Indian Ecommerce Logistics to grow at a CAGR of 12.17% by 2020

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Valued at USD25bn, the Indian ecommerce is growing at a CAGR of 35% to 40% annually and is projected to reach USD 80bn by 2020. As a result, the ecommerce logistics industry too will swell by 2020, growing at 12.17% CAGR. Presently, the Indian logistics is valued at USD 300bn. To meet the growing demands of people nationwide and offer best service in minimum time and minimum transportation cost, major ecommerce players are tying-up with several logistics partners on national and international levels. In fact, third-party logistics providers are growing tremendously.

Let’s go through the top 5 factors contributing to the growth of ecommerce logistics in India:

 

  1. Rising demand from Tier II and Tier III cities:

With smartphones becoming cheaper and user-friendly, significant growth in demands from Tier II and III cities are seen. Of the total orders registered by Snapdeal, 60% to 70% are from these smaller cities and towns.

  1. Demand for reduction in turn-around-time (TAT):

Online shoppers are demanding products to be delivered in minimum time. Partnerships with domestic logistics providers help online stores to deliver ordered goods in a limited TAT. For example, Snapdeal introduced ‘Snapdeal Instant’, under which deliveries are made within an hour of order placement. The e-tailer also offers 90-minutes reverse pickups, card-on-delivery, four-hour delivery, et cetera.

 

“The ecommerce industry is likely to spend about USD 8bn on logistics and infrastructure by 2025”

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  1. Demand for implementation of technology:

Tracking vehicles helps in knowing the status of transit and the time required to reach destination. Such tracking is possible only through integration of IoT devices and applications. This is why Flipkart has partnered with Blackbuck, while Paytm tapped Loginext .

  1. Demand for secure packaging and warehousing:

No consumer would be satisfied with torn packaging or damaged goods. To ensure that items are delivered in proper condition, etailers need to channel their products along warehouses that can ensure durability of the packaging. A new model for logistics and packaging for perishables is urgently required. Recently, Amazon included 6 more warehouses to its supply chain. The etailer now has a total of 26 warehouses spanning 10 Indian states. Flipkart too owns 17 warehouses totalling to 5.5mn cubic feet.

  1. Demand for smooth transportation:

Transportation is what determines the time taken for delivery of products. Poor road conditions, inaccessible areas, and very low usage of air cargo are some of the major obstacles seen in ecommerce logistics. However, government initiatives to improve infrastructure are likely to solve these problems soon.

It is very clear that the ecommerce industry is highly dependent on logistics for its growth. But there is a need to explore more ways and models to establish pan India operations. Also, potential partnerships among logistics players might help reduce delivery loads and transit cost.