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India’s digital freight forwarders – or tech platforms built by start-ups – once considered the darlings of cash-rich global fund managers, appear to be losing their sheen as carriers themselves have poured more tech into supply chains. 

The demise of Mumbai-based Freightwalla speaks to more than just a funding crunch, although the cash is no less relevant or germane to the context.

The proliferation of logistics tech start-ups in India’s historically fragmented freight space began in about 2015, when they trumpeted pricing transparency and shipment visibility as their distinct strengths vis-à-vis traditional players.

But much has happened since then.

Industry leaders, who didn’t want to be named, noted that India’s freight industry continues to be deeply rooted in a culture of relationships, and these loyalties can often influence business decisions.

“Shippers or other cargo interests still prefer traditional freight forwarders over digital players, as there is a huge skill difference between them, and moreover, not everyone is open to adapt to new-age solutions,” a Mumbai-based veteran forwarder told The Loadstar.

According to the source, digital forwarders have had to contend with targeting MSME [micro small-to-medium enterprise] shippers who typically do not hold sufficient volumes to deal directly with major carriers.

Such low-volume contracts arguably leave little room for high brokerage mark-ups amid soaring operating costs.

“A customer can cross-check rates with different carriers and switch over to another forwarder offering a better quote,” the forwarder said.

“As a digital forwarder, you need service contracts bundled with preferential rates from the more active carriers, to be able to adequately fulfil shipper enquiries,” the source added. “Unfortunately, since demand can’t be predicted, digital forwarders have to negotiate rates as the client requests for a quote, on a case-by-case basis.”

The lack of a behavioural shift towards digital freight platforms or online shipping remains the crux of what has unfolded for stakeholders, sources believe.

“We do digital forwarding services, but customers want us to meet them in person before signing up,” a start-up executive told The Loadstar. “They still operate on phone calls or texts when there is a platform for automated services.”

That’s not all.  Most carriers have come up with instant quoting and other end-to-end visibility features on their websites, in addition to increasingly encouraging direct shipper contracts, which marginalise forwarders.

Apart from so-called digital forwarders, there are broker-enabling software providers, or software-as-a-service (SaaS) rental platforms, e.g., ClickPost and Locus. 

“Our platform is no different or superior to others in the market and plain-speaking, there are many better and more advanced platforms available in the market,” the executive admitted.

Along with Freightwalla, names like Shipwaves, FreightCrate and Cogoport led the home-grown forwarding start-ups wave in India.  RAAHO, Trukky, 4Tigo, GoBOLT and GoComet (now headquartered in Singapore) are some of the other known players in this tech cohort.  Cogoport also laid out a specialised international logistics offering for reefer cargo to differentiate itself from others, but didn’t see its fortunes brighten, sources said.

However, on the back of raising substantial venture capital (VC) funding, including some $35m from US-based Tiger Global, Wiz Freight, founded in 2020 out of Chennai, claims to have turned profitable last fiscal year.

That said, undeniably the pace of departure from traditional freight forwarding practices to the fashionable digital mode in India hasn’t hit the estimates that tech-preneurs or investors had modelled, despite recent pandemic-induced ‘new normal’ forceful social-distancing advantages.

“Maybe, digital adaptation was too early for this industry in India,” a tech solutions provider said.

Now, with the market heavily oversupplied and significantly short on demand, clouds are darkening for everyone.

Most agree, given the admittedly conservative characteristics of the Indian freight industry, luring more shippers to the tech path will continue to be a sticking point for ailing start-ups, and it remains to be seen who will vanish from the race next.

You can contact the writer at [email protected].

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