E-commerce logistics start-up funding slows as recession looms

According to consulting firm McKinsey & Company, funding for logistics start-ups almost doubled in 2021 compared to 2020. This is largely due to the sudden expansion of e-commerce, coupled with capacity constraints and congestion, which highlighted the relevance of supply-chain resilience in recent years. As a result, there has been greater investor interest in e-commerce logistics operations, particularly in the largely untapped potential of emerging markets.

Select e-fulfilment start-ups by total funding received to date

Note: This list is not exhaustive. Start-ups represent the more prominent start-ups in the market that offer end-to-end e-commerce fulfilment solutions (picking, packing, and shipping) as a core service according to Ti’s estimates. Some of the listed start-ups only offer 3PL e-commerce fulfilment services as a core business model, whilst others offer e-fulfilment alongside other solutions like last-mile or middle-mile delivery.

Source: CB Insight

When looking at some of the more prominent start-ups in the market, funding does seem to have peaked in 2021, with capital flowing to later-stage companies and later-stage rounds.

Several of the more prominent e-commerce logistics start-ups are situated in emerging markets in the Asia Pacific region, where e-commerce is still mostly in its infancy. This is particularly the case in India (Delhivery, xpressbees, Ecom Express and ShipRocket) and Indonesia (SiCepat and Shipper). There is much potential in logistics start-ups in these markets, which are perhaps able to fill the gaps that traditional logistics providers have been unable or unwilling to address, by building own fulfilment and delivery networks.

Many start-ups operating in the e-fulfilment market have also reached unicorn status (J&T Express, Delhivery, xpressbees, Ecom Express, Ninja Van, ShipBob and Stord). Several have announced IPOs; in 2021, J&T Express announced an IPO and plans to be listed on the Stock Exchange of Hong Kong. Delhivery and Ecom Express also announced an IPO, and there has been speculation of an IPO of Ninja Van. Start-ups within this market, therefore, seem to be maturing rapidly in part due to recent influxes of cash. Start-ups seem to also be emulating incumbents through acquisitions to scale business. Shipmonk for example acquired Ruby Has Fulfilment at the beginning of 2022, adding 8 fulfilment centres and over 1.3m sq. ft of warehousing space to the start-up’s portfolio.

However, as the economy enters a pronounced downturn, these start-ups have not escaped unscathed; In Q3 2022 shares of Delhivery dropped by over 32%, below its issue price from May, after the company posted muted quarterly business growth. The company is now reportedly mulling delaying its public listing. Ecom Expreshas also put its initial IPO plans on hold after it struggled to raise money from new investors.Stord and Shipbob have also reportedly laid off staff amid macroeconomic headwinds. As can be seen below, investor interest in the start-ups analysed may be cooling off as interest rates increase and e-commerce sales stabilise. According to GeekWire, 2022 has seen a steep decline in VC funding due to rising interest rates and declining financial returns. As a global recession looms, it remains to be seen how start-ups within this space will fare in the coming year.

Funding in Select E-fulfilment Start-ups 2014-2022

Note: Totals represent Ti estimates of investments based on the analysis of the most prominent start-ups

Source: CB Insights

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Source: Transport Intelligence, November 10th, 2022

Author: Nia Hudson