New Delhi: The $160 billion logistics industry in India is called the ‘sunshine industry’ for more reasons than one. Far from the days of an unorganized sector, the logistics sector today has steadily become a regulated sector. With logistics being the heart of e-commerce, traditional players are now learning the new rules of e-commerce retail logistics, writes Shwetha Satyanarayan.
When was the last time you marked your calendar waiting for an online delivery or even stayed back home just because a parcel was expected? If you fail to recall, you are not alone. New age start-ups and e-commerce marketplaces are slowly blurring the demand-supply time gap in India. For instance, if you order a smartphone, you could get it within a day or your groceryorder could reach your home even before you do. With new age companies now showing that you don’t have to wait for long to get your hands on a purchase, retailers in India are at the doorsteps of a new era in the logistics sector.
The Indian e-commerce sector, which has touched a GMV of $15 billion in the last few years alone, has given rise to a new category of e-commerce focused logistics firms. In fact, the e-commerce retail logistics market is valued at $1.35 billion, and is projected to witness a growth of 36 per cent in the next five years.
While the traditional logistics sector has captured about quarter of the market share in the retail logistics sector (23 per cent), they are still plagued by several challenges like bad infrastructure, failure to deliver to time-sensitive customersand inability to handle cash on delivery (COD) payments. Venture capitalist Vani Kola in the ‘India Opportunity Report 2017’, said, “The traditional logistics sector in India is up against multiple challenges including poor infrastructure, non-standardisation of addresses and high labour attrition to name a few. It will require deep domain insights and heads down execution to win this market.”
On the other hand, tech-enabled dedicated logistic service providers have strategic tie-ups with start-ups and e-tailers and have managed to gain as much 28 per cent market share. With 80-100 million online shoppers, logistic players are leveraging technology and new business models to ensure timely delivery.
Trends and innovations to drive change
According to a latest survey by KMPG in association with CII, retailers and customers can expect technology to drive latest innovations in last mile delivery. The report, says, “Secured lockers at destinations where customers can collect their parcels at their convenience, digitization of postal address, automated delivery with less human intervention and use of technology like drone-assisted and unmanned vehicle delivery, and increase in number of designated pick-up towers will be some of the major innovations in the e-commerce logistics.”
Tier II, III cities as growth centers
For long, it was believed that only customers in metro cities shop online and have high customer expectations. However, it is expected that by 2020, 45 per cent of the total customer base for e-commerce retail will be from Tier II and Tier III cities. This market is fuelling the need for more customer-centric retailing that integrates metro-city-like facilities such as timely delivery of products and easy returns expedited through improved customer service.
“These cities will become huge markets for e-commerce companies in the next 5 years. A latest study has predicted that estimated shipment volume is also expected to grow from 13% to 40% by 2020. Hence, it is here that the logistics sector will have to really innovate because in these fast developing, small cities and towns the demand is highly disaggregated,” says Rahul Dev, a freelance digital marketer.
Demand from new categories
While fashion and apparel has dominated online delivery segment, new categories like groceries, cosmetics, furniture and home appliances, will give boost new players, predicts Dev. He says, “As more and more customers use e-commerce for their daily needs, the logistic providers will also have to step-up accordingly. New categories will evolve as consumer interests in e-commerce will grow. Service providers should focus on expanding last mile delivery expectations with the use of technology.”