Opportunities for 3PLs in E-Commerce 2.0 battle ground

E Commerce Industry in India is increasing with around 18% in 2020 and will grow by 33% in 2021 and 28% in 2022. By 2024 it will be of US$ 98B from US$38B in 2018. Launch of Flipkart Quick, and investment of $1.2B by Walmart in Flipkart, Amazon’s funneling of $1B and recent move by reliance “New Commerce” and investments and integration of Facebook and WhatsApp with Reliance promising to empowering local Mom and Pop stores and preparations of existing player such as Bigbasket and Grofers and Super Daily will create E-commerce market into an interesting battleground where supply chains of all these ambitious organizations will fight for dominance and market acquisition.

Sudden surge in online orders since Covid-19 Pandemic has shown promising market for perishables which were earlier seen as cash burning segments. Now E-Commerce Industry will also see a shift towards Grocery, Dairy, Meat and Fruite and vegetables. Pre-covid market was already dominated by Big Basket and Grofers in B2C and Udaan, ShopX and others in B2B.

 In India e-commerce logistics has three types of players. First is captive logistics arms of E-Commerce companies such as E-Kart, Future Supply Chain and Vulcan , Second is Traditional logistics services providers and E-Commerce centric third parties such as E-Com Express, XpressBeez and Stellar Value Chain. 

All three complement each other in covering more than 25000 Pincodes out of 100,000 Pincodes in India. 3PLs will have to face several issues and same mantra for all segments will not work. In order to better prepare for upcoming challenges 3PLs will have to device new ways to reduce cost and have to come up with innovative yet frugal ideas. Major shifts have been following.

Shift in Product category: As of now high value density products such as Mobile Phone, apparel, Gift items, kitchen items and other such products are sold mostly, however scene is changing rapidly. E commerce for grocery was US $2 Billion in 2019 and will be $29 Billions by 2024. By 2025, 38% population will live in cities , increasing demand for food commodities in Urban India. However, production centers are in remote villages, where farms are located. Strategic sourcing of those products and managing first mile, storing and delivering will require rigor on two fronts. First will be cost and second will be maintaining SLA( Service Level Agreement). Per capita income has increased from $1350 in 2010 to $ 2150 in 2019,and is showing positive correlation with consumption of Protein and nutrient rich food . Demand for meat will increase by 6.5% and Fruits and vegetables by 8% every year till 2024. On the other hand consumption of grains and cereals will be a function of increase in population.

Shift in complexity: Influx in orders of Meat, Dairy and F&V on e-commerce will bring complexity in supply chain by introducing challenges such has high perishability, quality degradation in supply chain and low shelf life. Navigating through customer complaint will not be easy as it is in case of electronics or apparel where effect of time span till reverse logistics will be negligible . Having lean solution for maintaining temperature of meat in last mile to use of refer storage for Dairy products and irradiation and vegetable specific requirements will demand huge capital investment in infra structure and operating expenses. Availability of all these products in each and every nook and corner at open rates will keep a cap on prices. This will push companies to rethink about their long term plans and sustainability of existing models.

Shift in Demand centers: According to a study by KPMG, demand will shift from Metro and Tier I cities to Tier II cities from 38% in 2017 to 50% in 2022. Two key drivers for this increase are penetration of smart phones and affordable data plans by reliance Jio and awareness about availability of cash on delivery options. Easy returns by Flipkart and Amazon has cleared off all the worries of losing money if product is not as desired. 

Sources: KPMG Report on E -Commerce 2018, McKinsey report on Agriculture Value Chain 2019. Department of Commerce of Industry, Govt. of India website