‘Only 20% small businesses offer online services, leaving market for last-mile logistics largely untapped’

February 11, 2021 8:00 PM

Logistics for MSMEs: Intra-city logistics providers, which usually deal with instant and on-demand delivery requirements, have a high degree of commitment to ensuring deliveries within the same day.

Major e-commerce players, as well as small businesses, are today looking to improve delivery time and experience as a critical tool to gain new customers. (Representative image)
  • By Hemanth Chandra

From making remote working a norm to bringing about a radical shift in the way consumers shop, Covid-19 is being regarded as a black swan event for the global economy. Even as traditional businesses took a hit due to the pandemic-induced lockdown, the changing landscape acted as a major catalyst for digital transformation across business and delivery models. Covid-19 accelerated the shift towards digitization as dependency on online services grew exponentially overnight. The Indian population was acquainted with the concept of last-mile delivery or doorstep delivery over the last few years, whether it is food delivery or shipments from e-commerce platforms. However, the situation emanating from the pandemic has given a boost to the mass adoption of these services.

Notably, small businesses that make up the backbone of India’s economy still have a limited digital presence. It is estimated that only 20 per cent of small businesses offer online services currently, leaving a large untapped market and infinite possibilities for the growth of the logistics sector. The demand for last-mile delivery services is likely to grow significantly in the coming years as greater digitization of businesses takes place.

There is already a surge for on-demand and instant delivery services across the Indian urban space. With logistics and delivery service providers brimming with orders, a strong need has been felt for technology-based instant last-mile delivery models that can not only improve delivery speed but also optimise utilisation of resources, thereby improving unit economics. In fact, efficient last-mile delivery has become a key determining point as far as customer satisfaction is concerned and all kinds of businesses are looking to provide last-mile delivery.  The on-demand delivery industry is already disrupting traditional markets by adopting a full-cycle approach to three essential components of a delivery experience: ordering, pick-up, and delivery. This will receive a further boost as businesses adapt to the Covid induced changes.

Emerging need for last-mile delivery

Evidently, e-commerce was the most notable beneficiary of the Covid-19 induced transition of the economy. As more people preferred the safety of home delivery over personal buying, e-commerce platforms were flooded with orders. In India, where a large section of the population had still not adapted to e-buying, the post-Covid period witnessed a rise in first-time-e-commerce-users. So overwhelming were the initial months of the 2020 lockdown that leading e-commerce platforms such as Big Basket, Amazon, and Grofers had to prioritise orders and request customers to bear with delays.

According to market research company Forrester Research, e-commerce sales jumped by 7-8 per cent in India in 2020. Even though this jump was much less than in the US or Chinese markets, it does display a trend towards shifting consumer behaviour. The growing e-commerce sector is creating more opportunities in intracity logistics and changing customer preferences with respect to shopping and delivery. According to KPMG research, 80 per cent of customers today look for same-day shipping. In fact, 50 per cent of shoppers are actually willing to pay extra money for faster delivery. As consumers become accustomed to the extremely quick delivery experience, offering shipping options will increasingly become a ‘need rather than a choice’ for retailers.

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Efficient last-mile delivery

“Last mile” as the phrase suggests refers to the final stage of delivery to the consumer which mostly happens from a point to another within a city. Often, while inter-city transportation has been efficient, the final stage delivery remains a challenge. This is where efficient intracity logistics and last-mile delivery services are gaining prominence. Intracity logistics for enterprises is not just about delivering parcels in 30 minutes. It is about solving the actual business challenges. It is about building capabilities to seamlessly execute the movement of goods irrespective of scale and size.

Major e-commerce players, as well as small businesses, are today looking to improve delivery time and experience as a critical tool to gain new customers and satisfy existing ones. Hyperlocal players are increasingly witnessing a rise in express delivery, next day delivery, or two-day delivery. Instant on-demand delivery is another relatively new focus area gaining increasing prominence in recent times. However, executing express deliveries and on-demand requires highly sophisticated logistics and last-mile delivery capability. The relatively nascent logistics sector in India, therefore, needs to grow at a rapid pace to meet the rising needs of a digital economy. Clearly, infinite space for last-mile delivery services is emerging in India.

Overcoming challenges in intracity logistics

Intra-city logistics providers, which usually deal with instant and on-demand delivery requirements, have a high degree of commitment to ensuring deliveries within the same day. This makes the entire chain of operations subjective to demand variability. Orders may suddenly surge from one part of the city, requiring quick identification and connectivity with an available delivery agent. Innovative technology is the bedrock of a system that efficiently matches the needs of demand and supply to ensure a seamless function together with optimisation of resources and positive unit economics. Innovation-focussed startups last-mile delivery startups are increasingly filling this void by harnessing technological innovation to create algorithms and systems that optimise the use of resources to the fullest while ensuring a high degree of customer satisfaction. The potential of the industry is huge, with tech startups solving the logistics puzzle beautifully.

Hemanth Chandra is the CEO of Pickkup. Views expressed are the author’s own.

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