India’s retail landscape is shifting from a brand-deficient market to a thriving branded economy. In our last article, Transforming Retail & Logistics Needs in India | Redseer, we discussed how branded retail is projected to surpass $1 trillion in scale within the next decade. In this article, we shall focus on the second part and discuss logistics providers — particularly third-party logistics (3PL) players — who are emerging as critical enablers of this branded or retail revolution.
The logistics complexity increases as brands scale to meet the growing demand for quick commerce, same-day delivery, and further penetration into Tier 2+ cities. Our report “New-Age Logistics x Brands: Crafting Success in a Complex Distribution World” by Mrigank Gutgutia and the team outlines how brands need to work towards solving the complex distribution challenges. The report explores how 3PLs work towards solving these hurdles, the growth drivers for 3PL providers, including expanding consumer needs and actionable strategies for brands to select the right 3PL partners.
In today’s intricate distribution landscape, delivery timeliness has emerged as the most critical factor for brands when selecting logistics partners. Over the past seven years, delivery timelines in India have been reduced by 65%, aligning with global trends. Brands now operate in an environment where meeting delivery commitments is essential to maintaining trust and ensuring customer satisfaction.
Our primary research on the logistics outlook of new-age brands revealed that achieving delivery timelines is the top priority for brands’ decisions when selecting logistics partners, followed by shipment protection, speed, and other factors like geographical coverage pricing, and payment. While speed is also important, reliability in adhering to committed timelines remains paramount for brands aiming to thrive in this complex distribution ecosystem.
The Rising Expense of Logistics
The growing footprint of branded and online retail in India is driving a substantial rise in logistics costs, projected to reach $50 billion annually by FY29, nearly double the $30 billion spent in FY24. This growth reflects the increasing scale and complexity of the distribution landscape as brands strive to meet consumer expectations for faster and more reliable deliveries.
Managing Complex Distribution Networks with 3PLs
While we have been talking about the complex distribution landscape for some time, let’s understand that from the perspective of an emerging new-age brand. Today’s brands supply their products to retail outlets, regional distributors, modern trade retailers, brand.com, e-commerce warehouses, and quick-commerce warehouses. This creates several operational challenges:
- Extensive Network Requirements: Brands often distribute to over 100 warehouses, demanding complex logistics orchestration.
- Fluctuating Demand: Varying channel requirements necessitate diverse timelines and fleet expectations.
- Partial Loads: Low demand volumes in certain channels lead to inefficiencies, such as partial truckloads and low fill rates, impacting margins.
- Replenishment Slots: Securing inventory slots in channel partners’ warehouses, especially for marketplaces, is challenging.
- Operational Complexity: Managing diverse warehouse operations adds layers of logistical difficulty.
- Returns Management: Unplanned and opaque return processes strain brands’ resources and timelines.
Why 3PLs are critical
3PL partnerships help brands address these above challenges. They ensure seamless operations on the logistical end while allowing the brand to focus on its core growth strategies.
The diversification of product categories is increasing the demand for specialized services such as reverse logistics, handling bulky items, and enabling same-day deliveries. These dynamics present an opportunity for 3PL providers to innovate, expand their offerings, and solidify their position as an indispensable part of India’s growing retail market.
Challenges faced by brands when dealing with 3PL Providers
Despite their critical role, brands face complexities around managing their 3PL relationships, based on interviews from 30 New-age brands, who have highlighted the challenges that hinder optimal service delivery:
- Delivery Time: SLA breaches undermine reliability
- Return Processing: Delayed return-to-origin (RTO) timelines impact efficiency
- Reach: Slower deliveries in Tier 2+ cities and beyond remain a bottleneck
- Shipment Protection: Insufficient manpower for handling heavy shipments compromises quality and customer satisfaction
To address these issues, brands need to work with the right 3PL providers and effectively manage the relationships.
Challenges by Category
The challenges faced by 3PLs differ across categories, with high return rates and RTO issues prevalent in fashion, electronics, and food, at the same time, shipment protection is a key concern for home and general merchandise. Brands need to focus on achieving the right reach at the optimal cost and speed, ensuring product availability and fast delivery across preferred channels while regularly evaluating 3PL performance.
Brands should focus on the channels their customers prefer for discovery and purchase, ensuring a strong presence and consistent experience across all touchpoints and geographies. They must ensure product availability and fast delivery through both internal systems and 3PL partnerships. Regularly evaluating 3PL performance on key metrics like timeliness, pricing, and reach is essential to optimize logistics and customer satisfaction.
Strategic Selection of 3PL Partners for Success
Selecting the right 3PL partner is a critical decision for brands. To succeed, they should evaluate potential 3PL partners across three key parameters:
- Comprehensive Offering Set: A robust and integrated service portfolio is essential. This includes express parcel services (forward and reverse), unbundled offerings like warehousing and shipping, hyperlocal fulfillment capabilities, and advanced tech integration for seamless operations.
- Extensive Reach Across Tier 2+ Cities: 3PL partners must ensure pan-India coverage, strict SLA compliance, and cost-efficient operations in underserved regions.
- Consistently Superior Experience: Redseer’s extensive research on brand experiences with 3PLs highlights the importance of choosing partners with a proven track record in various parameters like SLA compliance, customer satisfaction, and reliability. Our analysis, backed by peer evaluations and performance benchmarks, provides insights to guide brands in making the best decisions for logistics partnerships.
At Redseer Strategy Consultants, we focus on enabling we focus on enabling and empowering brands to make the right decisions focusing on their growth. Our data-driven insights empower companies to adapt to emerging consumer demands, optimize their logistics strategies, and expand seamlessly across new digital channels. As new-age brands compete to achieve growth in various sectors through complex omnichannel strategies, partnering with the right logistics providers becomes crucial.
Connect with us for tailored strategies that align with your goals. Together, let’s navigate the opportunities in this sector. Reach out to us now!
