The Indian e-commerce space is currently at an inflection point and there is tremendous opportunity for growth. With the increasing consumer demand for ‘fastest deliveries’, e-commerce giants are enhancing logistics services to make the delivery race more predictable than maddening.
Twinkle Sahita
For a consumer, it is just a simple process of ordering online and getting it delivered at their doorstep. But there is complex logistics process involved behind the ‘click and get it delivered’ model.
From building necessary infrastructure for the storage of goods to revising operating models for robust growth, Indian e-commerce market has evolved a long way in improving the productivity levels.
Such is the impact of the booming e-commerce market that Chinese e-commerce giant Alibaba plans to enter the Indian market. It has held talks with a number of start-ups before its India foray. However, its main partner is likely to be its biggest investment in India, Paytm. It has also held talks with business-to-business (B2B) players, logistics companies, and technology start-ups.
According to the CII report on e-commerce industry in India, currently the total e-commerce spend in India accounts for less than 2 percent of the total retail spending. But it has still become a key driver to create new markets in erstwhile unreachable geographies.
With the expanding online shopping market, e-commerce giants such as Amazon, Snapdeal and Flipkart are now making their lives easier by looking at efficient logistics services. Flipkart has partnered with MapMyIndia, Blackbuck and QikPod to strengthen its logistics arm; Snapdeal invested in GoJavas last year while Paytm invested in LogiNext. In July, it was reported that global logistics service, Aramex has invested in Mumbai-based logistics service Grab.in and Jaipur-based Logisure, to strengthen its last mile delivery service for the Indian e-commerce segment.
At present, the country’s logistics industry is worth $300 billion, according to the ‘Logistics Market in India 2015-2020’ by market researcher Novonous. In fact, the report states, Indian logistics market itself is estimated to grow at a CAGR (Compound Annual Growth Rate) of 12.17 percent by 2020.
With increasing penetration of internet and growing popularity of e-commerce across even the smaller markets, e-commerce companies will continue to witness increased demand amongst consumers for faster delivery each time they order a product on an e-commerce platform.
Amazon India recently announced the launch of its globally popular Amazon Prime membership programme in India. With Prime, Indian customers in over 100 cities can enjoy unlimited free one-day and two-day delivery on lakhs of eligible products from India’s largest online shopping selection. Amazon.in is offering a free trial period of 60 days to allow Indian shoppers to experience the benefits of Prime.
“Amazon India pioneered the concept of premium guaranteed deliveries with the launch of one-day delivery within 6 months of its launch in India. Today we have services like the Two Day, One Day, Same Day, Release Day, Midnight, Sunday Delivery (in 200 cities) and now Morning Delivery (in Bangalore, Mumbai, Delhi/NCR and Hyderabad). Over 1.4 million products are available for next day delivery which is by far the highest in the e-commerce industry. Over 70 percent of our customer demand is eligible for next-day shipping on products fulfilled by Amazon,” informs Akhil Saxena - vice president, India Customer Fulfilment, Amazon India.
Following the competitor’s trend, Snapdeal has also now launched a premium membership service for its customers called Snapdeal Gold. Under the service, Snapdeal will offer customers free shipping, free upgrade to next-day-delivery and extended purchase protection. The service, to be free for customers, will be available when a user pays for their purchase through Net banking, credit/debit card, EMI or wallet at the time of booking the order, Snapdeal said in a statement.
Three months ago, Flipkart also announced a “no-cost” equal monthly instalment (EMI) scheme, under which customers can buy higher-priced products such as premium smartphones, televisions, home appliances and other electronics via monthly instalments without paying interest. Flipkart also launched a Prime-like programme, Flipkart Assured, earlier this month.
The year 2016 will be a defining year for ecommerce in India with regards to SMEs also. In the coming times, we foresee thousands of them getting online to leverage the growth of India's flourishing digital economy. Considering that there are a vast number of entrepreneurial SMEs who have never sold online - but have great product selection and are motivated to grow – we will see thousands adopting and adapting to benefit from the digital economy.
DTDC, Blue Dart, Fedex, eKart (Flipkart) and Delhivery have gained popularity with the growth of online retailing. Aramex , Gati, firstflight have good client network and work infrastructure and they seem to be rapidly expanding footprint in India.
Logi-‘tech’ The logistics market in India is unorganised. To ensure timeliness in deliveries, e-commerce players are cashing on technologies like connecting devices through the Internet of Things (IoT) and automation to keep a track on goods. These technologies are making the entire process of product delivery lifecycle starting from warehouse to the customer’s doorstep faster.
Investing in better data analytics is the mantra for the ecommerce players looking to cut down cost of deliveries. Also, the idea of vehicular tracking is also gaining momentum in the e-commerce logistics sector. Tracking systems are a critical enabler at all stages in transportation in ensuring on-time delivery and fulfill customer promise.
Amazon India is already exploring the options available and will leverage it to provide better delivery experience to customers. Fast, reliable and resourceful internet connectivity across devices will help us use technology better for vehicle tracking. Flipkart benefited by its investment in Blackbuck in capturing data on vehicular movement and utilisation, and utilising the data for better planning.
This is where the software solution providers play the major role.
