Why investors are eyeing the logistics space as the next growth driver

India’s logistics and freight industry is one of the most rapidly evolving industries. Growing at a CAGR of 10.7 percent, it is supporting all kind of requirements from basic to highly complex ones.

Many factors such as improving infrastructure, no market entry barrier, low capital investment and more are attracting a large number of players to bring in their unique ideas, mostly influenced by technology. The sector, today, is home to a wide spectrum of players from small local and national players to multinational companies.

The industry is notably witnessing a large set of tech-driven startups focused on offering integrated end-to-end logistics solutions. Recent deal and investment numbers are more than impressive for the industry to emerge as a star industry.

In 2020, the sector saw total funding of $454.2 million, of which early-stage startups secured 45 percent of funding deals. The hyper development in the industry is stimulating investors’ sentiments, enabling businesses to scale at the desired pace. However, this is just the tail end of what the industry holds as potential.

Multiple reasons from the past and present are shaping the logistics industry. and will change the overall perspective – far from being a supporting sector, it holds the potential to be a significant growth catalyst.

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The home delivery factor

The multilevel growth of the ecommerce sector in India has a lot to do with the overall development of the logistics industry. There is a high demand for same-day and next-day delivery services, needed not just highly organised platforms to streamline processes but also a large number of permanent workers to execute delivery work.

From ordering a pastry to gadgets or jewellery worth lakhs of money – everything is being done with utmost ease, and high-level security support.

A smooth delivery function doesn’t only allow companies a hassle-free product delivery, but also gain the trust of customers – this grows over a period of time organically.  

Home delivery of goods has gained immense importance with the worldwide intervention of the deadly COVID-19. People are forced to lock themselves at homes, businesses are shut down, bring everything to a halt around us. The only hope to receiving essential products to survive was and remains “home delivery”.

A potent weapon against COVID-19

The second wave of COVID-19 shook the entire population, who found themselves looking for medical supplies to overcome the virus attack. A massive demand poured in for oxygen cylinders or concentrators, medicines, vaccines, and more.

Again, time was a critical factor, putting a lot of pressure on the supply chain to respond in an error-free manner. Cutting through the challenges caused by COVID-19, the logistics sector ensured delivery of essential items and timely distribution of all the necessary items and aids.

From managing hyper-local requests to deliver medicines at doorsteps to interstate and international transportation of medical aids, players joined hands to defeat COVID-19 with all the power they had.

The logistics and freight industry saw itself transforming from a support sector to a high-impact sector. It will continue to tread on this path with support from the government and investor community.

Covering the last mile: Government policies and future

Government policies play a vital role in uplifting and scaling up any industry. Logistics has been a focal point for the government of India, and many initiatives have been introduced to resolve transportation via road, air, and water. In addition, the green flag to FDIs, fast-paced infrastructure development, GST and many other reforms are supporting the growth of the logistics industry. 

With current and future government policies, financial support from the investors, and continuous innovations from new-age logistics businesses, the industry will experience much-needed process standardisation, technological upgradation, and digital transformation.