What is your assessment of the Indian logistics industry? How has it evolved over the last 10 years?
The Indian logistics sector has been on a high growth trajectory over the last decade due to the significant rise in domestic consumption and global trade.
India, being a rising global manufacturing and sourcing hub for many industries and other global themes like e-commerce, is driving demand compelling businesses to turn to specialised service providers for distribution and logistics requirements. This in turn is contributing to an increase in the need of integrated solution providers.
Growth of sectors like retail, commodities, manufacturing, development of SEZs, SME contribution to businesses, especially in tier-2 and -3 cities, etc., are all factors that are playing a crucial role in the country’s manufacturing growth and international trade and hence increasing the demand for logistics services.
Despite the recent slowdown in the Indian economy due to some structural and macro-economic challenges, the fundamentals of the Indian economy remain strong.
The long term view is that we are poised for growth accompanied by the Indian manufacturing sector becoming more global and sophisticated. And all of this would mean rapidly increasing demand for logistical services.
The logistics industry has grown at a fixed rate of 7–8 per cent per annum, and in the next few years we will see greater consolidation, more emphasis on technology and skills, and stronger focus on service quality.
The e-commerce space being extremely crowded, is the present size of logistics industry capable enough to cater to the needs of the industry?
India is on the threshold of emerging as a key player in the global e-commerce space.
Owing to its large population and rapid growth in the number of internet users, the potential of e-commerce in India is tremendous. Some industry statistics indicate the e-commerce industry has been growing at a CAGR of close to 55 per cent since 2007 and last year, it clocked a growth of over 85 per cent.
Already the Foreign Trade Policy provides fiscal incentives for exports through the e-commerce platform, which need to be completely implemented. This will push the industry on a growth trajectory and, needless to say, the potential and impact on logistics service providers will be huge.
As the e-commerce industry matures, logistics support will play a crucial role in its growth and sustenance; and we are ready to embrace the opportunity.
Talking about the logistics industry, what are the major setbacks that prevail here? Also, do you think there is any scope for improvement?
One of the major problems with e-commerce is customer fulfillment, because unlike a store, the customer does not walk out of the shop with the product in their hands.
In developing countries, transport infrastructure is established only around and between major cities than elsewhere, and internet penetration as a whole is low.
In addition, the quality of warehouses in tier-2 and -3 cities is relatively poor. All of these issues raise challenges for efficient online fulfillment beyond the trade hubs.
Given the country’s current tax structure, warehouse networks are decentralised as per state-based facilities and requirements. Implementation of Goods and Service Tax (GST) can change this scenario by encouraging the consolidation of distribution networks, which in return will grow the demand for larger distribution centres.
Tell something about your e-retail clients and the kind of services you provide to them.
Growth in the e-commerce landscape is not restricted by demographic challenges anymore, thanks to the internet. Hence, it is imperative to have a wide network, both domestic and international, to meet the growing demands of e-commerce. With a global network in 220 countries and territories, we are in a dominant position to offer the best services to our clients.
Secondly, the e-commerce business is a B2C model, which requires intrinsic solutions to requirements like return logistics, delivery pre-alerts to consignee, upfront visibility of destination regulatory charges, etc. The Express business model has been designed to cater to B2B requirements but now players are increasingly adapting their network to cater to the B2C model too. DHL, given its reach and range, is leading to meet this industry’s growing demands.
Also, the sustainability of the e-commerce business model is based on discounted formats to secure repeat business, low pricing, cash on delivery and nearly always free shipping. Hence, the focus was to find service providers based on price only. But this mindset is changing with e-tailers and customers demanding efficiency and reliability for their goods and that is what we deliver at DHL. As the world’s leading logistics player, our focus is on quality and reliability.
Today, right from Indian traditional apparel, books, artefacts, carpets, and electronic goods to stamps and coins, etc., everything is being distributed through this medium. In fact, there is no product that is not available through e-commerce portals.
What are the latest logistics innovations that have happened for e-commerce players?
With online retail being a rapidly mushrooming industry, 24-hour delivery timelines have become the norm.
We are familiar with product deliveries done using drones and modernisation of warehouses but we think the biggest logistical innovation that has happened to e-commerce is same-day delivery. To be able to afford that luxury for our clientele across the industry, and to set the bar at that level is something that is set to revolutionise our industry as well as clients’ expectations of us.
We offer a wide range of solutions to automate their shipping process for complete and better control of the shipping process. The e-commerce shipper can avail our hassle-free Import Express service to manage their returns.
What are the major challenges while serving e-retail clients?
There are challenges pertaining to on-time delivery and warehousing, which have already been discussed.
Apart from these, there are on-ground challenges such as rescheduling, especially in the case of heavy electronics and furniture, which become quite testing especially in case of 24-hour delivery.
Can you elaborate one biggest challenge that you faced while serving an e-retail client? How can you overcome this while maintaining the cost efficiency?
There are various challenges that come up in our business, which if not handled, tend to become speed bumps for us. KYC requirements from countries, the oft-arising case of incomplete or partial customer information and improper documentation, which leads to clearance delays, are problems that usually arise.
In such situations, we have processes in place that take over, automating the correction procedure, and ensuring that the product delivery happens smoothly. The volume of freight that we deal in, means that our processes have to be vigilant, and this, above all else, helps us maintain cost efficiency. Also, managing the reverse logistics in terms of return goods can be termed as a challenge.
What is your growth plan for the next two years?
The international e-tailing industry is expected to grow at a CAGR of 40–50 per cent for the next 4–5 years. Growth of the industry in India has been rapid and we expect our growth figures in the space to be in line with industry figures.