The current market size of online retail in India has been pegged at USD 3.5 billion (over Rs 21,000 crore) and is expected to touch the mark of USD 14.5 billion (over Rs 88,000 crore) by 2018, according to a research and consultancy firm RNCOS.
This tremendous growth is the result of rise in Internet and mobile penetration clubbed by the convenience of online shopping and offers extended by e-tailers. But this alone is not responsible for the unprecedented growth of the sector. There is no point in buying anything online if it doesn’t reach you in time and in fine shape.
The role of logistics solution providers in making or breaking an ecommerce business cannot be neglected. The steep increase in number of startups, interest of big logistics players like Gati, Indian Post, Bluedart, among others, and investors pouring in huge funds into back-end infrastructure, is testimony to the rise of a new wave of retail support companies.
Some of these start-ups that are riding on this ecommerce revolution are Dehlivery, Ecomm express, Nuvo Ex, Unicommerce, among others.
Gurgaon-based Dehlivery, which started operations in 2011,is now valued at USD 350-400 million. The company currently delivers to 3000 pincodes and has the mission to connect India through a physical network in a cost-efficient manner using technology.
“The logistics industry has seen a remarkable change in the past few years. It is no more a plain courier service; it has now turned into low cost speedy delivery mechanism. Where ecommerce has made shopping convenient for consumers, logistics have made deliveries hassle free,” says Santanu Bhattacharya, senior vice-president of tech and product, Delhivery.
“To match up with the growing needs of the ecommerce industry today, logistics service providers need to support multi-channel strategies of their customers. The intricacy and vitality of the supply chains require advanced Information technology solutions,” he adds.
Echoing these sentiments with respect to the change in role of logistics solutions providers, Navneet Singh, co-founder, Nuvo Ex says, “The logistics model has undergone a huge transition. Now a logistics firm needs to provide scale, robust technology and value added services to survive in this race.”
Nuvo Ex, which only provides reverse logistics solutions; it manages timely delivery of a product returned by the customer to the seller. It started with 10 orders in 2013 and is now clocking around 12,000 orders per day. Nuvo Ex is currently present in 20 cities and is planning to take the number to 50 by March next year.
“The idea of reverse logistics is quite simple. By delivering a wrong product, an ecommerce firm has already lost the buyer’s faith; they further cannot afford to take 10 days to process a return. It is then when we step in with our expertise in timely reverse logistics. Plus, it is a low volume but a high margin business,” Singh adds.
According to a report by Singhi Advisors, an investment banking firm, the fast growing e-commerce sector is expected to drive the USD 167-billion domestic logistics industry in India. The third party logistics (3PL) segment, which stood at USD 17.4 billion in 2013 and accounts for 7% of the logistics industry’s revenue, is expected to witness a compounded annual growth rate of 21% from 2013-18.
Investors on their part are also pouring in funds, though not at par with investments in customer facing businesses. “A customer-facing business tends to have more value, thus even investors want to shell out money there. Also from the entrepreneurs’ point of view, it is more profitable to be at the front end of ecommerce,” explains Singh, adding, however, that with more startups coming in, the situation will no longer remain the same.
Incidentally, in May this year, Delhivery raised close to USD 85 million in a new round of funding led by venture capital firm Tiger Global Management LLC. The funding came less than eight months after it raised USD 35 million in a Series C round.
Delhi-based Ecom Express last month also raised Rs 850 crore in fresh funding from the Indian arm of global private equity firm Warburg Pincus.
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