The Logistics Wave
The rapid growth of India’s online retail industry is proving to be a boon for logistics companies vying to deliver products to customers on time, writes Radhika P Nair
Logistics companies can earn $5 billion annually by 2021 from online retail firms (Technopak) Current market size of online retail in India: $2 billion (industry estimates) Estimated market size of online retail in 2023: $56 billion (Technopak)
Large companies like Blue Dart, Aramex and DTDC have set up separate ecommerce logistics arms. Startups like Ecom Express and Delhivery focus only on ecommerce logistics
Pick up from sellers, packaging, warehousing, last-mile logistics including same day delivery, cash-on-delivery, reverse logistics
INNOVATIONS IN THE PIPELINE:
Fully automated warehouses where machines will sort the parcels Multi-user warehouses where logistics firms will pick up goods from multiple sellers, stock, pack and ship them Customers can pick up or return a product from designated collection centres in cities and small towns Lockers from where customers can pick up parcels using codes sent to their mobile phonesSpecialised services like delivery person taking measurements of a customer, going to a tailor, getting alterations done and then delivering the altered garment.
The race to sort, package and ship millions of products that Indians are buying online is becoming a hotly contested one in the Indian logistics industry as several companies launch innovative services to grab the growing business. The lack of efficient logistics support has been a bottleneck for India’s online retail industry. Typically companies that offered plain vanilla courier services found themselves called upon to provide rapid delivery for shipments ranging from books to electronics and furniture. “Initially logistics companies were not able to meet the requirements of online companies,” said Sanjiv Kathuria, 50, who set up DotZot last year to offer logistics only for ecommerce firms. “That is now changing.”
DotZot in which DTDC one of the largest logistics companies in India holds a majority stake will set up collection centres in urban and rural locations where consumers can pick up packages and drop off the ones they want to return. The company, which is now on track to earn `20 crore this fiscal and `100 crore by 2016, uses DTDC’s extensive network covering over 5,200 locations in India to deliver 12,000 shipments a day.
Also in the fray for a slice of this growing action are specialist startups like Delhivery and Ecom Express that are preparing to launch more focused services for the e-commerce industry. These ventures will set up warehouses
with machines sorting out thousands of parcels and at the other end provide alterations at a customer’s doorstep Such innovations have become vital to meet customer expectations in an industry that doubled in size within a
year to reach `12,500 crore last year. By 2023, online retail is expected to become a $56 billion (almost `3.5 lakh crore) industry. “Every single online retail transaction needs to be delivered. The opportunity for logistics is as big as online retail,” said Ashish Jhalani, head of advisory firm eTailing India.
Other large firms like Blue Dart and Aramex have also set up separate ecommerce divisions. A study by advisory firm Technopak showed that online retail will add $5 billion (over `31,000 crore) annually to the income of logistics companies by 2021. In the next year just Snapdeal will generate business of about `250 crore for third party logistics firms according to its cofounder Rohit Bansal.
Kathuria, a former India country director at logistics multinational TNT, said logistics companies have so far had to play catch up to meet basic requirements in this fast-growing industry. They have now established systems
and processes to pick up packages from a number of sellers and ship them to multiple pin codes. At a customer’s doorstep they pick up returns and keep the online retail firms updated on the status of the package at every step of its journey. Even cash-on-delivery (COD), which accounts for about 60% of all online retail transactions, is under control, said the companies. “We have built IT systems to track COD and have worked with partner banks to remit the money to their branches, sometimes multiple times a day,” said Sahil Barua, 29, cofounder of Delhivery, which is backed by Nexus Venture Partners and Times Internet, part of The Times Group which publishes The Economic Times. Delhivery, which aims to earn `60 crore this fiscal, was founded in 2011 and has a reach of 130 cities. Delhivery, which has an employee base of 3,000, handles about 50,000 orders a day.
With competition heating up in online retail, companies have started offering services like next-day and same-day deliveries, adding to the pressures on logistics companies. The need for speed and the requirement to reach customers in remote locations is driving innovation. “If online retail has to grow to the humongous numbers everyone is talking about then logistics has to reach the smaller towns,” said DotZot’s Kathuria. DotZot is running
a pilot for drop off points in Delhi and a few smaller cities like Rajkot. Here a customer can return a package at designated collection centres, where they are scanned by staff resulting in instant returns message to the customer and the online site. The company is intending to launch a similar facility for pickups. The company is also working on a plan to launch multi-user warehouses. Here DotZot will pick up orders from sellers, stock them, do the
packing and handle shipments.
Ecom Express, cofounded last year by a group of former Blue Dart senior executives, is setting up a fully automated hub in Delhi where machines will sort packages for shipments. “We will need to invest in automation at various levels otherwise we will not be able to handle the volumes that are being projected,” said T A Krishnan, 50, chief executive of Ecom Express that has a of 59 cities.
The company has, in fact, identified specialised services as a source for growth. Ecom Express already offers services like delivery persons delivering packages wearing the uniform of the online retail site. The company is in talks with a Bangalorebased fashion portal to provide a service where the delivery person will wait for a customer to try out a garment, take measurements, go to a pre-approved tailor to get alterations done and deliver the altered garment to the customer. The firm, which has an employee base of over 1,300, plans to expand to over 50 more locations in the next quarter.
“We are a specialist and can offer tailor-made services as demanded by online sites,” said Krishnan. He declined to reveal company revenues. DotZot’s Kathuria said that the challenge for logistics firms will be to stay in step with online firms. “I am very clear that the online companies will decide what service they want to offer customers,” said Kathuria. “Our job will be to enable those services for them.”