Growth of e-Commerce industry and role of logistics companies

.Behind every great leader there was an even greater logistician.. – M. Cox

Globally, Asia is expected to have outdone North America in 2014 as the biggest e-commerce marketplace. The figures cannot be more promising, by 2017, it is likely that Asian e-commerce sales would peak $1 trillion or about 20% more than North America.

So what does it spell for India?

Ecommerce Industry in India

The online retail space is evolving like never before. The prospects for the ecommerce industry are getting bigger and the momentum is just building up and growing steadily and rapidly.

The growth statistics are traced thus:

  • Today, the Indian ecommerce industry is valued at about $17 billion.
  • Online retail is expected to quadruple to about $43 billion in the next 5 years as per, Nomura.
  • The Indian e-tailing market size stands at about US$2.3 billion for year 2013 and is expected to grow to about $8.5 billion in 2016 and $17 billion by 2018.
  • As per a study conducted by PwC and Assocham, the CAGR for e-tailing in India is expected to grow at a stupendous rate of 50% and cross the $100 billion mark in value over the next 5 years.
  • According to Forrester, online retail is expected to forge ahead to $76 billion by 2021.
  • Popular shopping categories are apparels, computer and consumer electronics. In India, the average annual spend on online purchasing is going to be up by 67% in 2015. It is estimated that in 2015, around 65 million customers will buy online as against 40 million in 2014.
  • Internet users are expected to grow twofold by 2016 and estimated to grow enormously by a hundred -fold by 2021.

So what does this entail for the Logistics industry?

Logistics is the veritable backbone of the online industry. As per a report by Roland Berger and Barclays, the Logistics market is expected to grow annually at 3% till 2020. The growing online market presents logistical tests as well as newer markets and more opportunities. Companies are making strategic acquisitions so as to better their market presence, enter newer markets and niche segments. A marketplace model with no inventories, investing in larger and bigger warehouses and facilities with a key focus on delivery, tailored finance structures are the new order of the day for most logistics companies.

Today, the logistics sector is the fifth best thriving industry in India. In developing markets like India, based on product type, market development and awareness, different e-commerce logistics patterns are in place. As these patterns grow, and are accepted, it will definitely bring about marked changes in the actual physical supply and delivery networks. This is giving rise to new forms of logistics models that incorporates e-fulfilment centres, delivery and package hubs, localized depots that cater to order fulfilment and also process the returns.

Logistics service providers can take these initiatives to address the different trends in ecommerce. They include:

  1. The actual ecommerce lies in the discovery and development of the demand generation in Tier 2 and Tier 3 cities and consequently, the focus on logistics to these places.
  2. CoD or Cash-on-Delivery is still a pertinent part of the e-tailing business. Therefore, both the ecommerce companies and logistics companies have to address issues relating to CoD, online payments and offering absolute reliability in CoD deliveries.
  3. Catering to an increased number of offline retailers who are employing online modes to channel their goods. They would require adequate handholding in terms of a good delivery model, inventory management, invoice handling, consumer behaviour patterns and other value-add services.
  4. Reduce dependency on airlines to move goods so as to reduce expenditure by over half and also discover newer transport channels like road and rail. Logistics companies can now more seriously explore the railways route as in the new budget, the railways have committed to extend full logistics support to ecommerce companies by actually assigning selected pick-up spots in chosen stations.
  5. Increase warehousing capacities; include more fulfilment centres, sorting and delivery hubs in different locations.
  6. A qualitative effort translates to quantitative gains and it impacts forever. The estimated worth of backend logistics for the ecommerce segment is supposedly around INR 35- 40 billion and it makes perfect business sense to cash in on this.

A couple challenges faced

  • Improvise on identifying and developing the address location systems for delivery.
  • Logistics companies have to scale up to be growth enablers. And this can only be done by standardizing the delivery methodologies.
  • With increased ecommerce market penetration into smaller cities and towns, to meet increasing demands with on-time and well-organized delivery system, an effective and workable model should be in place.
  • Fluctuating costs, CoD deliveries, finding reliable third-party vendors, on-time shipping and delivery and returns acceptance and logistics are some of the other issues faced.

In conclusion

With infrastructure enhancements like logistics, digital connectivity, increased awareness and a greater impetus on the benefits of online shopping and the bullish growth, the going is great for both ecommerce and logistics companies and it can only get brighter and there is nothing to stop this mammoth tide. And there can never be a time like this to reap the benefits and savor success riding on the pinnacle of the ecommerce wave.

Summing it up in a quote that says it all by the famous Alexander, the Great, .My logisticians are a humourless lot . they know if my campaign fails, they are the first ones I will slay..

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2 comments

  1. This is a very well written with plenty of details regarding ecommerce, and it spells out all the facets of the hitech world. To know all about logistics and the ecommerce industry, you can safely read up this blog. Very well analysed. Good work.

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