In the pre-festive period, it was predicted that the demand for warehousing was going to grow owing to the increased demand through e-commerce. It has been observed that more people, even from Tier II and Tier III cities, are using online shopping as compared to the pre-pandemic period. Consequently, the warehousing companies should be getting increased demands, particularly leading up to the ongoing festive period.
Warehousing and logistics firm Shiprocket which only works with e-commerce firms has reported gaining a steady growth path, and on the warehousing side, they were able to double the business in the festive rush over the last few months.
“People are now being more and more conscious about the speed of delivery,” Vishesh Khurana, Co-founder, Shiprocket said. In fact, the company, which currently has about 13 warehouses across the country, wants to set up 400-500 city-centric smaller warehouses, which will accelerate the speed of delivery.
“Outsourcing of operations will become pretty much standard – brands will decide not to own warehouses separately to execute it cost-effectively,” Khurana further added. The outsourcing of warehousing operations is also known as on-demand warehousing.
Along with that, another major trend that we see is enterprises preferring distributive warehousing where they want their inventory to be stored in 3, 4, or 5 locations across India for seamless delivery.
Warehouses are the storehouses that businesses use to store, manage, and track products that are yet to be shipped to customers. Traditional warehouses generally take more time and are difficult to execute. The demand for outsourcing and the better speed of delivery has led to newer categories in warehousing: distributive warehousing, on-demand warehousing, etc., Though these new-age warehousing options have only been explored by a few players, experts believe they will be in high demand in the upcoming years.
Warehousing Express, Stock Area, Boxmyspace, etc. are a few of the firms that are involved with on-demand warehousing. Distributive warehousing is a larger category of warehousing designed to service goods nearing the end of the supply chain. The sector however is mostly captured by major players like DHL Express, Gati, Snowman Logistics, and Mahindra Logistics, etc.
The current warehousing market in India was valued at Rs. 1,050 bn in 2020 is now expected to expand at a CAGR of 15 percent till 2025.
Need For Integration
Given the fact that a firm selling goods online may be using multiple warehousing services, the challenge is to integrate all the warehouses on a single platform and allow sellers to have investor visibility across multiple warehouses, else working with multiple warehousing firms will turn out to be a cost-ineffective option. This is where players like technology solutions providers like Unicommerce, Zoho inventory, Vin eRetail, etc. come in. They play an instrumental role in the overall growth in the warehousing space.
“Over the last year with increasing e-commerce adoption, we have seen companies strengthening their supply chain with multi-warehouse operations to efficiently meet the rising consumer demand across the country,” said Kapil Makhija, CEO, Unicommerce. “Companies are investing in technology that can automate all the crucial tasks of warehouses and allow them to ensure fast and error-free deliveries.”
The rising demand is also leading to rising consumer expectations, which suggests that the supply-chain and warehouse need to be more responsive and should be able to solve sector-specific problems. Also, new sectors such as home decor, pharmaceutical and nutraceutical, FMCG, Beauty, and personal care are emerging in the industry and this creates a need for more holistic warehousing solutions, that can solve sector-specific problems.
"Companies that are structured to handle big warehouses will also set up small warehouses. We will also see companies adopting a hybrid model where they leverage fulfillment providers and also have their own supply chain. The warehouses will be more automated than ever before," Makhija further said.
Role Of Investors
Earlier, warehousing was seen as just another business process, but now it has become an integral part of a company’s value chain and has attained a life of its own. This begs investments in this space so that further growth is possible.
Earlier this year, industrial real estate platform Welspun One Logistics Parks has introduced India’s maiden warehousing AIF (Alternate Investment Fund) exclusively for domestic investors, who can directly invest in warehouses. The Rs. 500-crore fund was launched in January 2021, followed by a strong first close of over 60 percent, which the company is set to close. Through this AIF, the investor can reap the benefits of the returns by owning units of a fund, instead of an asset.
In fact, the warehousing segment has received a record Rs. 5.500 crore from investors in Q2 2021, making it the most active quarter for the sector in the last couple of years. The major one is the $700 million Blackstone deal with Embassy Industrial Parks. Such developments only suggest a boom that is awaiting the segment.
