Paving the Last Mile
India's top online retailers are
bringing all their attention to ensure that products sold on their portals
reach customers on time and in good shape
Online retailers are waking up to
the fact that getting logistics right is the key to succeeding in India.
While they can do little about the
potholed roads and local government restrictions, the ventures are investing
and innovating in areas that they can make a difference in. With most of the
growth coming from beyond tier one cities, this has become all the more
important. Also, if the $2.3 billion (`13,700 crore) sector is to grow to the
projected $38 billion (`2.28 lakh crore) in five years, it is vital for
online retailers to get their logistics issues sorted out quickly.
“One of the issues many ecommerce
companies face is that in order to sustain a significant growth momentum,
they need to go beyond tierI markets...For that, the delivery network has to
significantly expand without compromising on the customer service levels and
expectations,“ said Manish Saigal, managing director at advisory firm Alvarez
& Marsal.
Setting up a distributed chain of
warehouses, using technology to determine where to expand to and training
delivery staff to handle more customer service responsibilities are just some
of the steps these firms have taken.
Take online marketplace Snapdeal,
for instance. The company completely relies on thirdparty logistics firms for
picking up products from its 30,000 sellers scattered across the country.
However, there was a problem.
“All courier companies will pick
up from one location and ship to multiple locations. But not all will pick up
from multiple locations,“ said Kunal Bahl, CEO of Delhi-based Snapdeal, which
is targeting sales of $1 billion (`5,990 crore) this fiscal.
The firm began setting up
fulfilment centres, or warehouses, across the country a few months ago. In
May, it launched Snapdeal Plus under which sellers can stock their products
for an additional fee at the 40 fulfilment centres in 15 cities. This service
allows the company to reduce shipping time to almost two hours in many
centres.
This is a model that Amazon.in has
followed since its launch in India a year ago. “Our fulfilment centres play a
pivotal role in our distribution network,“ said Amit Agarwal, vice president
and country manager at Amazon India.
Apart from the main warehouses at
Mumbai and Bangalore, Amazon also has a network of about 20 delivery centres
in these cities and in Delhi and Chennai to ensure speedy deliveries.
Flipkart too is following suit.
The company, which is rapidly scaling up its next-day delivery promise to 50
cities and offers same-day delivery in 10 cities, has seven warehouses and is
increasing that count.
Also, its in-house logistics arm
eKart allowed it to quickly provide value-added services like next-day
delivery and the recently launched scheduled delivery.
“Having eKart is an advantage. We
have the agility to roll out these services. But now some of the third-party
firms have reached the same level and we will start using them for these
services soon,“ said Rahul Chari, vice president of supply chain engineering
at Flipkart that crossed $1 billion (`5,990 crore) in sales last fiscal.
The courier companies have also
spotted the opportunity. “Most courier and express delivery companies have
set up ecommerce fulfillment divisions and are changing processes and IT to
respond to the changing needs of the online retailers,“ said Alvarez &
Marsal's Saigal.
E-tailers and logistics firms are
working closely to plan expansion of capacity and pincode reach according to
the demand forecasting done by the former.
“We are integrating our systems
with that of logistics partners so we can deal with issues like offloads and
sudden weather disturbances in real time and communicate delays to customers
immediately,“ said Flipkart's Chari.
For most e-tailers the delivery
boy is doubling up as a customer service executive increasing their reliance
on logistics partners who employ them. While delivery boys were already
taking care of cash-on-delivery and returns, companies now want them to do
more. Flipkart's Chari said the firm wants to expand their productexchange
facility where the delivery boy carries the exchange product when picking up
the product the customer is returning and instantly verifying the value of
the product through techenabled mobile devices.
While the firm's delivery team
handles installation of large items like refrigerators, it wants the teams to
start using their hand-held devices to answer further customer queries or
even connect them to the call centre.
The entry of specialist service
providers like Delhivery and Ecom Express has helped firms experiment with
niche customer service initiatives. “We want to offer all the value-added
services that our clients want,“ said TA Krishnan, chief executive of
one-year-old Ecomm Express, which operates in 60 cities and intends to expand
to 700 locations in two years. Delhivery, which also provides value-added
services and even fulfilment centres for stocking products, is targeting
revenue of `144 crore this fiscal.
For offering such value-added
services, logistics firms are investing in manpower. “We are constantly
training our manpower to be skilled in IT as well as techniques for delivery
optimisation in a short period of time,“ said Sanjiv Kathuria CEO of DTDC's
logistics arm DotZot. Ecommerce accounts for 7% of DTDC's business.
While logistics firms take care of
transport, the almost complete dependence on commercial airlines is worrying.
Snapdeal moves 95% of its orders by air.
“Cost (of air shipment) is much
higher compared to surface movement and capacity is a concern as the
ecommerce volumes grow,“ said Saigal. Companies are talking to airlines to
operate cargo-only flights in the night, said a person who works for a
logistics provider. For larger items, like air-conditioners and refrigerators
that do not need to be delivered in a day firms are increasingly using road
and rail transport.
To ease both transport and
last-mile issues especially to remote corners of the country, e-tailers are
hoping the government run India Post, which has a network covering all
pincodes in the country, will step in. Already Flipkart, Snapdeal and Amazon
have partnered with India Post to some extent though none of the companies
wished to comment on how well the partnership is working.
“I think if the government and
India Post takes ecommerce very seriously that could help us a lot,“ said
Snapdeal's Bahl. “It is very hard for a private player to match up to the
strengths and manpower that India Post has and replicate that network. I
think they are keen as well.“
Radhika P Nair and Aditi
Shrivastava ET140620
|
Wednesday, June 25, 2014
RETAIL / ONLINE SPECIAL.................... Paving the Last Mile
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