With online retail touching $140B in 5 years, better delivery will be the key focus: Report
Online retail is expected to grow 5x in five years to become a $140 billion industry, and a better delivery experience will be the cornerstone of the growth. A report by RedSeer and ShadowFax says that emerging brands and platforms drive better delivery experience on the back of 3PL players.
Thursday March 18, 2021,
5 min Read
According to a joint report byand the logistics firm , there has been a 3x growth in online retail in India in the past four years – touching $38 billion in 2020. This is figure is expected to grow 5x in the next five years to become $140 billion in 2025.
“This growth of online retail will lead to an increase in penetration from close to five percent of the overall retail at present to 11 percent of the retail market by 2025,” said the report.
As the online retail market expands and grows, there will be a significant focus on the delivery experience. Hence, RedSeer and ShadowFax defined the ‘Delivery Delight Index’ in the report.
The index outlines interesting facts about the change in consumer behaviour to enable a deeper understanding of customer behaviour and preferences, and help the brands better serve their customers.
The Delivery Delight Index is also aimed at helping brands and platforms understand the satisfaction levels of end customers across key parameters like ‘speed of delivery’ and ‘delivery experience’.
The focus on delivery experience
The report states, “Delivery experience is emerging as an important parameter to drive overall customer satisfaction.” It further explains that as online commerce and its related segments evolve, it has brought a shift in consumer behaviour, preference, and expectations. Around four years ago, discounts, offers, and product assortments were key in driving buying decisions online, while today, all that has changed with digital maturity.
It adds that the preference of the online shopper has evolved to seeking convenience related to parameters such as ‘faster delivery’, ‘safety and hygienic experience’, and ‘discounts’. While the development of the ecosystem has led to the emergence of digitally native brands, the COVID-19 pandemic has further accelerated the digital journey of traditional brands and retailers.
The platforms now have better control over technology and product, which helps them to onboard customers easily. However, there still is a need to partner with third-party logistics (3PL) platforms for last-mile fulfilment.
Some of the traditional/retail and digitally native brands that have partnered with 3PL companies are leading in better delivery experiences. This reveals that the industry needs agile supply chain management and warehousing solutions of 3PL players to improve their delivery experience score, leading to better revenue per customer.
Commenting on the launch of the Delivery Delight Index, Abhishek Bansal, CEO and Founder, Shadowfax, said in a select media briefing,
“I have said this in the past and continue to foresee that five years down the line, ecommerce will evolve into maximum two-day deliveries. While discounts on products are no longer a key driver for consumers to shop online, speed of delivery, safety, and hygiene have become imperative in the past few months. Third-party logistics will emerge as important drivers to bring consumer delight to the brands, offering safer, faster deliveries.”
Key frontrunners of the ‘Delivery Delight Index’
E-tailing marketplaces - 1mg, Amazon, and Pharmeasy
Hyperlocal marketplaces - Amazon Pantry, Bigbasket, Dunzo, Flipkart Supermart, Grofers, Swiggy, and Zomato
Traditional brands/retailer – Decathlon and D’Mart
Digitally native brands – Mi and Zivame
The delivery experience is measured on delivery-related metrics across various types of delivery including pre-delivery, during delivery, and post-delivery. The selection has been made on the basis of -
- Large network of fulfilment centres that are closer to demand hubs
- High share of regional or hyperlocal fulfilment
- Better control on delivery
- Efficient packaging
- Agile customer care operations
- Better demand predictability across regions
Key results from the ‘Delivery Delight Index’
- Traditional brands/retailers platform and digitally native brands can provide a similar or better delivery experience as compared to players with a high captive share of logistics on the back of their partnerships with 3PL players.
- In the initial years of E-tailing, when the ecosystem for logistics was developing, players focussed on developing an in-house logistics arm to provide the best-in-class delivery experience to the customers. However, with the entry of 3PL players dedicated to ecommerce logistics, there has been ‘Democratisation of Delivery’. Several players have successfully leveraged 3PL partnerships to provide a better delivery experience.
- With an increase in customer base from Tier II+ cities, it is important for emerging brands/platforms to partner with 3PL players to increase their reach. At the same time, brands/platforms need to partner with 3PL players for warehousing as well to enable faster order fulfilment, leading to improvement in delivery experience
On the launch of the Delivery Delight Index, Anil Kumar, Founder and CEO of RedSeer Consulting said,
“The DDI report provides insight into the consumer psyche and will help ecommerce and traditional brands take necessary steps to improve their delivery NPS. This is the first time that such a comprehensive study has been undertaken in the ecommerce sector to understand where various brands and platforms stand in the overall delivery experience.“
Edited by Kanishk Singh