E-Commerce

Hard cash may worry logistics firms: Nielsen

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The report points out that the promising growth potential in India’s e-commerce logistics industry has led to the entry of several new-age logistics start-ups.
The report points out that the promising growth potential in India’s e-commerce logistics industry has led to the entry of several new-age logistics start-ups.

The e-commerce industry is expected to reach $100 billion by 2019

The country’s logistics service providers will need to address the key issue of use of cash as working capital as they are likely to handle about $14 billion in currency by 2018 with online shoppers continuing to rely on cash-on-delivery as payment method, according to a report.

The report “Ecommerce: the next big opportunity for Logistics” by Nielsen states that the sheer volume of cash-on-delivery (CoD) orders will require fundamentally different cash handling capabilities than those used at present.

“CoD orders will continue to dominate the Indian market. As a result, one of the biggest differentiators for any logistics service provider will be its ability to effectively manage cash flow and address challenges such as theft, use of cash as working capital and reconciliation issues. This requires fundamentally different systems compared to those that currently exist in the market,” it says.

Logistics, the report observes, is emerging as the biggest challenge in e-tailing, while simultaneously being the key differentiator considering the stiff competition between domestic and international players. “Constantly rising consumer demands and stiff competition has forced the e-commerce industry to drive efficiencies through a renewed focus of logistics.”

The e-commerce industry which is expected to reach $100 billion by 2019, currently accounts for between 15 per cent and 20 per cent of the total revenue for some of the large logistics firms. The domestic logistics industry is pegged at $167 billion.

To capitalise on the opportunity that ecommerce presents, the industry will need to also develop wider presence in tier II and tier III cities, which are expected to contribute more than $10 billion to e-tailing shipments by 2019, according to the report.

Besides, with offline retailers moving to online channels, the logistics service providers need to go beyond the traditional express delivery model to offer a host of value-added services, including managing inventory, handling invoicing and providing consumer insights. Logistics service providers will also need to improve surface transportation capabilities via both road and railway, across various geographies to create more opportunities and avenues for growth for the sector.

The report points out that the promising growth potential in India’s e-commerce logistics industry has led to the entry of several new-age logistics start-ups, the setting up of new verticals by older logistics companies such as Blue Dart, DTDC etc, as well as investments into a separate logistics arm by e-tailers such as Snapdeal and Amazon. The sector has also recently seen a spate of interest by investors, it added. Of the approximately 90 start-ups that have sprung up over the past few years, more than 50 were focussing on logistics were founded in 2014-15 alone.

“For e-commerce to function efficiently, it is necessary to have a consistent logistics system that will provide support through warehousing, inventory, delivery, invoicing, handling cash-on-delivery and product-returns.

“The role of logistics in e-commerce is to reduce the risk that arises from the virtual relations,” according to the report.

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