Dec, 2016      |     By Anil Kumar, Ujjwal Chaudhry

State of E-logistics in India

E-logistics industry grew moderately to ~650 Mn shipments in 2016


Anil Kumar

Anil Kumar

CEO

Ujjwal Chaudhry

Ujjwal Chaudhry

associate director

  • A comprehensive performance review of the E-commerce logistics sector
  • Assessed through a regularly tracked set of performance indicators

Introduction to Report

Five key dimensions for assessing sector performance

E-Logistics Sector Assessment Scorecard-CY 2016

E-logistics industry grew moderately to ~650 Mn shipments in 2016

Driven by a strong festive season, Q4'16 turned out to be a blessing for the Key Dimension industry mirroring the sentiments of e-tailing industry

Captive logistics became the dominant logistics partner in 2016; Reverse shipments continued to be an attractive market

Shipments Performance - Key takeaways

Clientele Diversification- E-logistics industry diversified further in CY16 in terms of type of shipments, end users as well as e-tailers

E-logistics industry saw a greater share of large and Tier 2+ shipments in 2016

E-logistics industry experienced diversification both in terms of end-users as well as number of e-tailers served

Clientele Diversification- Key takeaways

E-logistics players have invested a significant capital in improving its large supply chain

  • Dedicated warehouses for large appliances as well as delivery centres have been established to enhance large supply chain delivery performance and cost optimization

In future, Tier 2+ cities would provide biggest opportunity for e-logistics industry

  • Growing internet and smartphone penetration will drive a steady growth in eCommerce users from Tier 2+ cities by 2020
  • Ecommerce consumers are expected to rise from 46 Mn (2016) to 120 Mn by 2020; the increase coming primarily from Tier 2+ cities

Although hyperlocal shipments volume will have a considerable jump, its overall share to e-logistics is expected to remain stagnant

  • Increased internet penetration coupled with changing workforce demographics is expected to be prime driver of growth in this industry
  • 3PLs have a limited share (<10%) in this market as it is dominated by captive logistics arms

3PLs' dependence on big e-tailers have started to reduce Y-o-Y

  • 3PLs continue to get greater number of shipments from long tail clients which allows them to diversify their clientele
  • Diversified clientele also allows 3PLs to nullify increased cost pressure faced in case of consolidated client base

Pin code coverage increased across e-logistic companies especially among captive logistics and new age 3PLs

Delivery Excellence- Both delivery speed and compliance improved across the industry

Delivery speed improved at zonal and national level while it was stable for local shipments

Similarly, compliance levels increased at national level while it was stable at local and zonal levels

Delivery Excellence- Drivers of speed improvement

Increase in regional utilization

  • Both captive and 3PL companies are focusing on increasing regional utilization
  • Sellers are geotagged to reduce the distance and time travelled by a shipment

Focus on route optimization

  • In first mile, establishment of centralised pickup point to allow smoother transfer of shipments
  • Improvement in last mile connectivity through optimization of routes where a delivery executive can handle multiple orders

Extensive investment by logistics players to improve supply chain coverage

  • Logistics players have invested significantly to improve the supply chain network by establishing greater number of delivery hubs, sorting centres and warehouses across the country

Logistics players focused on improving their unit economics however overall revenues stagnated for 3PLs throughout the year

Logistics players achieved improvement in cost efficiency by undertaking a myriad of new initiatives

Increased regional utilization has optimized cost

  • E-tailers and in turn 3PLs are focusing on reducing the distance and time travelled by a shipment to improve cost efficiency
  • Regional utilization in the industry has reached ~50% implying roughly ~50% of shipments traversed intra-zonally

Increased use of automation to and supervisory best practices has improved efficiency and reduced manpower costs

  • Logistics companies focused on utilizing automation at first mile, loading/unloading of goods and sorting of shipments through conveyer belts and automatic sorters
  • Increased supervision to reduce absenteeism among workers along with fraudulent practices observed in first mile and last mile

Use of alternative modes of deliveries

  • Logistics players, both captive and 3PLs are utilizing the country's vast network of Kirana stores, medical shops to optimize last mile deliveries
  • New Age 3PLs such as Delhivery has tied up with local restaurants to utilize the latter's manpower to deliver goods

CY16- Summary

What went right for the sector

  • Diversification of handled shipments both in terms of shipment profile as well clientele allowed 3PLs to reduce their risk due to client consolidation
  • Increased focus on expanding pin code coverage was seen in the industry especially from captive logistics and new age 3PLs to be better prepared for changing consumer demographics
  • Delivery performance both in terms of speed as well as compliance stabilized over the year
  • Unit economics for the sector improved, driven by cost reductions by optimization of supply chain

What went wrong for the sector

  • Overall shipments growth did not meet the industry expectation, primarily due to slowdown experienced by e-tailing sector
  • Increased dependence on captives logistics by big e-tailers have reduced the potential market for 3PLs both in terms of revenue and shipment size

Player Assessment

  • eKart and ATS, which are captive arms of Flipkart and Amazon respectively, handled the highest numbers of shipments in the industry (~80% of the total shipments of Flipkart and Amazon)
  • Among new age 3PLs, Delhivery had a slight lead over Ecom Express in terms of shipments handled
  • Ecom Express has a competitive edge in terms of consumer shift towards Tier 2+ cities due to its larger reach, however Delhivery leads in terms of e-tailers served
  • Traditional 3PLs like Blue Dart and GATI have an edge in handling large shipments. Among new age 3PLs, Delhivery has a competitive edge over Ecom Express, the latter having no presence in large shipments
  • Traditional 3PLs have a wider network of pin code coverage serving close to 20,000 pin codes. New age 3PLs pin code coverage is around 7000, followed by captives who serve around 5000 pin codes
  • Among new age 3PLs, Ecom Express served ~11,000 pin codes significantly leading the nearest rival Delhivery which served close to 7,000 pin codes
  • List Item #3
  • Ekart was the best performing captive leading ATS by almost a day for zonal and national deliveries
  • Among new age 3PLs, Ecom Express was slightly faster than Delhivery in the above discussed lanes. Similarly, Blue Dart was faster than GATI across all the three lanes

E-logistics industry is expected to grow to 2500 Mn shipments by 2020 due to growth in e-tailing industry

Although captives will continue to dominate the market, 3PLs would service a sizeable e-logistics market

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