LogiNext Solutions, Mumbai based supply chain automation firm, received $10 million funding from Paytm last year. It was founded in 2014 by Dhruvil Sanghvi and Manisha Raisinghani and the company helps automate supply chain nodes enabling them to track their shipments from pick-ups to line haul, last mile and reverse logistics. Apart from tracking, it also offers analytics from multiple data sources.
LogiNext works with over 50 large clients and 100 small businesses, services companies, including Mahindra, Myntra, Paytm, Reliance Fresh and DMart. Earlier, the company had announced plans to increase its shipments from 50,000 to 2 lakh per day.
“We will meet 90 percent of our target this year. We will be crossing 1.5 lakh shipments a day which are being processed on our platform. Optimisation and visibility can only happen with technology entering the sector. All of these companies are tech savy but are reluctant to invest heavily in technology,” said Dhruvil Sanghvi, co-founder and chief executive of LogiNext.
Globally, there are companies like ORION software, OnFleet, Bringg, Infor, and JDA software and Elementum which are offering similar solutions as LogiNext.
Importance of Tier 2 and Tier 3 cities With the growing appeal and penetration of smartphones, tier 2 and 3 cities will spearhead the next wave of growth for the Indian smartphone market, the report from the International Data Corporation (IDC) has predicted. In the recent times, e-commerce has increasingly attracted tier 2 and tier cities. This is the new talk of e-commerce.
Ergo, the e-commerce giants are looking at expanding its services in these cities.
“To ensure last-mile delivery of shipments ordered on Amazon.in, even in the far corners of India, India Post and Amazon India have partnered with each other. India Post is one of the prime carriers that Amazon India uses as a delivery channel. Through India Post’s extensive network, we are able to service over 19,000 pin-codes through 155,000 post-offices across all 35 states and union territories in India,” said Saxena, Amazon India.
To tap these cities, Amazon India has also introduced innovative delivery mechanisms like Amazon Pick-up programme (I Have Space) which currently partners with local store owners to provide pickup and delivery services to customers who order on Amazon. The programme currently has presence in cities such as Jodhpur, Vellore, Tirupur, Ajmer, Raipur, Guntur, Warangal, Vadodara, Salem, Bharuch, Kolhapur, Nasik, Dehradun, Agra, Belgaum, Kota and more.
Service Partner programme is another last mile model by Amazon's budding and aspiring entrepreneurs in these areas that act as Amazon.in’s local distribution network providers and create the last mile delivery footprint. This programme now covers more than 200 satellite towns and Tier II and Tier III towns and villages.
The company works closely with ‘Head Held High’, an NGO that skills rural youth, we have helped establish rural distribution centres in remote areas like Mandya, Attibele, Shimoga, Tumkur, Kurnool in Karnataka, Tamil Nadu & Andhra Pradesh.
In a pursuit to reach the last customer possible in each and every district/ village, Amazon.in has engaged with an NGO in a pilot project of rural delivery network in Tier 3 & Tier 4 towns through Connect India E-Commerce, a logistics firm incorporated by founders of BASIX group. The service is called as “Amazon Rurban (Rural-Urban) Connect Through BASIX”. The pilot aims to link up Amazon Last mile delivery across the vast geographical expanse of India with the help of the already existing well-established rural distribution network of BASIX. BASIX is a Social Enterprise Group engaged in building sustainable livelihoods for lower income households across rural India.
“Our measure of success is when we are able to deliver exotic tea or designer wear or even Pampers to a customer residing in Khelmati in Assam or Manglapuri in Andhra Pradesh and so on and so forth. We have invested in India for the long-term and will continue to incubate creativity and innovative thinking in the organisation,” adds Saxena, Amazon India.
According to the industry report released by PwC followed by Red Seer released, in April, it states Snapdeal had the fastest average delivery time of 3.9 days, followed by Amazon at 4.1 days. The Red Seer report also indicated that Snapdeal had 99 percent delivery accuracy, indicating that 99 percent of the orders get delivered in the time committed by the company at the time of order booking. The consulting firm had conducted a mystery shopping exercise, by tracking 6,000 orders across 25 cities.
The report also stated that the average delivery time for Flipkart stands at 5.1 days. “For instance, at Flipkart, we have seen a rise in the new crop of sellers from Tier II & III cities, and today, almost 50 percent of our seller base belongs to smaller cities–Jaipur, Lucknow, Ludhiana, Meerut, Surat, Ghaziabad, Kanpur, Agra, Coimbatore, and Ahmedabad being few of the largest seller hubs,” said the company through a statement.
As the Indian e-commerce space is still at a nascent stage with great scope for innovation, there is immense potential for the growth of the logistics industry in the coming years.
There exists challenges such as lack of coverage and network congestion in Tier 2 and 3 cities that leads to incomplete transactions and scarcity of skilled human power that have the technology know-how in the areas of analytics, machine learning, online platform rules, simple interface, algorithms etc.
Another major challenge is the Cash on Delivery being the preferred mode of payment by the consumers that results in locking working capital and cash handling risks.
Technologies such as Big Data to reduce turnaround time, Robotics and Internet Of Things have entered the sector to ease the complicated tasks involved and minimise the human power required to complete them.
With these advancements taking place, logistics sector will revolutionise in the coming years which in turn will help the emerging e-commerce sector to win the race against its rivalries.