party providers may be relegated to serving only peripheral areas.

Historically, Meesho was the only large e-commerce platform in India without a captive logistics unit. Both Amazon and Flipkart operate their fleets, primarily because they ship high-value goods such as electronics and appliances.

With the slower growth in consumer demand and the increasing importance of Meesho in the delivery services sector, the dynamics of the market are shifting. Many consumer brands are now distributing products through quick-commerce apps and offline retail channels, reducing their reliance on direct sales from their websites.

Bernstein, in a report on May 21, identified Meesho as the top client for all major 3PL players in India, accounting for 50% of volumes in the entire 3PL space. Bernstein expects Meesho to aggressively expand Valmo, suggesting that platforms typically target the majority of volumes for in-house logistics.

Meesho has clarified that it will not abandon its third-party partnerships, stating, “Meesho has forged successful partnerships with multiple third-party logistics providers. We are committed to continuing to work with and expanding this ecosystem through Valmo.”

The impact of Valmo’s expansion was evident when Delhivery announced its Q4 FY24 results. CEO Sahil Barua mentioned during an analyst call that the company was “realigning” due to Valmo’s significant growth. Bernstein has since reduced Delhivery’s share price from Rs 520 to Rs 450, citing Valmo as a factor behind Delhivery’s reduced market share.

While Delhivery has multiple business lines, including trucking, its exposure to Meesho is lower compared to XpressBees, Ecom Express, and Shadowfax. Despite their diversification, none of these companies reported a full year of profit in FY23. Ecom Express’s losses widened to Rs 375 crore, XpressBees reported a net loss of Rs 180 crore, and Delhivery’s net loss stood at Rs 415 crore.

The competitive pressure introduced by Valmo has even led to consolidation talks among these companies, though no deals have materialized due to the lack of new major clients. Industry insiders suggest that while an acquisition or merger could optimize costs, it would not drive long-term growth.

From its inception, Meesho outsourced logistics to firms like Delhivery, Ecom Express, XpressBees, and Shadowfax, using its proprietary software to determine the most efficient and cost-effective delivery options. With Valmo, 3PLs now face increased competition and may need to adjust their prices to remain competitive.

Meesho’s strategy of dividing the supply chain into segments and relying on small partners for various stages of delivery could pose a risk, particularly in terms of building the necessary physical infrastructure cost-effectively.

Valmo’s growth comes as Meesho, having achieved profitability, seeks fresh funding. The impact of Valmo on Meesho’s business will be closely monitored as the e-commerce unicorn continues its expansion.

Disclaimer: This information is covered based on the latest research and development available. However, it may not fully reflect all current aspects of the subject matter.

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