Ecommerce-focused logistics companies are prepping for a year of hard graft, battling infrastructure hurdles and competition from a new breed of startups while also keeping pace with the ambitious growth targets of the country’s biggest online retailers.
GoJavas, Ecom Express and Delhivery are rushing out a slew of services, expanding their reach and building up technology platforms for clients such as Flipkart and Snapdeal that have set record sales targets for this year. India’s online retail market is estimated to reach $36 billion (Rs 2.4 lakh crore) in 2016-17, up from $11 billion in 2014-15, according to Goldman Sachs.
“The key will be to provide good customer experience by focusing on reliability, speed and visibility,” said Vijay Ghadge, chief operating officer at GoJavas, “so that (customers) can keep buying again and again.”
The Gurgaon-based firm counts Snapdeal not only as a client but also an investor. The New Delhi-headquartered online retailer owns a 42% stake in GoJavas after it invested an additional $20 million in the firm in October. GoJavas’ expansion is critical for Snapdeal.
“Snapdeal is currently delivering to over 28,000 pin codes and it is our ultimate goal to cover all pin codes and consumers in the country. We have the widest reach already and we continue to strengthen our resources to access consumers beyond tier-2 and tier-3 cities,” said Jayant Sood, chief customer experience officer at Snapdeal. Snapdeal gets more than 65% of its orders from tier-2 and tier-3 cities, with the north-eastern states accounting for 12% of overall sales. Aizawl, the capital of Mizoram, is the eighth highest sales pin code for Snapdeal.
In trying to access many of these areas, delivery and logistics companies face significant hurdles. The lack of surface transport and limited air cargo capacity act as bulwarks preventing smooth first-mile and last-mile deliveries.
“Even as the ecommerce segment grew exponentially over the last 2-3 years, logistics continue to be a problem. Also, the high costs and lack of technology innovations has not happened as one would’ve expected,” said Surabhi Arora, associate directorresearch at consultancy Colliers International.
This demands that the logistics partners spend more also on strengthening their physical infrastructure and technology platforms to seamlessly integrate these with that of their clients.
“Technology will help us to handle scale. We are creating software that will help us handle updates on the field, swipe on delivery and customer interaction, among others,” said Ghadge of GoJavas, adding that the company, which currently delivers to about 3,200 pin codes, or 300 towns and cities, was looking to expand to 4,000-4,500 pin codes, or 600-800 towns and cities, over the next 12-18 months.
Ecom Express, which counts private equity firm Warburg Pincus among its primary backers, is also expanding at a furious pace. “We’re looking to begin (covering) 500 towns and cities by end-December, and 1,000 by the end of the next fiscal year (March 2017),” said TA Krishnan, cofounder and chief executive of Ecom Express. It currently reaches about 300 towns and cities.
The Gurgaon-based company, which has about 250 clients, is targeting the eastern and north-eastern states, which, thus far, have been woefully under-penetrated by logistics and delivery firms due to inadequate infrastructure in these places.
“We have 17 hubs and about 700 delivery centres, but are in the process of adding centres in 100-odd cities in in Bihar, Odisha and Jharkhand between now and April,” Krishnan said. Delhivery operates in 350 cities and towns and handles about 20,000 deliveries a day.
Integrating technology is at the forefront of these efforts, from developing specialised software to moving towards complete automation. GoJavas, which has automated the sorting stations at two of its major nodal points, aims to do the same across Mumbai, Bengaluru and Hyderabad in 6-18 months. “Human intervention happens just once in 70% of our orders today. We’re looking to automate everything,” Ghadge said.
These firms also have to battle a growing argument that ecommerce companies need to have in-house logistics arms for cost rationalisation and greater control over deliveries. Flipkart recently pumped in Rs 666 crore into Ekart, its logistics business.
It’s a strategy the logistics companies say is suspect.
“When the funding dies up, how long will (ecommerce companies) sustain (in-house logistics units)? Will they have that much traction on their own (to run these units)?” asked Krishnan.
Another worry is the emergence of technology-focused, venture capital backed, hyper-local delivery companies in an already crowded space. Startups such as Opinio, Parcelled and Shadowfax Technologies that have come up in the past year promise to deliver goods to consumers within 30 minutes of an order being placed.
“The lines are getting blurred. For the ecommerce companies, their overheads shot up and there was a lot of variability, but now the landscape has changed,” said Xitij Kothi, founder and CEO of Bengaluru-based Parcelled.
This year certainly promises to be a litmus test for the country’s logistics and delivery companies. “We can handle scale. It can be a bit nerve-racking, but we are confident. Our past performance gives us that confidence,” said Ghadge.
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Source – ET Retail