Current trends and way forward for e-commerce logistics in the country.

 

The Indian e-commerce market was estimated at $ 28 billion in 2017, and is expected to touch $ 80 billion by 2020, growing at a CAGR of 30 percent. The online travel segment contributed about 60 per cent of the e-commerce industry in India, including travel and e-ticketing websites. E-Ticketing accounted for a major share of the online travel market, buoyed by the domestic air ticketing growth. E-commerce retailing is the second major and fastest-growing segment. Financial services, job searches and online matrimony contributed to about 15 per cent of the market in terms of value. 

 

The Indian e-commerce retail market is one of the fastest growing sectors and continues to gain momentum. In 2017, this sector was estimated to be worth $ 12.7 billion, in terms of Gross Merchandise Value. This sector is driven by factors such as increased penetration of internet and smartphones, innovative payment options, deals and discounts and the rapidly changing lifestyle needs.

 

The e-commerce retailing industry in India, witnesses approximately 1.2 million transactions per day. Apparels and electronics constitute a major share of those transactions (approximately 70%), followed by books. The number of transactions however vary with respect to seasonal variations, holidays and discounts. This sector sees approximately 60%-65% COD transactions, as a result when

demonetisation struck it hampered the industry’s momentum.

 

Indian e-commerce logistics industry

 

Logistics is a key enabler for growth of the e-commerce industry and is increasingly emerging as a key differentiator in terms of customer service and satisfaction. The logistics sector specific to e-commerce retailing in India was valued at $ 0.47 billion in 2017 and is projected to reach $ 2.1 billion by 2020, at a CAGR of approximately 45%.

 

A combination of delivery speed, upgraded warehousing infrastructure, better service capabilities, technological advancements and innovations have become the must haves for the e-commerce LSPs. The growth in e-commerce was fueled by rural and tier II-III cites. These cities are expected to account for approximately 55 per cent of the orders in the near future. E-commerce retailers are shifting towards the marketplace model, with multiple merchants across categories from various parts of the country. Warehouses are being planned across the country to serve a dispersed set of vendors and customers. This decentralisation of demand and supply could also help improve the market share of surface movement.

 

The recent introduction of the E-Way bill is often seen as a compliance burden by 3PLs and E-tailers alike. As claimed, the E-way bill was introduced to reduce the overall operational cost of the Indian logistics sector, at par with the costs of other countries. This result is yet to be seen by the logistics sector. Partial implementation of the E-Way bill is another challenge which has confused logistics players throughout India. As far as the Industry is concerned, GST and E-Way bill are yet to give the intended returns.

 

Larger marketplaces, which contribute a major share of the e-commerce logistics sector’s revenue are focusing on captive services to better control the consumer delivery experience. Hyperlocal e-tailers’ reliance on captive services is another opportunity lost for 3PLs. Consequently, 3PLs have shifted their focus towards diversifying their clientele. Diversified clientele also allows 3PLs to nullify increased cost pressure faced in case of consolidated client base.

 

GATI and other 3PLs are now looking towards reverse shipments to regain their market share as reverse shipments continue to provide a sizeable market opportunity for e-logistics. They are also skeptical of the operational costs associated with return shipments, seen as a temporary barrier to e-logistics industry. Also e-tailers tend to reduce their share of shipments whenever they witness higher return shipments, this negatively impacts the revenue for 3PLs.

 

GATI E-connect, the e-Commerce logistic solutions vertical of GATI, is amongst India’s first integrated e-Commerce logistic solutions provider. Backed by the pioneer and leader in express distribution in India, GATI E-connect has an extensive reach of more than 99% districts in India. It is one of the few organisations in the e-Commerce logistics market that provides real time last mile delivery updates to their customers. It ensures the best last mile delivery experience, through route optimisation, last mile delivery applications and cloud telephony. Dedicated fulfilment centers and one ship solutions are other services offered by GATI E-connect.

 

Way forward – India e-commerce logistics

 

Outsourcing last-mile deliveries to hyperlocal e-commerce logistics is seen as an upcoming delivery model being explored by 3PLs like GATI. There is also a growing trend of managing special services such as time-bound deliveries, card swipe at delivery and other in-house value added services, while outsourcing the standard deliveries to the 3PLs. With the growing demand from customers and the need to attain a competitive advantage, specialised services may increase in the near future, which could result in outsourcing of these services to the 3PLs as well, a possible opportunity for them. 

 

Returns management is a key challenge especially with e-commerce retailers providing options of try and buy, and a return policy of 7 to 10 days and up to 30 days in categories such as white goods. No 3PLs currently offer real-time visibility or updates on the status of reverse shipments. GATI is taking a step in that direction by focusing on developing its strength towards dedicated returns management centers which can carry out quality checks, relabeling and handover of cargo for return to warehouses of sellers or e-commerce retailers. GATI is expected to 

 

invest in technology to develop its reverse logistics supply chain, along with a robust control environment to tackle fraud and tampering during reverse logistics.Similar to European markets, the Indian e-commerce logistics market is now implementing the concept of pick-up and drop-off centers that allow buyers to collect or return goods ordered online. For instance, existing outlets of some large logistics players are being converted into pick-up and drop-off outlets, which will give online shoppers the option to collect their orders from offline centers located in convenient locations around homes and offices. Few companies have also successfully experimented with parcel pick-up from local grocery stores and petrol pumps to increase convenience and reduce the cost of last-mile delivery.

 

Courtesy: GATI Ltd – India’s pioneer in express distribution and supply chain solutions.