Economists, like engineers, are fascinated by the concept of efficiency. The sharing economy, powered by Web 2.0, has done more to improve market efficiencies than any other innovation in recent times.
Simply put, the sharing economy involves people taking assets and resources which are otherwise underutilised (such as rooms in a home) and motivates people to earn extra income by selling/renting them out.
Airbnb, Uber, Olx, Quickr are all alike in the sense that they act as high-tech services which match excess supply with excess demand, and help consummate a sale. None of these companies owns the products or services that are sold on their platforms, a key distinction of the sharing economy.
Small-time moving
The mini truck moving market in India is one that has been plagued with inefficiency. In a vibrant economy such as India’s, small-time moving is an essential element of life. A family may have bought used furniture from someone across town but has no easy way to move the items out from the seller’s home.
A business may be located in the central district of a city and has a need to regularly send semi-finished product to another business and get it back finished, but not regularly enough to invest in its own delivery truck.
Most people who want to hire a mini truck do not know where to start or whom to call. These are not vehicles that you can easily flag on the street like an auto rickshaw – so people are forced to go hunting for places where they remember to have spotted three-wheeler diesel autos (like Piaggio’s Ape) and four-wheeler small commercial vehicles (such as Tata Ace) parked overnight in the hope of finding a good rental deal.
But deals struck on the street are never fair and are hopelessly lopsided in favour of the owner/driver of the truck. There’s no benchmark rate for mileage, time or labour –and with the tendency of drivers in a cluster to back each other up, the renter grudgingly is compelled to agree to an unfavourable deal.
Enter Shippr, a company which claims to “have been born to solve the inefficiency and fragmentation of the local trucking industry”.
Its website is simple to use and mimics the platforms of the big taxi companies like OLA and Meru. A section on pricing tells you exactly what you will pay, so there are no surprises. You type in where you are moving from, where you want to go and when. Then you choose the size of the truck – a mini truck or a bigger model – and how many “labour hires” you want.
This feature serves a critical need because most people don’t know of muscle men readily available who can help lift, move and load stuff at both ends of a trip. The site uses Google Maps to calculatedistance and provides an estimate instantly. A one-time password is dispatched to your phone and if you key it in within 60 minutes, the order is confirmed.
It really cannot get any easier than this.
Logistical headache no more
I used Shippr twice this week and the experience was near-perfect. The driver and helper showed up five minutes early and carried my heavy washing machine to their truck. They delivered it at the destination safely and the price had to be calibrated based on actual driving distance and time taken. The receiver paid the driver in cash and a logistical headache was over with no migraines whatsoever.
Curious to understand the business model, I asked the driver during my second trip how the company operates. Riding next to him, I learned that Shippr pays the owner/driver Rs 1,200 a day. The revenue earning trip is logged into the Shippr database against the driver’s ID. The driver is responsible for fuel, vehicle maintenance, insurance and taxes. All fares earned over and above the Rs 1,200 day go to Shippr. The driver keeps the cash from all transactions and settles with the company each week.
I learned that the company’s business is booming with a fleet of 265 trucks in Bangalore. Drivers average 10 trips a day, some doing a dozen trips or more. Most importantly, they earn gross incomes averaging Rs 50,000 a month. Even allowing for EMI payments on the mini trucks, they net Rs 30,000 - Rs 35,000 a month.
This is hard, bone breaking work but not bad considering that they own their vehicles.
A Clear win-win situation
Most importantly the drivers are treated like employees, which means they are entitled to overtime, Provident Fund and ESI. (In the US, a federal judge in San Francisco recently allowed a class action lawsuit against Uber to go to trial. The plaintiffs argue that Uber drivers should be deemed as employees and not independent business owners, a position that the company vehemently takes exception to.)
The sharing economy in Shippr’s case benefits everyone: the customer, the driver and the company - a clear win-win-win. This sector badly needed some creative disruption and in Shippr (and Cargoji, which just began operations in Chennai), VCs appear to be onto something big.
It will be interesting to see how this model evolves in the coming years.
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