Logistics Industry role in E-Commerce

Logistics Industry role in E-Commerce:

Each time you buy something from the who's who of e-commerce in India, you set into motion another parallel marketplace in the virtual world. It's a marketplace where logistics companies—big and small, new and old, countrywide and regional—bid for the business to ship your purchase to your doorstep. A software, whose nerve centre is an algorithm, powers it, and it is reshaping the logistics business and is providing new legs to a flagging sector. 

There are 25,000 pin codes that government-owned India Post goes to or the 10,000 pin codes that DTDC, a large private sector player, services. A New firm like Ecom can dare to venture into this business; a good reason is the time and place: e-commerce logistics is a Rs 600 crore segment, growing at 50% a year, and the logistics marketplace is an egalitarian platform that rewards competitiveness and performance. Say, a buyer in Guwahati buys an iPhone 5C from a seller in Nagpur on SNAP DEAL an e-commerce site that uses such an algorithm to hand out logistics business. The moment the order is placed, the algorithm on SnapDeal's logistics marketplace—SafeShip— starts whirring and selects the one company that is best placed to deliver from the 14 registered with it. That choice is

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 made on the basis of data fed into SafeShip by each of those 14 players: which pin codes will they service, how much will they charge for each pin code and how much time will they take to deliver? For every order, SafeShip automatically selects—without any manual intervention—the company that services both pin codes (buyer and seller), at the least cost and shortest delivery time.

B2B & B2C Businesses:

"Traditional courier companies have grown in a B2B (businessto-business) era and don't have experience in B2C (business-to-consumer), as is the case in e-tailing." Much of the business for traditional logistics companies comes from institutional players. This can be, broadly speaking, broken into two: moving documents (for example, a bank sending papers to another branch) and moving goods (for example, an auto component company moving fenders to an car manufacturer). Thus, they are dealing with companies and fewer locations. 

Shift from relations to Performance:

 

E-commerce, by comparison, requires servicing more sellers (eBay India has 45,000 retailers), more locations and more consumers. "Old models, based on relationships, don't work online as you get business based on performance, consistency, service and price,"

 

Ecom Express is not the only new company to go up against global players like DHL and FedEx, and established domestic names like DTDC and ATS Global. Since 2008, at least five new companies have sprung up, all of them with a focus on e-tailing. 

Even some of the traditional players are reorienting themselves to the emerging opportunity in the e-commerce space. For example, DTDC is one of the larger players, with revenues of Rs550 crore in 2012-13. This April, DTDC launched a new company, DotZot, to focus on online sales. This year,DotZot

 

 expects to do business worth Rs20 crore and is aiming for Rs100 crore in the next two years.

 

 

Democratic And Competitive 

Despite the many unique demands of e-tailing logistics, players cannot ignore this segment. According to the Express Industry Council of India

 

, a logistics industry body, e-tailing accounts for less than 10% of the revenues of the logistics sector, but it is growing at 50% a year, against 12-14% for the overall sector. 

For a sector industry whose main business line—shipping documents—is under assault from the electronic revolution and a tight economy, e-tailing is a saviour. "Online marketplaces have given a fresh lease of life to courier companies and have, in fact, led to start-ups eyeing the business growing at about 75-100% a year,"

 

A logistics marketplace is emerging as the template of choice for e-commerce players for logistics. Besides being democratic, it incentivises courier companies to offer lower prices and do faster deliveries.

"It's a democratic process where you get business based on your efficiency,". Size and reach still matter as, harnessed well, they feed into that efficiency, which can work to the advantage of larger, established players.

 

"The more pin codes you can reach, the better in the business"

 

Thanks & Regards,

V Phani Kartheek

12DM-154