From Click to Doorstep: Is India’s E- commerce Logistics market on the verge of an Explosive Breakthrough?
india-e-commerce-logistics-market
June 21, 2023
In India, the logistics sector is going through a transformation that is being fueled by a number of significant factors. Some major trends are expected to influence logistics in India in the coming years as well, including changes in consumer behavior, infrastructure improvements, and technological breakthroughs. In this insight, we will take a deep dive into these growth drivers and how they are going to shape the future of the E-commerce Logistics Industry in India.
1. India, with an over 1.4 Bn population, grew at 4.2% in FY’2020 in GDP...
India
- Population: 1.3 Bn (2020)
- A1 Cities population6: ~100 Mn (2020)
- Household: ~248.8 Mn
- Demographics1:
- ~28.6% (0-14 yrs)
- ~63.6% (15-64 yrs)
- ~5.3% (65 & above)
- The Standard of Living in India varies from state to state. In 2019, the poverty line reduced to ~2.7%. The middle class population constitutes 300–350 Mn2 people.
- Wealth share: Top ~130 Mn people in India constitute 77% of wealth share
- Life Expectancy: 69.7 years (2020)2
- Average Per Capita income3: INR 72,805 in FY15 to INR 94,954 in FY19
- Area: 3,286,927 km2
- North to South: 3,214 km
- East to West: 2,933 km
- Density: 419.80/km sq
- India is a federal union comprising 28 states and 8 union territories, for a total of 36 entities.
- Richest States (2018)5: Maharashtra (GDP INR 27.96 lakh crore), Tamil Nadu (GDP INR 17.25 lakh crore), Karnataka (GDP INR 15.88 lakh crore), Uttar Pradesh (GDP INR 15.80 lakh crore), Gujarat(GDP INR 14.96 lakh crore).
- Top States by GSDP7 per capita (2018)5: Goa (~INR 376K), Sikkim (~INR 283 K), Haryana (~INR 188K), Karnataka (~INR 166K), Kerala (~INR 161K).
- Railways: 1,23,236 km with 13,523 passenger trains and 9,146 freight trains.
- Road Network: Over 5,897,671 km (3,664,643 mi).
- National Highways: 131,326 km
- State Highway: 175,036 km
- Rural Roads: 4,166,916 km
- Urban Roads: 526,483 km
- Aviation Network: 486 total airports, airstrips, flying schools and military bases.
Source: 1. National Family Health Survey (2015-16) 2. BBC 3: Financial Express 4. World Bank 5. Ministry of Statistics and Programme Implementation 6. A1 Cities: Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad 7. Gross State Domestic Product at Constant Prices
1.1 ...and witnessed a large increase in Online Shoppers with ~160 Mn people in 2020...
Number of Internet users in India grew with a CAGR of 18.2% in 2015-20201
Number of Online Shoppers in India are growing at a rapid rate in the country1
Smartphone Users ~700 Mn
In 2020, India has close to 700 Mn Smartphone users. This number is projected to grow to ~760 Mn in 2021 owing to cheap data plans and better online infrastructure.
E-commerce Sites 12-24 Mn
There are an estimated 12 Mn-24 Mn ecommerce sites across the entire globe however less than 1 Mn of these sites sell more than $1,000/year
E-commerce Retail Share ~4-5%
The share of Indian e-commerce is expected to grow from the current 4% of the country’s overall food and grocery, fashion, consumer electronics retail trade to 8% by 2025
E-commerce Apps per phone ~10-15
An average Indian has 10-15 Ecommerce applications on his/her phone. These include major horizontal platforms like Amazon, Flip kart and a mix of vertical platforms for Fashion, Electronics and more.
Time spent on E-commerce sites 50-80 Min
An average Indian spends around 30-60 Min on E-commerce Applications per day for buying Grocery, Apparels, Electronics and more.
Source: 1.Statista
Industry articles & Ken Research Analysis
1.2 ...owing to the Growth Strategies Followed by E-commerce Retail Companies...
EMI
E-commerce companies are collaborating with the financing companies such as Zestmoney, Cash care technology which lets consumer to pay in 3-12 months for products which have ticket size more than 5000. Financing influences buying decision of 83% e-buyers1
Funding
E-commerce companies are investing huge amounts to improve their operational process. Flipkart invested INR 290 Cr (USD 60 Million)2 in Shadowfax to spruce up its last mile delivery capacity which is sustainable enough to capitalize the surging.
