Online retail pushing growth of “last mile logistics”

Perception of Indian retail has changed in recent times. This is due to tremendous growth seen in e-retail where domestic e-retailers like Flipkart, Snapdeal etc. have expanded their operations in a big way, which pushes the traditional retailers to launch online portals to supplement their existing business. Not only this, even a few large bricks & mortar retail players have spent heavily on their online retailing campaigns. The number of total mobile connection user base has increased to over 943.97 million, the second largest in the world, out of which over 265 million internet users are exploring these e-retail platforms in order to shop online. This brings the concept of fast delivery or the same day delivery which is directly pushing the e-retail giants to have a larger warehouse facility in order to fulfill these requirements. Currently with the rapid increase in online sales in India, the current warehouse management and supply chain is unable to fulfill these massive orders, resulting in delay in delivery to a week or even more than that depending upon the location and the availability.

Looking at the growing opportunity, few global players like Amazon, ebay etc. have entered the Indian markets and started occupying large warehouse spaces in order to share the pie of the e-retail business. But these well-established global companies are still not able to serve the Indian customers with faster free delivery. Same day or next day deliveries is a distant dream right now due to inadequate road networks and inefficient supply chain management. The ‘last mile connectivity’ is the big hurdle. Currently, most of the players are using courier services to deliver goods purchased from Flipkart, Snapdeal, and Amazon India. These couriers use motor cycle or scooters to carry giant backpacks filled with deliverable things. As of today, without the use of couriers to deliver these goods, the e-commerce market may not sustain for even a short term. Mature players like Amazon and ebay are trying to adopt Click & Collect which is the fastest growing multi-channel retail format internationally as it provides a simple solution to the “last mile” problem.  However, Click & Collect also has logistical challenges for pure play retailers as they do not have a store network from which to offer collection. Amazon has recently tied with BPCL petrol pumps for collection points. 

Going further, these ambitious demands of millions of consumers will certainly boost the logistics and warehousing industry in near future, where logistics (Supply Chain) will need to push from 2PL to 3PL and further to 4PL and modern automated warehouses which will ensure the key factors like Just-in-time, logistic automation etc. with which the problems like lag in delivery time could be resolved.


About the author

Surabhi Arora, leads the research team in India and has more than 13 years of experience in carrying out multi-disciplinary research and analysis in the area of finance and real estate industry. Surabhi specialises in real estate economics, policies, commercial and residential real estate research with in-depth knowledge of market dynamics across major markets in India.

 



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