Logistics Challenges in E-commerce

E-commerce players are struggling with logistical challenges
“Logistics is constantly seen as a low-talent industry in India”

India provides a huge opportunity for online retailers. As per the Assocham report, India's e-commerce market, which stood at $2.5 billion in 2009 reached $8.5 billion in 2012 and rose 88 per cent to touch $16 billion in 2013. This growth is expected to retain; as more and more startups are entering into the online space to get leverage from price-conscience Indian consumers and offer them a large category of goods.

 Undoubtedly, this spurt has created new avenues. But at the same time, a unique pressure has developed on all Logistics Service Providers (LSPs) as they are constantly struggling against poor infrastructure, reliability and high cost. Even for e-commerce players, logistics fulfillment is one of the major challenges as the majority of sales are done through cash on delivery (COD) method. And, they have also had to deal with the return of goods which hovers anywhere between 5 to 25 per cent. Recently, owing to high returns and few other reasons, e-retailer Flipkart has expressed its inability to deliver the goods more than Rs 10,000 in the COD format in few areas of Indian state Uttar Pradesh.

 

Moreover, an industry figure suggests that online retailers spend up to 12 percent of their revenue as compared to brick and mortar retailer, which spend around 6-8 percent on year basis. Definitely, growth in e-commerce is a boom to logistics industry, but on ground, many reforms are solicited else this growth cannot last long.

 

Speaking about the modern logistic services in e-retail, Sahil Barua, CEO of Delhivery, says, “What is required is the evolution of flexible, rapid package delivery systems with innovations in real-time tracking and routing technology, automated sorting systems, flexible delivery models (e.g. kiosk-based delivery or even drones) and different operating models (hub-and-spoke v/s distributed-processing models).”

 

Growth hurdles

Barua added logistics is constantly seen as a low-talent industry in India. Despite the unprecedented growth that e-commerce has generated, it is hard to find truly great talent willing to work in the logistics space in India. This can be termed as the biggest hurdle in this sector.

Many logistics players consider regulations, especially interstate transportation and taxation regulations, a challenge. Several legal requirements in different states are barriers to the growth of e-commerce in these states.

 Bhandari, Owner of BIC Logistics, said, “E-commerce players are more committed to time efficiency; at times it becomes difficult for LSPs to maintain this due to infrastructural issues like broken roads, traffic jams and other issues.” Moreover, under-investment in technology from LSPs and their clients is also seen as the major growth barrier, he added.

Striking a similar note, Saurabh Kochhar, Co-founder and Managing DirectorPrintvenue.com, said, “Initially, sending out goods was not an issue, but since our order flow has been increased, logistic is really been a challenge.”

Present logistic solutions for e-retailers

Last 10 years was very crucial as during this period e-commerce has grown in India and many international brands have enter India. In a major development, DTDC Courier & Cargo, an express courier company, has come up with its specialist logistic company ‘DotZot’ for e-retailers . According to the company, it will be the first pan India delivery network with a reach of over 8,000 pin codes and 2,300 cities focusing exclusively on the e-retail space.

Sanjiv Kathuria, a former TNT executive and current CEO of DotZot, said, “E-retail needs a focused, different and innovative approach for the order fulfillment. DotZot will be decisive for merchants who are looking at growing and retaining their e-powered customers. E-commerce customers are becoming increasingly demanding and a great delivery experience is the key differentiator that e-retailers can provide.” Moreover, logistics providers such as Aramex and Blue Dart have started offering warehousing and delivery solutions to online retailers. Moreover, former top executive of Bluedart T Krishnan has initiated a service called ‘Ecom Express’ which is operating in 36 Indian cities presently. The company plans to add 500 cities over next three years. Chottu.com is yet another logistics company that caters only e-retailers. The company said to have expertise in last minute deliveries.

Definitely Internet gives huge market opportunity, and hence it is essential for online players as well as LSPs to develop infrastructure accordingly to create win-win situation. 

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