Ecommerce and Logistics : A Likely Symbiosis or an Unlikely Challenge?

The customers use express delivery services for shipment of various products, having high value like life-saving pharma products, electronic products among others as they provide time bound logistics services. The express industry in India though small is yet significant in the logistics industry and is among the fastest growing segments of the industry. It has evolved rapidly and has increasingly added a variety of services and user segments in the domain of express deliveries. As per Crisil Report, 2012 the market size of express logistics segment during 2011-12 was estimated at Rs. 10,870 crores (about $1.8 billion). The industry is expected to grow at 17 percent per annum compared to 11 percent growth estimated for the overall logistics industry to Rs. 17,450 crores (about USD 2.9 billion) in the next three years.

By providing an integrated time-bound door-to-door delivery services, the express segment has become an important part of the logistics industry in India. In addition, the industry makes significant contribution towards employment and exchequer. It is witnessing a demand boost due to the above average growth of industry segments like organized retail, e-commerce, consumer durables, electronic products and healthcare. The segment is also receiving a fillip from the higher level of consumption demand in the country for items like electronics, garments, etc, in turn creating additional demand for express industry.

Although logistics accounts for about 10 percent of the total costs for e-retailers, the squeezed margins, make bearing such costs almost economically unviable. Reverse logistics is also becoming more important. While the industry average is about 20 percent, some segments like apparel have an abnormally high return rate of 60 percent. In about 70 percent of cases of reverse logistics, the cost to pickup and return is greater than the value of the item.  This has increased the challenges which the leading ecommerce players face in current operating scenario.

Transformation of e-commerce would also facilitate the adoption of newer models for logistics. Large warehouses located outside the metropolitan limits reverses the trend of aggregation around large retail outlets. Moreover, growth of e-commerce is likely to help in leveraging economies of scale. Further, given that home delivery forms an integral component of the ecommerce experience, the cost of moving goods to the shoppers’ location has to be considered in the design of supply chain and relevant logistics.

Given the sensitivity of the customers to the time-bound service, on-time delivery is another key and an important differentiating factor. These complications in turn have led space for specialized logistics service providers like TCI, who use technology and other efficient processes to bring down these costs, forming a lucrative opportunity for specialized logistics provider to operate in the sector.

TCI offers multiple services in both B2B and B2C categories. TCI XPS is fully geared to cater to the logistics requirement of e-commerce sector and can cater to the specific warehousing requirements of sector due to its ability to deliver products to customers in a safe, secure and cost effective manner across the country. For its B2B customers, it offers forward movement service portfolio management. For its B2C customers, it offers warehouse to customer, vendor to customer and bulk and break services through its unique Hub-and-spoke model for delivery. Further, it also handles Reverse movement Service Portfolio for both B2B and B2C customers.

Ecommerce has, undoubtedly, made a strong presence felt. However, while the demand side continues to be strong, the lack of necessary infrastructure is proving to be a major impediment in continuing growth. Whether the sector takes off, aided by necessary support from key 3PL providers, or ends up in a quagmire due to lack of necessary logistics backbone would largely depend on the ability of the existing players to respond to the changing needs of the sector.