E-commerce has seen an unprecedented rise in business in the past year, with Paytm joining Flipkart and Snapdeal in the eight-member unicorn club. A report by Bank of America Merrill Lynch in 2015 stated that the e-commerce market in India will be worth $220 billion by 2025. Yet, e-commerce is beyond just sales and GMV numbers. Speed of delivery is as important as the product quality for a customer. It would not be wrong to say that logistics could be the defining factor for success of e-commerce companies in retaining their customers.
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 of 12.17 per cent by 2020. Innovations are very important in this sector, as the demand is always for more reach and faster shipping at lower costs. Yet, the companies will need to invest in automation, while utilising existing resources well.
YourStory takes a look at how e-commerce majors have built a solid ground for advancement in logistics in 2016, and how this year will pan out for Indian e-commerce in terms of logistics.
Lessons from 2015
It would suffice to say that 2015 was the year of logistics for e-commerce in India, with many startups coming up in the space, and investments flowing into them. Online marketplaces such as Snapdeal, Flipkart, and Paytm came up with innovative strategies in logistics and supply chain management, backed by ample investment.
Following the most significant trend in 2015, Snapdeal took the hyperlocal route and launched ‘Snapdeal Instant’ to allow delivery of packages to customers within an hour of placing the order. Having received a whopping $500 million in funding in 2015, Snapdeal also launched four-hour delivery, card-on-delivery, and 90-minutes reverse pickups. At present, the company is fulfilling 60 per cent of its orders from its own fulfillment centres, as compared to the seven per cent at the start of 2015.
Amazon added eight new fulfillment centres this year, increasing their storage capacity to nearly five million cubic feet across all 21 centres in India. Amazon claims that this is the largest storage capacity and warehouse infrastructure in India in the e-commerce industry.
Investing in better data analytics and forecasting customer demands was the mantra for the e-commerce players looking to cut down cost of deliveries. Flipkart tied up with partner stores that act as alternative delivery channels, so that customers can pick up their shipments at their convenience. “By bringing together core capabilities of IoT, devices, data and automation, we have started implementing the automation technology to pick and move packages to designated picking station, among several other applications that make warehouse processes quicker and smoother,” said a spokesperson from Ekart, the logistics arm of Flipkart.
Local networking for faster deliveries also gained momentum in 2015. Paytm launched a two-hour delivery model for mobile phones, similar to Snapdeal’s omni-channel strategy. E-fulfilment centres and return processing centres have also aided Paytm’s growth in 2015. Renu Satti, Vice President, Paytm, said: “Increasing the reach of our delivery network by partnering with local delivery companies was another focus area [in 2015]. Going forward in 2016, a lot of focus will be on strengthening city local delivery network and setting base for local fulfillment.”
Shopclues claims that its logistics initiatives have ensured better delivery service level agreements (SLA). Vishal Sharma, Vice President, Operations, said: “We have invested and developed technology that integrates with 90 per cent of our third-party logistics partners to ensure faster tracking and information flow between merchants and customers. This has resulted in faster shipping, integrated tracking and real-time updates on deliveries both in the forward as well as returns.”
Vehicle tracking crucial in e-commerce
Since the logistics market is highly unorganised in India, under-utilisation of resources is not surprising. Increasing adoption of technology in operations is essential to keep up customer satisfaction. Ashish Chitravanshi, Vice President, Operations, said that Snapdeal has been building strategic technology solutions that are leveraged by its third-party logistics partners to improve tracking of shipments. Amazon added that fast, reliable and resourceful internet connectivity across devices will help us use technology better for vehicle tracking.
Vehicle tracking plays a significant role in providing necessary control and effective route planning for faster delivery. In September 2015, Paytm invested in logistics solutions provider Loginext to exploit tech ecosystem for supply chain. Flipkart benefited by its investment in Blackbuck in capturing data on vehicular movement and utilisation, and utilising the data for better planning. “The efficiency improvement on information gathering and orchestration is a primary focus area for us in the next year as well,” the Ekart spokesperson said.
Technological developments in logistics have surely surpassed manual methods in connecting sellers, third-party logistics partners and customers. It has also made possible card on delivery, electronic proof of delivery etc., for these players. Logistics solutions provider Loginext–which caters to Paytm, Myntra and Amazon among others–even provides ‘heat maps’ for giving information on those areas where maximum delays are happening.
