Moneycontrol
Feb 06, 2017 12:30 PM IST | Source: Moneycontrol.com

1001 Startup Ideas - Smart Lockers for e-commerce companies

The startup will deploy smart lockers in various localities, and e-commerce companies can deliver the goods to those lockers, and such goods can be received by the customers by using a lock code which is sent to the customer.

1001 Startup Ideas - Smart Lockers for e-commerce companies
What is the idea?
This week's 1001 startup idea is to establish a company which would set up smart lockers for last mile delivery by e-commerce companies. The startup will deploy smart lockers in various localities, and e-commerce companies can deliver the goods to those lockers, and such goods can be received by the customers by using a lock code which is sent to the customer. This startup aims at solving the problem of last mile delivery.

Market Definition
According to Mckinsey, Last-mile delivery, especially of parcels, has recently received lots of attention in the media and from investors. The cost of global parcel delivery, excluding pickup, line-haul, and sorting, amounts to about €70 billion, with China, Germany, and the United States accounting for more than 40 percent of the market. It also goes on to state that the biggest driver of this growth, not surprisingly, is e-commerce, which has shifted market share from the B2B to the B2C segment.

Mckinsey also found in its research that 70% of the respondents covered in the report stated that they preferred the cheapest form of delivery. Mckinsey sees autonomous guided vehicles with smart lockers as one of the preferred modes of delivery in the main cities.

According to Barclays, in 2013, products ordered online generated just over one billion deliveries. By 2018, this number is expected to grow by 28.8% to 1.35 billion in the UK alone. The same report also states that there is a rise in popularity in Click & Collect and Locker Points as alternative delivery options.

Competitor Analysis
Accenture in one of its reports stated the following

“The last mile is under attack. In a seismic market shift, we have moved from integrators and postal companies competing for market share, to extensive experimentation and significant venture capital for last-mile delivery start-ups. Ironically, these start-ups are powered by the same technology that is fueling the parcels eCommerce boom—better smartphones connected by faster networks and driven by lower cost cloud platforms. Digital is at their core, which means these players can respond in a way that is inherently nimble, consumer-centric and flexible—aspects that traditional players struggle to maintain. While these resultant new business models are experimental, they can have a dramatic impact in a world of big bang disruption.”

There are various startups which are trying to solve the problem of last mile delivery through various means. Some companies have come out with applications which use the GPS to track the exact location. One such startup is Fletchr which is working in the Middle Eastern region.

Smartbox and QikPod, on the other hand, are Indian startups which are working on the same lines and have provided smart lockers at various locations in India and has tied up with e-commerce companies for the delivery of products. There is also Boxz Lockers in Hong Kong which does the same. Amazon has setup its smart lockers in various countries.

Pain Point & Target Audience
The target customer market for this business is the “e-commerce portals looking to improve their last mile delivery efficiency”.  One report quoted on Bringg.com estimates that 28% of the total delivery cost to a business comes from the last-mile. One of the biggest challenges in last-mile delivery in the developing or emerging economies is that the addresses are not mapped, and it’s difficult to deliver goods to addresses provided by customers of e-commerce companies. This not only has cost and time implications but also leads to reputation loss for these companies.

Value Proposition
eMarketer has predicted that the e-commerce sales will clock more than USD 3.5 trillion in the next five years. This means that there will be a lot of stress on the delivery of the products sold by e-commerce companies. This startup will ensure not only cost reduction regarding delivery for e-commerce companies, but it also reduces delivery time leading to efficiency.

Business Model
The startup will tie up with online retailers in a way that their customers can choose their products to be delivered to smart lockers setup by the startup in various localities. The startup can charge per product delivery for its services.

It needs to be noted that a smart locker costs about USD 2000-USD 2500 on Alibaba.com. If a smart locker receives 50 products every day and it charges 50 cents per product delivery. Then the revenue received from one smart locker will be USD 9125 in one year. This makes the business highly scalable.

In future, the startup can rent these lockers from various companies and individuals and share the revenue to make the business asset-light and scalable.

Way to market
The first step for the startup would be to tie up with e-commerce retailers for this service. Since the big e-commerce companies have various mechanisms and options. It would be more feasible to tie-up with the smaller niche e-commerce retailers rather than going for the big names.

The startup needs to ensure that the customers of the online retailers find it more feasible to have goods delivered to smart lockers and hence, it will have to keep its services free for the first few months and then charge an economical sum later e.g. 50 cents per product delivery.

Milestones
The startup should consider starting from one of the emerging economies and try to target one major city in that country. It can start with a country like Indonesia where e-commerce is booming and start with its capital city Jakarta. It should target receiving at least 2000 product deliveries in the first one month. QikPod which is a company which provides smart lockers facilities for various e-commerce companies received USD 9 million in funding in 2015.

Investment Needed For Prototype
Smart lockers are not very expensive. There are various options of smart lockers available on Alibaba.com which start from USD 1500 and go up to USD 5000. A decent smart lockers costs around USD 2000-2500. The startup would need to start with at least 50 scanners so it should target raising at least USD 100K from angel investors or incubators. DPD launched an accelerator dedicated to the delivery industry by the name of ‘Last Mile Labs’. It offers GBP 12,500 as initial funding and access to GBP 100,000 at the end of its programs to selected startups and hence, seems to be the best fit for making an application.

Team Capability
You would need to have a supply chain professional and a tech expert in your team to devise a great product which combines supply chain with technology.

Investors / Expert Take
E-commerce is booming across the globe, and it is only expected to rise. It needs the sufficient infrastructure as support and Investors recognise that; hence, they are keen on investing in technologies and great scalable businesses which solve the delivery problems for online retailers.
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