Logistics Sector – Delivering the change in e-commerce

Product-based eCommerce started gaining momentum in India about five years ago largely driven by demand from metros cities. With an already established supply chain network in place, it was faster and easier to deliver across metros and Tier 1 cities. However, for the eCommerce industry to grow, deeper penetration across the country was key, and traditional logistics companies were not geared to serve the unique demands of this new-age industry. This is where new-age logistics players have been able to fill the void while traditional players have had to overhaul their systems to be able to serve eCommerce platforms.

With increasing internet access, the number of shoppers from tier 2+ cities has grown to half of the annual online shoppers. And both e-tailers and logistics firms are constantly innovating on their delivery models and infrastructure to serve customers in every segment and product category. Shadowfax too has evolved over the years to meet the demands of the market. We started with food and grocery deliveries and within a span of five years grew to include eCommerce and B2B logistics. Today, we are a full stack third-party logistics player servicing nine categories in various capacities.

eCommerce Growth in India

As eCommerce evolved in India, a multitude of specialized platforms forayed the space to cater to customer needs across product categories. They broadly fall under six sectors which include Horizontals (platforms offering products across categories), Verticals (a category focused platform), direct-to-consumer (D2C) platforms, Omni-channel, hyperlocal (food & grocery), and eB2B. While each sector is at a different level of maturity and their ability to serve customers across city tiers varies, the eCommerce industry as a whole has tremendous potential for growth.

According to the RedSeer Shadowfax Logistics Index that we launched recently in partnership with RedSeer Management Consulting, eCommerce shipment volume is estimated to grow 4x in the next 5 years from more than 2.5 billion shipments in FY2020. And one of the key enablers for this growth in the market is the supply chain infrastructure built by eCommerce captive logistics players and third-party new-age logistics players (3PL).

Logistics Perspective of eCommerce

eCommerce in India is still evolving, which means that there are different levels of supply chain maturity across sectors while accessing customers in smaller cities and driving customer delight. On the other hand, the emergence of new-age third-party logistics (3PL) players has made it easy for platforms to fulfill orders across India. These 3PLs are as niche as hyperlocal-focused to completely diversified supply chain service providers, like Shadowfax, offering hyperlocal, warehousing, and eB2B logistics services.

While it is obvious that logistical performance underpins eCommerce success, the impact that logistics has on this sector can only be fulfilled through a macro view of the eCommerce industry from a logistics perspective. This makes the RedSeer Shadowfax Logistics Index (RSLI) a one-of-its-kind industry report which provides a nuanced understanding of the key success levers for eCommerce logistics and how it varies across various eCommerce sectors.

The quarterly report is a comprehensive logistical assessment of 4 e-tailers across six retail sectors along four pillars:

• Growth and Scale: Measure of shipment volume & growth in the quarter
• Speed and Cost Efficiency: Measures the total reach & cost efficiency for forward and reverse logistics
• Customer Experience: Assesses the seller partner experience in forward and reverse logistics
• Merchant Experience: Measures the overall customer satisfaction through the various stages of the delivery process

Emerging Trends and Insights

The RedSeer Shadowfax Logistics Index brought out many interesting insights and trends across eCommerce sectors. Also, the fact that Q2 FY21 was showing recovery after the lockdown combined with festive season sales resulted in an uptick in sales for many e-tailers.

• eCommerce horizontals dominated in growth during the quarter. The sector saw 100%+ growth due to COVID recovery along with superior customer & merchant experience and pent-up demand. Meesho led the sector in shipment volume growth during the quarter.
• Omnichannel retailers dominated in speed and cost efficiency due to their low cost of fulfillment. Hyperlocal brands and vertical platforms had high costs of fulfillment. Croma led the Omnichannel sector in speed and cost-efficiency.
• Horizontal and vertical sectors led in customer experience across logistics parameters reflecting in their higher NPS. eB2B lagged in customer experience due to lower customer satisfaction on ease of shipment returns and lower NPS3. Nykaa, a Beauty and personal care-focused vertical platform, is the cross-industry leader on NPS
• eB2B platforms have high merchant satisfaction as they have enabled significant reach for the merchants, resulting in higher NPS.

In many ways, logistics is emerging as an indicator of the economic recovery and fiscal wellbeing of India. As the eCommerce industry grows, speed of delivery and criticality at the doorstep is going to be the two major factors playing heavily into the customer’s decision making, platform stickiness, and enhanced customer experience.

For a complete view of eCommerce logistics, download the RedSeer Shadowfax Logistics Index