The online retail market in India has grown by leaps and bounds from its nascent state in the mid-2000s to its current market of USD19.5 billion worth of transactions at a gross level before returns and rejections.
Key growth trends include rising internet penetration, mobile as a game changer, language diversity, advent of social commerce, convergence of customers across multiple ecommerce businesses with use of technology and growth of digital wallets.
Indian e-commerce retail logistics:
The e-commerce retail logistics market is valued at USD1.35 billion in 2018, and is projected to witness a growth of ~36 per cent in the coming five years
The sector is serviced by traditional logistics service providers (LSPs), e-commerce retail focused logistics service providers and captive logistics arms
The intrinsic challenges that the industry faces are high cost pressures, high rate of returns, poor infrastructure, infrastructural inefficiencies to cater to growing intercontinental traffic
Commenting on the report, Jaideep Ghosh, Partner & Head, Transport, Logistics & Sports, KPMG in India said “The e-commerce retail industry has witnessed substantial growth, attributed to various factors such as, ease of access to data through smartphones with attractive pricing from telecoms, emergence of new consumption hubs beyond Metro & Tier 1 cities and changing consumer behaviors. Further, fueled by a recently-held large deal and an increasing dominance of international players in the India ecommerce space, with each having a war chest to outweigh the other, the industry is expected to witness rapid growth. Consequent to this and bolstered by other trends and developments in e-commerce retail, rising consumer expectations and amplified demand for same-day deliveries, the e-commerce retail supply chain functions are adopting new technologies and are evolving innovative last-mile delivery and other supply chain mechanisms. The growth of the sector continues to be on an upward trajectory, and is expected to continue to do so”
An important aspect of e-commerce retail is high number of return shipments. Return shipments in e-commerce retail constitutes ~18-20 per cent of total shipments. These lead to complications like refund, exchange and replacement, which increases the overall supply chain cost, due to the returned shipments being cycled back into inventory, restocked and relisted or sent back to sellers. However, with stricter return policies and improvement in processes, returns are expected to reduce to 10-12 per cent by 2020.
Recent shifts in e-commerce retail logistics:
Modal Shift: Surface transit is the preferred mode of transport, resulting in slow growth of air express market. The pressure to reduce logistics cost has led to a switch to surface transportation, which is comparatively inexpensive
Zonal Shift: With the implementation of GST, e-retailers no longer enjoy the same tax benefits, and are spreading their footprint of Fulfilment Centers (FCs) pan-India
Shift in demand centres (Reach expansion): Currently more than ~60 per cent demand comes from metro and tier I cities. However, by 2022 this share is expected to come down, as we foresee emerging demand centres in tier II and beyond cities, driven by increased internet penetration
Upcoming trends shaping the e-commerce retail logistics industry:
- Innovations in last mile delivery mechanisms and technologies due to rise in: customer expectations and cost unpredictability
- Last mile delivery – Technological innovations such as PUDO centres, secured lockers, digitisation of addresses and automated delivery mechanisms
- Supply chain innovations like improved surface connectivity, increase in FC footprint and specialised FCs