Experience Store
Niche e-commerce players which are involved in high valued products have started following omni –channel strategy to increase their growth.3 Pepperfry has invested USD 12 Million (2019) to set 100 experience stores in order to give a touch and feel of products.
Penetration In Tier 2 and Below cities
E-commerce firms are expanding to Tier 2 cities as operating costs are 30%-50% lower there. Better internet connection with almost free bandwidth , vernacular language enabled by e-commerce, easy payments such as scan and pay are contributing factors to the growth.
Tech Advanced Logistics
E-commerce companies are collaborating with new-age logistics partners who are using technology such as AI and ML leading to reduction of RTO rates and increased reach to the customers.
No Question Return Policy
E-commerce platforms are introducing customer friendly policies such as easy returns and refund policies. Acc to stats, 96% of the buyers shop with a retailer on the basis of easy returns and refund policy.
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Try and Buy
Try and Buy is another policy adopted by E-commerce firms. This strategy provides competitive advantage to niche e-commerce players such as Lenskart and Blue Stone. Return rate are reduced to half of the regular rates.
Discounts
Several E-commerce Companies are offering regular deals and discounts to attract more customers. Acc to stats, Deals and Discount offers increases the business of E- Commerce players by more than 40% in festive seasons.5
Source: 1. Hitachi Capital Consumer Finance 3. Economic Times 5.Money Control 2. Company Website 4. Economic Times 6. Ken Research Analysis
1.3 ...and State Initiatives and Policies that have led to E-commerce and Logistics growth in India
Punjab
- Government signed MoU with e-commerce giants to boost e-commerce by empowering retailers:
- Amazon: enable B2B linkages of MSMEs with key international markets including US, Canada and Europe
- Flipkart: enable access of MSMEs with domestic markets
- Interest Subsidy for Start-ups: 8% per annum for a period of 5 year with a maximum limit of INR 5Lakh per annum (2017)
- Lease/ Rental Subsidy for Start-Ups: Reimbursement of 25% for 1 year to a ceiling of 3 Lakh per annum (2017)
Uttar Pradesh Subsidy for MSME IT Start-ups to Promote Mobile Payments, 2017
- 25% subsidy on electricity bills for 3 years with a max limit of INR 30 Lakhs
- Reimbursement of 25% of lease/rent charges for the space with maximum limit of INR 10 Lakhs per year for 3 years
Chhattisgarh Logistics Park Policy with Minimum Fixed Capital Investment of 15 Crores and minimum land are of 6.5 Lakhs, 2018-23
- Subsidy of 35%-40% of fixed capital investment
- Rebate of 50%-60% of total annual interest paid upto 6-7 years with a max limit of 60Lakhs p.a -1000 Lakhs p.a
Jammu and Kashmir Scheme 2017-20221
- Central Capital investment Incentive at the rate 30% of the investment in plant and machinery (upper limit INR 5 crore). Central Interest Incentive at the rate 3% interest on working capital for 5 years
- Central Comprehensive Insurance Incentive: Reimbursement of 100% insurance premium for 5 years
West Bengal
- Investment of INR 600 Million inn development of IT to increase digital penetration (2017)
- World Bank funded INR 300 Million for development of competitiveness of logistics infrastructure, 2019
- Increase in government infrastructure investments by 5 times in 2019 since 2011
Haryana, 2017
- Government earmarked 5lac sq ft. of area for development of e-commerce warehouse in / around districts of Gurgoan , allowing e-commerce companies to reduce the project gestation time for warehouses.
Madhya Pradesh, 2016
- 6% entry tax on e-commerce firms
- Government partners with Bharti Airtel to build internet awareness and literacy among women
Source: Government of India, Industry Articles and Ken Research Analysis
2. The rise in E-commerce Penetration has led to increase in funding in the E-commerce Logistics Sector in India
Some Major Investors in Ecommerce Logistics Market in India
Rise in Funding
- Retail linked e-commerce has been driving significant investment and value for the Indian logistics sector and has emerged as a crucial segment of the logistics spectrum.
- There has been a significant number of investments, with global companies looking at India as a favorable market.
