“We are looking to double COD destinations,” says Percy Avari, Aramex Country Manager
Aramex now has COD in 1800 pincodes and delivers to 4500 pincodes across IndiaService providers like Aramex enable e-commerce in India in that they help the e-commerce companies ship their products to customers. Besides e-commerce, they also provide services to other industries like auto and pharma. For a perspective on the services, the industries they cater to, and the outlook for the future, YourStory.in caught up with Percy Avari, Country Manager, Aramex.
When was Aramex setup in India?
Technically we were registered in 1996, but we started operations in 1997.
How many offices do you have in India currently?
We have 62 offices in India right now. This number is growing by the day. By the end of this year, we should be having 130–135 offices.
How many locations do you deliver to?
We don’t look at locations, we look at pincodes. We deliver to around 4,500+ pincodes today.
How does the business model of Aramex work?
The way the business model operationally works is, Aramex is strategically located with its own offices in key locations of the country, where operational management and priorities of business require us to be. And, in other cities we have got business partners whom we call business associates who run and manage operations in those cities. So, it is a combination of self owned businesses and hubs, and business associates.
What are some of your major challenges when it comes to delivering to tier 2 and tier 3 cities in India today?
Today, in India, the way the legal system is structured in terms of paperwork, and I am talking more with regards to the e-commerce industry over here and not generally; because most states have their own requirements with regards to paperwork, and some states have a higher compliance level on that; this kind of paperwork cannot be provided by the buyers on e-commerce. The biggest challenge today, for us, is the shipment of the consignment. Once we ship the consignment, the challenge that comes in is with regards to infrastructure, how we ship the shipments to tier 2 cities is a big challenge, tier 1 is relatively easier. Shipping to Tier 2 and Tier 3 cities is the need of the hour for e-commerce today. Infrastructure is grossly missing. I can take up a delivery to Ludhiana/Amritsar, but if I have to take it beyond that, infrastructure availability in terms of consolidators and so on is relatively missing.
Second biggest challenge for us after infrastructure is availability of skilled labor, so availability of sufficient feet on the street who are skilled/semi-skilled to deliver is a big challenge.
These are the major challenges that we face with regards to our deliveries in tier 2 and tier 3 cities.
How many B2B customers do you have in India?
In B2B, we would be having close to around 1000 customers.
Out of these, what percentage is e-commerce?
In terms of e-commerce, today, we have a lot of small new startups happening, there are close to 150 e-commerce companies today working with us.
Can you please name some of your customers, e-commerce and otherwise?
We have customers across various verticals. In banking, we have customers like ICICI Bank, Axis Bank; in automobile, we have customers like Ford Motors, Tata Motors. Looking at pharma, we have customers like Ranbaxy; in e-commerce we work with most players, but my top customers would be HomeShop18, Flipkart, and Indiatimes.
What, according to you, are the keys to success in Supply Chain Management in a country like India?
The key to success in a country like India is going to be about driving innovations and being able to overcome challenges and still provide solutions to the customers. All of us know that there are challenges; the question is how you drive innovation whether it is in terms of technology or whether it is in terms of processes, and provide a solution to the customers by overcoming challenges at a price where the business is viable.
Can you tell us about your key offerings and the revenue model?
We have three key offerings at Aramex in India, which are International Express and Freight Forwarding on the International side, Domestic Distribution and the third one is the logistics side of it.
Our revenue model would be on the simple distribution model where we charge as per the weight distributed. Second is a complex model wherein we handle the entire supply chain of the customer, which would be chargeable on a usage basis, in terms of the items of logistics they use on a pre-agreed pricing on each of the usage, so the customers pay only when they are using and otherwise don’t. These are the two key models.
Something interesting on your website that we found was Shopandship.com. Can you tell us a bit more about that? How has the traction been so far from a customer adoption perspective for ShopandShip?
ShopandShip was started half a decade back when we noticed that most of the global companies do not ship to Middle Eastern Countries; and if they ship then the price of the shipment doesn’t make the purchase viable. Now, since we are a logistics company having presence globally, we saw an opportunity here wherein we could provide the customer with permanent addresses in US, UK and China; when he registers with us on ShopandShip, that customer has the freedom to shop globally, it will be delivered to the local address in US, UK or China. Aramex then picks up the shipment from their facility, and ships it to the destination country, custom clear delivery. That is how ShopandShip works.
The traction has been very good, because today most of the customers are interested in buying things that are not easily available locally or what is available locally is not in-line with the latest trends. For example, the latest iPhone might not be immediately available for sale in India and I don’t want to wait till it is launched in India, then, I become a ShopandShip customer. I buy online at UK / US and Aramex brings it to India. Or, for example, Marks & Spencer is already available in India, but some of the latest global trends are not locally available in India.
This is high-end value plus the products sometimes might be available in India but the price outside is much cheaper. So today, the customer has a chance to buy what is not available in India plus what is available outside at a better price.
As someone who provides e-commerce logistics in India for many players, what do you have to say about the e-commerce story in India?
Yes, e-commerce in India is very much here to stay. We are currently what US was in the late 90s. Whether it would continue at the same pace or it would change is something we need to look at.
In the next 2-3 years we will see e-commerce in India consolidating, and then emerge into a new model than what we see today. The industry is here to stay, but we are going to see a sea of changes in the way companies operate and provide solutions to customers. We see a lot of younger companies that provide last-mile delivery, COD and SCM solutions only catering to e-commerce companies. What do you have to say about that?