Manish Porwal, Business Development Manager at LogiNext, said: “We are also working with cold chain logistics service providers for delivering perishables. Our scheduler takes input from the system about the products being transported and accordingly schedules the deliveries. Also, the temperature and other settings required for a particular product could be set via our app used by delivery boys.”
Shopclues’ strategy is to work with third-party logistics partners which have enabled vehicle tracking or working toward adding on this function. However, infrastructural improvements are essential for seamless tracking, said Vishal of Shopclues. “Vehicle tracking in India is primarily dependent on the mobile infrastructure available. Inadequate coverage across the country affects tracking of vehicles,” he added.
Significance of Tier II and Tier III
The higher affordability of 3G and 4G smartphones has given rise to more orders from Tier II and III cities. Snapdeal gets 60 to 70 per cent of its orders from Tier II and III cities, while Flipkart gets only 20 per cent of its orders from those areas.
Despite the handicaps caused by inadequate coverage, e-commerce majors have come up with innovations for high-speed delivery. Snapdeal has built its supply chain towards many regions of the country like the North East. “We have the widest delivery network and therefore clearly see a direct correlation to the number of orders that we receive from the region,” said Ashish.
Flipkart claims that its algorithm on routing makes delivery and pick-up more accurate and faster than anyone else in this business. Flipkart’s investment in MapMyIndia has helped the company too. Ekart spokesperson said: “The accurate address data for both sellers and buyers will allow us to better schedule deliveries and pickups.”
Going a step further, Amazon India has engaged with an NGO in a pilot project of rural delivery network in Tier III IV towns, through logistics firm Connect India E-Commerce Pvt. Ltd., incorporated by founders of BASIX group. The plan is to ensure last-mile delivery with the help of the well-established rural distribution network of BASIX.
According to Samuel Thomas – Director, Transportation, Amazon India, the company received 65 per cent orders from Tier II and III cities in 2015. To establish rural distribution centres in rural India, Amazon has been training teams in packaging, checking shipments, tracking deliveries through a mobile app, route planning to make deliveries on time etc. Samuel said that many of these centres have witnessed a five-fold increase in the number of deliveries.
Amazon has a ‘service partner’ programme too for last-mile delivery in remote areas. “Budding entrepreneurs in these areas act as Amazon.in’s local distribution network providers and create the last-mile delivery footprint. This programme now covers more than 100 satellite towns and Tier II and III towns and villages,” Samuel added.
Turn to 2016
Money will be flowing into developing logistics for e-commerce this year. Having invested in B2B logistics startup Blackbuck, Flipkart has announced that it will be putting in $2.5 billion into logistics needs over the next four to five years. Besides roping in GoJavas, Snapdeal made six acquisitions last year–most in technology and logistics sectors–reducing its delivery times by 70 per cent.
Transportation expert Jaspal Singh, Partner at Valoriser Consultants, said: “Logistics system in India is underdeveloped and there is no big player that can provide pan-India access at economical cost. We will surely see some strategic partnership among logistics players to distribute the delivery load.”
A lot of the trends observed in 2015 are expected to continue in 2016 too. The Ekart spokesperson said that while technology-enabled supply chain will see greater penetration into Tier II and III cities, highly personalised and specialised services are also required. Ekart added that specialised cargo delivery will add to the complexity [of delivery] in 2016.
Roads are sure to continue as the most important mode of transport, but improvements are essential here as well. The Union government’s decision to earmark 20 per cent of the $1-trillion reserved for infrastructure brings hope in this direction. Jaspal believes since the cost of manpower is rising, there is a possibility of sharing of resources among logistics companies to reduce the delivery time. “There is need to look for consolidation and sorting of packages at a central location irrespective of the e-commerce company,” he said.
After Loginext and Grey Orange, there is a possibility that the likes of Roadrunnr and Delhivery might be the next ones to tie up with the biggies. With Amazon, Flipkart, Snapdeal, and even Paytm expected to overtake even offline biggies, taking a leap of faith in logistics seems like the inevitable next step.
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Graphics by Gokul K