Outlook of Growth Potential of Indian E-Commerce Logistics

India’s interest and curiosity in the e-commerce retail logistics is on a rise. The e-commerce retail market is among India’s fastest-growing markets and is expected to grow at a CAGR of 52 per cent to touch USD36.7 billion by 2020. E-commerce retail companies continuously work to introduce innovative business models and technology-driven approaches. Convenient payment options, customer-friendly policies, speedy deliveries and easy returns drive customers to online channels. . The industry has been witnessing a rapid scale-up in service orientation and complexity with an ever-increasing emphasis on service levels, increased penetration in tier-II and tier-III cities, surged Cash on Delivery (COD) services, geographic penetration and supply chain security requirements. Logistics is thus a key enabler for growth of the e-commerce retail sector and is increasingly emerging as a differentiator in terms of customer service and satisfaction.

Logistics Industry in India: India’s logistics and warehousing industry’s revenue is expected to grow at a CAGR of 10.7% during 2015-2019. India ranks 53rd across 115 countries with an efficient record of logistics system score of 3.08 out of 5, showing a lot of poise to grow in the coming five years. 3PL, e-commerce logistics and cold chain are the 3 biggest segments in the logistics and warehousing industry in India based on future growth rates.

E-commerce industry in India: The e-commerce market in India was estimated at USD17.6 billion in 2014, and is expected to grow at a CAGR of 40 per cent to touch USD136 billion by 2020. At USD3 billion, e-commerce retailing is the second largest and fastest growing segment.

E-commerce retailing in India: The e-commerce retail market is among India’s exciting and fastest growing markets. It is poised to be worth USD36.7 billion by 2020, from USD3 billion in 2014, growing at a CAGR of approximately 52 per cent. At present, the e-commerce retailing industry is witnessing approximately 1 to 1.2 million transactions per day, led by categories including apparel (approximately 43 per cent), electronics (approximately 24 per cent), and books (approximately 22 per cent).

Ecommerce retail supply chain.PNG

Outlook:

1.       The sustained growth of over 50 per cent in the Indian e-commerce retail sector underlines the need for ‘efficient and sustainable logistics operations’ for various sizes of e-commerce retailers in India.

2.       The increasing penetration of e-commerce is likely to alter the way e-commerce logistics functions in India.

3.       The growth in e-commerce in coming times shall be driven by rural and tier II III cites. These cities are expected to account for approximately 55 per cent of the orders.

4.       Technology and logistics are key to the success of e-commerce businesses. Unlike other sectors where logistics is a support function, logistics here enables growth in e-commerce retail with respect to strategy and execution.

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P.S.: This article was written with reference from an article published by KPMG, which can be read here: https://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/E-commerce-retail-logistics-in-India.pdf

 

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