Future and Challenges for eTailing Logistics in India

Over the last two decades, rising internet and mobile phone penetration has changed the way we communicate and do business. E-commerce is no more a novel concept in India. There has been no doubt about the growth prospects of e-commerce in India. According to the Gurgaon-based consultancy Technopak, the $2.3-billion (Rs 13,800 crore) Indian eCommerce sector will touch $32 billion (Rs 1.92 lakh crore) by 2020. But for this to happen, the logistics sector - the link between eCommerce stores and customers must keep pace with the rate of growth in eCommerce.

At an e-tailing event in Gurgaon, the chief executive of a logistics company, while narrating his own experience, conveyed that during the festive season of Diwali, he was expecting the number of orders to double but, it went up by four to five times and led to a logjam.

Logistics startups are playing a critical role to help the logistics issue with the new e-tailers that are starting and help them during the peak seasons. There are various challenges for these logistics companies as the consumer behaviour in India is slightly different.

1. Tier 2 and Tier 3 cities will emerge as extended market and thus, it will lead to have a wider network to cater to the customers here. It is necessary to develop a network of branches and delivery points that will be able to service the high-growth cities.
2. Cash On Delivery need better cash handling capabilities. With higher volumes and customers looking for CoD, the companies not only have to effectively manage the cash but, handle it securely as it is not their money but, their clients. On top of that reconciliation issues and calculating the returns will add to the problems.
3. Delivery staff will be on high demand. Online marketplaces, etailers and logistics firms all will chase delivery boys to reach customers. The industry may face multiple pressures like high attrition and rising salaries. In addition to this, the industry has to look at the honesty and integrity of these staff as they will handle the products to deliver and more and more cash.
4. Reverse logistics is other big challenge to manage. It is not just the product that has to be carried back to the merchant but, cash as well if it is CoD.
5. Special and precious products will be added like medicines, jewellery etc. which will also be a challenge to the logistic industry. Such products may increase the requirement of special treatment and adds complexity.
6. Till now these logistics providers have tried to deliver locally by road. They also need to focus on other modes of transports like metro trains and other means to avoid traffic issues. While transporting from city to city there can be constraints for transportations through air as there may be container constraints and security issues.
7. Above all the different tax structure in different states will add up to the problem.

To cope up with these small with difficult challenges etailers needs to look at niche market areas which can give them high volumes. It will be difficult to find such business but, if you can then you have it. Also, in case you have a high margin business then that is the icing on the cake. These focused and high margins business will focus on high returns.

Here are few logistics companies which you can depend on. I suggest, have talks with all of them and sign-up with at least three of them so that you are ready when the flood comes and the deliveries are on time. Keep in mind that the sales of startups is mostly through word-of-mouth and an unhappy customer will tell hundreds of others but, a happy customer will tell to very few people.

Ecom Express: Launched in Jan 2013, they are making about 85,000 shipments a day. Claims to cover 207 cities and 2240 pin codes.
GoJavas: Launched around 2013, and their first client was Jabong - the online fashion and lifestyle etailer. Today it serves 200 companies and claims that it delivers to 2300 pin codes and covers about 105 cities.
Delhivery: Was started in April 2011 by Sahil Barua and two others who worked at Bain and Company, a consulting firm. Claims to cover 175 cities, 3600 pin codes and does about a lakh shipments a day.
eKart: It helps Flipkart with the deliveries.
Holisol Logistics: Started in 2009, offers warehouse consulting solutions. A year ago it expanded to deliveries. It is a single vendor for logistics, warehousing and fulfillment services for seamless flow of information. The company has set up a one-lakh-sq-ft warehouse for Jabong and a 1.6-lakh-sq-ft warehouse for FabFurnish at Jamalpur and Bilaspur in Gurgaon, respectively. The firm offers delivery services for e-taliers like Jabong and Freecultr and offline sellers like Raymond and Biba Apparels.

There are other courier companies as well which took the eCommerce and etailing industry lightly earlier.

Dotzot: Launched by DTDC in June 2013 with a delivery network of 8000 plus pin codes and 2300 cities.
Gati E-connect is another one which has also joined this logistics service. They claim to reach 5120 direct pin codes  and reach to 15,400 remote pin codes enabling to reach your business to the remote places.

Cash on Delivery seems here to stay, and the problems of that last-mile of delivery, and unreliable third party couriers will take at least a decade to resolve. In the meantime, the businesses that make it will either have huge margins on each order to cover the cost of these difficulties. It is very much important for startups and etailiers that the service which these logistics partner provides needs to be the best one at the price they can afford.

Such logistics companies should build algorithms using not only RFM (Recency, Frequency and Monetary values) but need to consider the distance as well. The use of technology is very important where in the deliveries need to be automatically allocated depending on the above factors and algorithm.

Happy know your thoughts and experience with the logistics partners. Feel free to share.