- Further, with shifts happening in the e-commerce retail sector like a larger share of demand expected from tier II and tier III cities and air-to-surface movement, existing players are looking at innovative ideas to improve end-to-end logistics.
- Dominant e-commerce retail platforms are looking at investing in their captive logistics arms in order to increase capacity, expand reach, and ensure speed to market, enabled by a strong technology backbone.
- Moreover, with the growing dominance of the surface mode of transit, multiple new players are emerging with sole focus on surface delivery.
- Software Solutions space for India E-commerce Logistics Industry is still in a nascent stage, it covers players providing logistics technology solutions, such as fleet management, global positioning system (GPS) tracking, and Internet of things (IoT) based solutions.
- Retail-linked Retail-linked
Source: Industry Articles and Ken Research Analysis
3. Investment activities are done in major companies such as Ekart, Dehlivery, Ecom Express, and more.
| Company |
Major Investors |
Total Funding Amount1 |
Last Funding Type |
Latest Funding2 |
 |
Klick2shop Logistic Services International |
INR 22.4 Bn |
Venture- Series Unknown |
Ekart Logistics received a funding of INR 16.32 billion from Klick2Shop International in between Nov 2017 |
 |
Steadview Capital, Canada Pension Plan Investment Board, Soft Bank, The Carlyle Group, Fosun International, Tiger Global Management |
INR 70.3 Bn |
Secondary Market Round |
Delhivery raised $25,000,000 / Secondary Market from Steadview Capital in December 2020 |
 |
CDC Group, Partners Group, Warburg Pincus, Peepul Capital LLC |
INR 35.5 Bn |
Private Equity Round |
Ecom Express raised $20 Mn from CDC Group in March 2021. This was CDC Group's second round of investment in Ecom Express after Dec 2019 |
 |
Mirae Asset- Naver Asia Growth Fund, Flipkart, Qualcomm Ventures, NGP Capital, Eight Roads Venture India, International Finance Corporation, Mirae Asset Global Investment |
INR 8.7 Bn |
Series D |
Shadowfax raised $60,000,000 / Series D from Eight Roads Ventures India and 5 other investors in Dec 2019 |
 |
Investcorp, Gaja Capital, Northwest Venture Partners, Alibaba Group, Innoven Capital, Chiratae Ventures, SAIF Partners |
INR 20.3 Bn |
Series E |
Xpressbees raised $110,000,000 / Series E from Gaja Capital and 2 other investors in November 2020 |
Source: 1: Crunchbase Data 2: Industry Articles, Press Releases
4. Further, Technological Disruptions is poised to fuel the E-commerce Logistics Industry growth in the coming years
Tech Disruptions
Aggregators
-
Faster turnaround with Sorted Inventory, Optimise Costs, More warehousing Fulfilment Centres
-
Warehousing and Trucking Aggregators, WMS/TMS, RFID tagging, ASRS
-
Amazon Transportation Services, E-Com Express, Fedex, Delhivery, Flipkart , Bigbasket
-
Warehousing (IwareQ, Godamwala) & Trucking Aggregators ( Truck Ola, Black Buck) , WMS(TBS, Oracle Netsuite), RFID (Bridgei2i, Blue Ocean)
Marketing , Sales and Customer Experience
-
Consumers will be able to initiate and receive package digitally, track real time status, change pick-up and drop off locations at last minute
-
Delivery through Smart Lockers, Partnering with local Kirana Stores, Virtual Assistant Support Features
-
Delhivery, Amazon Transportation Services, E-Kart
-
Pinnacle , SmartBox Technologies For Smart Lockers
Digital Up gradation
-
Faster turnaround, Cost optimization, Track transactions, Manage Data Volumes
-
Cloud, Big Data and Embedded Analytics ,Voice Directed Technology, Block chain, IOT
-
DHL, Amazon Transportation Services, E-Com Express, Fedex, Delhivery
-
LBD, Roambee, Shipway
Futuristic Advancements
- Manufacturing at retail location Expected to revolutionize distribution centers.
- Amazon Fly: 3D printing delivery truck, prints product as soon as an order is placed, on spot
-
Divide by Zero Technologies, Imaginarium
Drone Technology
- In-house inventory monitoring Asset performance monitoring Drone makers claim scanning accuracy of close to 100%
-
Dall Systems, Skylark Drones
Source: Industry Articles and Ken Research Analysis
