Logistics threat to Indian ecommerce

11 November 2014

NEW DELHI: India's ecommerce businesses have focused too much on marketing and customer acquisition and not enough on the nuts and bolts of delivering goods, industry observers have claimed.

Their comments came in the wake of the recent "Diwali debacle" as the country's leading online retailers appeared to overreach themselves during the country's peak shopping season and were forced to apologise to consumers for late delivery or, in some cases, non-delivery.

"The single weakest link to the growth of ecommerce business in India in the next three years is the inadequacy of the logistics, and the last-mile link," Arvind Singhal, chairman of retail consultancy Technopak, told the Financial Times.

His remarks were echoed by Jaspreet Bindra, the former head of Microsoft India and now an angel investor. "Logistics is still in its infancy here, and we've got ecommerce coming in and galloping," he said. "Companies themselves haven't really paid as much attention to their supply chain as they should."

Online retailers have invested in warehouse and delivery in the major metros, but much of the explosive growth in the sector is coming in lower tier cities and rural areas, fuelled by the spread of low-cost smartphones enabling internet access for a greater number of people.

"Things need to start happening now," warned Chris Buckthorpe, chief of strategy for Indian delivery company GATI-KWE. "Otherwise, in the next three to five years, the industry is going to potentially grind to a halt."

Buckthorpe added that ecommerce companies needed to rethink their relationship with logistics businesses and move away short-term thinking based on price to develop long-term partnerships.

"If ecommerce companies are trying to manage an overall end-to-end customer experience, they need to engage with the logistics providers more directly in the planning and process development," he said.

While logistics businesses are optimistic about the future, they face a potentially significant challenge from a reinvigorated postal service.

IT and Communications Minister Ravi Shankar Prasad is due to meet the heads of Amazon India and Flipkart in the next few days to discuss how India Post, with its extensive rural network, can meet the needs of ecommerce players.

Postmen could also be incentivised to ensure timely deliveries of goods ordered online.

Data sourced from Financial Times, Economic Times; additional content by Warc staff