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How ecommerce revived logistics platforms in India

How ecommerce revived logistics platforms in India
Siddharth Agarwal, VP-corporate strategy and planning, Ecom Express (left) and Aneel Gambhir, CFO, Blue Dart  |  Photo Credit: Ecom Express and Bluedart
4 Jan, 2021

The domestic ecommerce industry clocked 2.5 billion shipments in 2019-20—the 12-month normal before India braced up for Covid-19 and the impending nationwide lockdown. To put that sector-statistic from consulting firm Redseer in perspective, Deutsche Post DHL Group’s Blue Dart Express handled 240 million shipments across industries in the same year.

But the post-lockdown period would see ecommerce catapult use-cases far and wide for players—both of Blue Dart’s vintage and rising ventures like Ecom Express. Demand on logistic platforms revived strongly last year, as technology applications helped companies expand to fast-growing and diverse needs, and overcome digital divides in their operations.

For instance, Blue Dart’s leadership expanded a contact less delivery feature, digitising processes from billing and collections to payment in the post-Covid period. Customers now had the option of choosing from 14 digital wallets, UPI interface (BHIM), Netbanking, credit and debit cards and QR code. 

“Our collections, which were 35%-40% digital pre-pandemic, took a sharp turn to becoming 100% digital during the pandemic and in the recovery period,” Aneel Gambhir, chief financial officer of Blue Dart, said in an email response to TechCircle.

The logistics company, headquartered in Mumbai, had seen revenue nearly halve during the first financial quarter of 2020-21: Rs 414 crore against Rs 786.6 crore a year before. They recovered on the back of the festive season to gross Rs 864.4 crore in the following quarter of the current fiscal. No prizes for guessing, but ecommerce contributed to the comeback.

“As a segment that was already popular prior to the lockdown, ecommerce became a strategic necessity for businesses and individuals during the lockdown and post unlock,” Gambhir said. “The pandemic has caused a shift in the buying behaviour and we saw a rise in sales from the ecommerce platform exponentially, especially from tier II and tier III regions.”

According to the Redseer-Shadowfax Logistics Index (RSLI) for Q2 FY2021, large horizontal platforms like Flipkart and Amazon clocked around 450 million shipments, which was fulfilled by a combination of their owned logistics arms and third-party logistics platforms like Ecom Express and Delhivery.

Logistics was also vital for hyperlocal (including food-tech and e-grocery) platforms, which grossed 250 million shipments in the September-ended quarter, according to RSLI. Emerging sectors like D2C (direct to customers) saw over 90% growth in shipment volume.

Changing horizons

The new breed of logistics companies like Gurugram-headquartered Ecom Express were back in business. It has had the capital backing of private equity investor Warburg Pincus.

Ecom Express’ recovery started from June onwards, when leading ecommerce marketplaces resumed operations at full capacity. April and May had been rock bottom for the company, which claims to deliver between half a million and 1 million shipments every day in normal conditions. The biggest challenge during the lockdown was to secure packages that were in transit, given that there was not much clarity over what was allowed and what was not.

“If you're working with the top marketplaces in India, that inventory is worth a lot of money,” says Siddharth Agarwal, vice president for corporate strategy and planning, Ecom Express. “We are responsible for safeguarding their shipments. So, the initial period went in safeguarding shipments, to ensure that if there are trucks in transit, they reach the closest hubs and delivery centres,” he explains.

Surprisingly, by June, the order volumes were almost on par with volumes recorded in February for ECom Express. “This was because people had been waiting for the marketplaces to open up and shop to live in the new normal,” Agarwal says. And by Diwali 2020, the volumes were 40-50% higher than the previous year’s Diwali, he says.

The festive season also saw tier-2 and tier-3 cities shop online with a bang. More than 48 million of festive shoppers were from tier-2 cities of the total 88 million shoppers, according to RSLI. It was double the number of shoppers from metro cities (23.8 million).

“Future growth of horizontals and verticals will be fueled by better reach in Tier 2+ cities,” says Rohit Gupta, vice-president for business development and strategy, Shadowfax, another third party logistics player. “The keys to success will be smart warehousing strategy, tech-based approach to cut shipment delays and excellent seller experience to win in product assortment.”

Blue Dart embraced digital transformation—a pivot “amplified by the pandemic,” says Gambhir, which will “fuel the logistics sector into a future that showcases full visibility, wide-scale automation, and predictability.”

Blue Dart has had two trademarked products for its clients since the early 2000s called ShopTrack and PackTrack. In the recent past, it redesigned the two products for any client to access it from anywhere. “Application programming interface (API) based solutions for our customers have been enhanced at detailed levels to ensure an automated and seamless supply chain, from pre-pick up till post-delivery (inclusive of collections),” Gambhir explains.

“So, we use technology-enabled mobility solutions for administering specialised pickups of product returns, which also include quality control checks, product image verification and close coordination for timely pickups.”

For Ecom Express, the pandemic accelerated their path to new segments from its usual hub-and-spoke model. About 95% of its business is from e-commerce.

“Hyperlocal is a point-to-point service. So, whether it's medicine delivery or grocery delivery, we were not in those businesses,” recalls Agarwal. “It was on our roadmap for this year, but not as early as Q1 of the current fiscal. At that time, we were very nimble from both sides.” But as the demand surge was huge, Ecom Express collaborated with leading e-grocers and pharmacies to launch hyper-local services.

Communication is vital, and Ecom Express had invested in tools ahead of time to support people who travel to different cities for sales. With 2,700 centres connected online, up to 30,000 staffers use its app on mobile phones for delivery. “Everyone is already digitally savvy,” Agarwal says.

While Ecom Express started testing work from home about 10 days before the lockdown, Bluedart scaled up an existing system. Blue Dart employees were earlier allowed to operate from home on a case-by-case basis. When the lockdown began, it shifted to a WFH set up. “India had the benefit of having its first case of the Coronavirus a little later than the likes of Europe and other continents,” Gambhir says. “This gave us some leeway to ensure that our IT systems were in place to handle the change when it did happen.”

Blue Dart has also developed Cosmat IITM indigenously, which includes an advanced state-of-the-art track and trace system for all consignments. Consignments are scanned from pick up to every transit point till delivery, using bar coding and laser scanner technology, transmitting updates automatically to the Oracle database.

After the lockdowns, its exposure to e-commerce expanded to all major companies that account for 70% of online retail business in the country. “The pandemic only fuelled this trend, with migration to work from home and travel restrictions imposed,” Gambhir recalls. “The ability to order an essential/non-essential item online and have it delivered to your doorstep became necessary.”