We have a team internally that focuses only on the e-commerce vertical, just like we have a team that focuses only on pharma and a team that focuses on automobile. For us, it is not just one vertical we focus on, but we have got specialists who focus on and work for that vertical in isolation. So, we have an e-commerce supply chain team who looks at “what are the customers demanding today?”, “what are the changes in the market and what do we need to do to keep in touch with those changing trends and keep providing the solutions to the customers?” For us, innovation under every category is an on-going process.
To answer your question regarding few younger companies setting up only to focus on the e-commerce vertical or e-commerce companies going into the logistics side of it, all I can say is there is sufficient scope for new entrants in India in logistics. Going into industry-specific servicing, whether that model is sustainable or not, only time can tell. Because logistics is a highly capital-intensive industry, and if your capital investment is focused only towards one industry vertical—how much you will be able to grow at the same pace of that industry is a question mark. Whether being a specialist in only one industry makes sense when it comes to logistics, I have my reservations on that.
Some of the larger players are managing their logistics themselves. Your take?
The scope is large in logistics today. The companies could certainly start off being an e-commerce specialist, but then also move on to other segments like retail, automobile etc. There is sufficient scope, competition is always welcome. The only thing is the investor needs to look at where the existing competition is vs where your startup is and how much time would you actually have to be close to the competitor. What I am saying is if an Aramex or a Blue Dart delivers to over 5000 pincodes, you may surely as a beginner do it for 10 cities and for 500 pincodes, but at some point the customer is going to demand more and ask you to bring it to 3000–4000 pincodes, and it is not easy believe me, it took us 7-8 years to build this kind of network when we started off. Building a network is easier said than done.
Now, coming to e-commerce going into logistics, I have not been able to get an answer why they need to do it, is it something that you want to show as a USP that becomes a marketing strategy or is it something related to your operations? Because today, there are existing service providers in logistics who are able to provide you with a comparable service that your team would have. So, what is it that you wish to achieve? In China, Taobao I know started up with setting up their own infrastructure, and they had to because the logistics companies were not able to keep up to the pace of the growth that they had, as a result of which, there was a vacuum in between, which they needed to fill so that they could continue growing. But today in India, I don’t think any of the logistics companies are not able to scale up as and when the industry demands. So when a logistics company is able to scale up when the demand is there, what is your objective of setting up your own logistics infrastructure is a big question. And, how much you will be able to scale up beyond a certain point? Today you have cash on delivery, and you have decided you prioritize your capital on the supply chain, but would that capital in-flow allow you to continue growing, as your business demand keeps growing is a big question.
Also, most of the e-commerce companies have not contemplated that China is a labor-controlled economy, there is nothing called a Trade Union in China. India is a free country where these unions are very strong. If you look at most of the logistics companies, they have been facing challenges with regards to unions. Are the e-commerce companies geared up to manage that kind of an environment where they hire 1000–3000 people is a million dollar question, again.
What has been the growth rate of e-commerce shipments at Aramex in the last one year?
More than 100% I would say.
Do you have any predictions for 2012?
The first three months have shown that the growth rate will continue. We should end this year, if not at a 100% growth rate, at a 80–90% growth rate.
What are your biggest challenges today, for scale?
My biggest challenges, as I had said, are infrastructure and the tax structures in India. If something can be done of these two things, providing a consistent service would be much easier. We have the capital to invest in this business, we have the know-how, we have the capability, but we have a bottleneck when it comes to the tax structure and the infrastructure growth that is not consistent with the industry demands.
Are you trying to address these issues from a policy level?
We have an organization called Express Industry Council of India, which is basically an association of all the express companies who work towards meeting with the challenges faced by the industry by working with the concerned government and regulatory authorities to see how the problems can be solved. But in a complex demography like ours, it is easier said than done. Okay, the challenges are there, the industry keeps working together on a regular basis. I am closely associated personally with some of the industry bodies and associations, and try and work with them to see how we can represent the internet industry with regards to the challenges that the industry faces.
Our target is, by first quarter of 2013, we should be able to double our pincodes whether it is COD pincodes or normal pincodes. That is the target as far as pincodes are concerned, we are also actively investing further into the technology side of it. We have already launched hand-held devices, which allow us to collect payments using credit cards at the doorsteps of the customers. Today, we have over 500 Point of Sales equipment in 10 cities where you can courier and we have been able to work very closely with technology companies to come up with an extremely cost-effective solutions for the same. And, our target is to take it to 3500–4000 handheld terminals by the first quarter of 2013 in at least 200 cities. So a lot of investments are happening at the technology side. We are also investing on the infrastructure side by building our own warehouses in three principal cities, because today one of the other challenges is the availability of a proper facility, which can provide a complete back-end solution to most of the companies whether it is e-commerce, retail or pharma. One of the biggest challenges for them is to have warehouses where things can be stored, inventory management with value-added services in terms of consolidation, packing, labelling and so on, so a lot of investment is happening on that side also.
Out of the 4500 pincodes, how many are also COD enabled?
Out of the 4,500 pincodes, COD would be around 1800 pincodes.
Your advice to newer players in logistics?
My first advice would be you need to have the right kind of people who can handle the logistics part. It is not an easy task where you can build a network based on 4-5 offices and operate with people from there. You need to have a strong backing basis which can help you attract people to join you as partners and business associates, any company that decides to do logistics on their own would require millions of dollars of investment. Otherwise, you need to have a strong backing that would attract other entrepreneurs to join you as partners.
Having a strong backing is very important, and having a very strong technology end, in terms of technology that can be upgraded on a real-time basis and having the right kind of technology solution is the second key thing.
We thank Percy Avari for taking time and sharing his thoughts on logistics and e-commerce in India today.