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Logistics of eCommerce in India

January 5th, 2016

eCommerce IndiaWe’d like to present some stunning facts about the Logistics Industry supporting eCommerce in India.

India’s three pure e-commerce logistics companies – Delhivery, Gojavas and Ecom Express – have already achieved reasonable scale. Flipkart and Amazon have built large in-house capabilities through Ekart and Amazon Transportation Services, respectively. Traditional players such as Blue Dart and Gati have also entered this segment. The seven companies together deliver ~1m parcels a day.

Pure logistics companies cover only the top 4,000-5,000 pin codes out of ~30,000. Coverage will have to increase meaningfully when growth increasingly starts coming from smaller towns, and that will require heavy investment. The larger players have successfully raised funding so far. In addition, Flipkart has announced plans to invest US$2bn over the next few years in logistics expansion. Snapdeal too has announced US$150-200m investment in delivery
channel expansion while investing in Gojavas.

The logistics value chain has three stages: 1) pickup from vendors, 2) quality checks, packaging, and sorting at fulfilment centers; and 3) last-mile delivery. Logistics players today are primarily involved in the last-mile (8-12% of GMV, including cash on delivery), though firms such as Delhivery have built end-to-end platforms.

Using in-house resources, outsourcing or traditional channels have advantages and disadvantages. India’s ecommerce industry has evolved into a structure where players want some control over the supply chain as well as visibility during peak seasons. They therefore outsource only part of their deliveries. Flipkart and Amazon do the bulk of their deliveries through in-house resources (both handle ~80% of their deliveries). Snapdeal used to outsource 100% but acquired a stake in Gojavas at the start of the year to ensure greater visibility.

Interestingly, India appears to be ahead of the more developed markets in this respect. Both Amazon and Alibaba started with outsourcing but have recently either started to initiate in-house channels (Amazon – at least partly) or invest in logistics players (Alibaba).

You can read about the Success Story about eCom Express Logistics company which started a pure play ecommerce logistics company including last mile delivery.

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