“Last year we launched our flagship 110-acre, Grade-A warehousing park in Bhiwandi - a key warehousing market in Mumbai Metropolitan Region (MMR), India’s largest consumption center. Recently, we have forayed into North India by acquiring spaces in Lucknow in Uttar Pradesh and Farukhnagar in Haryana,” said Anshul Singhal, Managing Director, Welspun One Logistics Parks.
The sector is likely to see such expansion from other warehousing players in the field.
New technological advancements and the growth of the digital space have led various sectors to embrace innovation and adaptation. The fast-moving consumer goods (FMCG) sector, in particular, has rapidly shifted in that direction by joining hands with the e-commerce industry. McKinsey reveals that e-commerce sales in the consumer goods industry are projected to reach $1.8 trillion by 2025, a fourfold increase from the last decade. In the face of intense competition and a high turnover volume in the sector, Artificial Intelligence emerges as a crucial differentiator in helping brands stay ahead of the curve.
Artificial Intelligence plays a vital role in bringing consumers closer to the brand. An ongoing challenge within the FMCG industry is for accurate consumer insights to enhance data-backed decision-making. Insights AI combines advanced AI technologies like Emotion AI, Behavior AI, and Generative AI, to ensure brands get in-depth consumer behavior data. These technologies help brands understand the expectations and preferences of target audiences and provide accurate data for efficient decision-making.
As with any other industry, consumer needs and expectations in the FMCG sector are ever-evolving. AI's ability to access and process vast data sets allows brands to tailor their marketing strategies quickly and effectively in line with the requirements of the target audience. With the inclusion of Insights AI, the Indian FMCG industry could witness a significant improvement in the cost and quality of products and services.
One of the most crucial aspects of any FMCG product lies in its ability to resonate with the consumer. Here is where understanding the emotions and behaviors of the consumer towards the product becomes important. Insights AI plays a vital role in bringing these insights closer to the brand in several ways.
Insights AI can create exceptional value for the FMCG brands thriving in e-commerce. 29.1 percent of consumers believe that AI can be better utilized in providing personalized product recommendations, while 33 percent agree on its function to provide optimized search results. It can decode an individual’s purchase history and demographic information to create personalized shopping experiences for its consumers.
As one of the industries undergoing a major change due to Insights AI technologies, let us look at some of the ways it is creating a difference today.
1) Consumer Research: Insights AI can gather data and feedback on the path to consumers' purchase journeys- from looking at a product ad to completing a purchase on a website. It helps provide deep, unbiased insights, which ultimately provide a seamless shopping experience.
2) Marketing Communications: FMCG can benefit immensely in creating targeted and personalized campaigns that truly resonate with their target audience by understanding what consumers like and dislike.
3) Content and Media Testing: Brands can optimize the visual appeal and engagement across various content formats, such as ads, videos, social media posts, etc., by testing content and media pre and post-launch.
4) Pack Design and Shelf Placement Testing: FMCG brands can test their pack designs and shelf placements using Insights AI, which analyzes the shopper’s purchase intent, stopping, holding, and closing powers to make products stand out.
5) New Product Development: Validate your concepts, opinions, and ideas before a new product is developed to ensure that you are not completely relying on your gut instinct and guesswork.
While AI has a huge potential for FMCG brands to scale and improve, its widespread adoption also raises concerns about data privacy and ethical considerations. The heavy reliance on consumer data for insights also means transparency is a key priority in AI.
AI-led disruption in the FMCG sector is not just a possibility- it is already happening. From optimizing strategies to personalized recommendations, AI is leading the way for the FMCG sector to thrive- in the e-commerce space and beyond. With the continuous evolution of technology and fierce competition in the market, the need for products and brands to stand out is imperative, especially among FMCG players. As such, brands must remain agile, adaptive, and customer-centric in their approach toward AI to deliver meaningful experiences for the end consumers.
Ranjan Kumar is the Founder and CEO of Entropik – research integrated platform powered by AI. He is an engineer from IIT Kharagpur, has invested most of his time working with soft computing, neural computing, and deep learning. Ranjan has worked with distinctive firms like ONGC Ltd and ITC Ltd, after which he turned an entrepreneur with Oyeparty.com in 2012. He has also headed business at Citrus Payments, a fintech company, giving the division exponential growth under his leadership.
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