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Calibration: Why Logistics Aggregators Are The Primary Driver Of E-Commerce?

The eCommerce platforms are merely the demand catalyst that helps in connecting a buyer with a seller. Now, this demand has to be aptly met by first sourcing the product from the buyer and timely delivering it to the seller.

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In India, the eCommerce industry is growing by leaps and bounds. The segment is forecasted to attain a market size of $120 billion by 2020, up from $39 billion in 2017. In other words, the eCommerce segment has been experiencing a growth rate of 51 percent throughout this period. This is the highest eCommerce growth rate around the world and about seven times that of our GDP. It is obvious that this growth rate is driven by the rapid digital adoption that our country is experiencing at present. However, there is more than that meets the eye.

The eCommerce platforms are merely the demand catalyst that helps in connecting a buyer with a seller. Now, this demand has to be aptly met by first sourcing the product from the buyer and timely delivering it to the seller. Irrespective of how simple it might sound, this process – also known as logistics or supply chain management – is very intricate and needs superior intense calibration. Let us have a look at how they are fulfilled.

Logistics, because every delivery matters:

As we witness deeper penetration of social media, more customers - especially millennials - can now discover products and merchandizes beyond their local markets. However, the logistics of these operations are what come across as a bottleneck. The share of logistics cost is about 14% of our GDP. The sector is aiming to bring it down to 10% by 2020 through adoption of digital processes and making relevant infrastructure overhauls. Small sellers and SMBs can be seen at the receiving end of it because of high shipping rates, RTO, COD, and no proper channel for visibility. However, logistics aggregators are actively eliminating such challenges by introducing quick reimbursement of COD orders, wider network of logistics partners, and offshore deliveries.

This has been driving the demand for robust logistics operations and is making tier II and tier III markets more accessible – such as the Kanchipuram silk saree market of Tamil Nadu and the brass industry of Moradabad. Such specialized industrial regions are now able to cater to a broader market with the help of eCommerce platforms and logistics aggregators, especially the ones that fulfill orders competitively and without violating SLAs. 

India is rapidly digitizing at present and more people are flocking towards online marketplaces. This is because online marketplaces extend the touch-of-a-button shopping experience to customers alongside the comfort of their homes. In order to carve a niche, eCommerce players have also launched superlative features such as one-day and two-day delivery in the market, something that was an impossible feat to achieve about a decade ago. Logistics aggregators and 3PL (third-party logistics) players also provide such services to e-commerce seller with lower charges and their tech-driven approach.

This is helping offline brands to conduct omnichannel sales and make their products and merchandizes available to the pan-India audience. The multi-mode transportation model is also something that adds considerable value to the ecosystem. It enables market players to leverage various options available to them without having to coordinate with intermediaries. For instance, before an order is placed, the product has to be prudently sourced to the warehouse and later, sorted upon receiving the order. It is then dispatched via relevant shipping mechanism to the destination city. There, the package is extended to the local warehouse which then passes it on to the neighborhood distribution center and is picked up by the delivery person. At times, there are as much as 7 to 12 intermediaries and even more involved in a shipping operation (including railways, waterways, etc.).

However, the beauty of these operations is such that we barely get to know how intensive and calibrated their operations are. Perhaps, making everything look like a clockwork.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Saahil Goel

The author is CEO and Co-Founder, Shiprocket

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