The e-commerce retail market in India is expected to deliver around 15 mn daily shipments — which is valued to touch around $145 bn by FY26. The development will add to the Indian e-commerce retail logistics market, which is also projected to grow at 24 percent CAGR to $6.3 bn in FY26, an increase from $2.2 bn in FY21.
The e-commerce space has seen high demand and supply-side changes partly due to the increase in online purchases as a result of the COVID-19 pandemic. Tier-2 and below cities are seeing high growth in shipment by volume, comprising 46 percent of shipments in CY20 from 25 percent in CY15, thus leading to e-tailers requiring logistics partners that can provide reach and scale, according to the ‘India E-commerce Report June 2022’, released by business research service firm PGA Labs.
Also, more than 60 percent of the e-commerce logistics market is outsourced, which provides headroom to specialised logistics service providers (LSPs) and consolidators. The spread of D2C (direct to consumers) brands and social commerce will be the main factors that will drive growth.
Operational efficiency has greatly increased because of automation, artificial intelligence, machine learning, data analytics, and the Internet of Things (IoT). Moreover, reducing the cost of technologies such as cloud computing, GPS trackers, and IoT sensors is also allowing small scale logistics companies to modernise their systems, as per the report.
Higher use of digital payments has resulted in a decrease in the cash handling requirements of LSPs. This has also caused a reduction in Cash on Delivery (CoD) transactions, which is viewed as a challenge for logistics providers. However, infrastructural inefficiencies, high return rate, and COD orders are some of the main challenges faced by LSPs when lowering the overall e-commerce retail logistics cost in India.
The Indian logistics market can become more efficient with dedicated freight corridors, free trade warehousing zones, logistics parks, and container freight stations. Government initiatives such as the National Infrastructure Pipeline, Sagarmala, and the new National Monetisation Pipeline are expected to drive the logistics market and help last-mile delivery capabilities in India. Moreover, the National Highways Development Project aims to extend India’s current expressway network of 2,000 km by adding 18,637 km of greenfield expressways by 2022, while the Bharatmala project involves constructing 83,677 km of highways by 2024.
