Despite infrastructure and government hurdles, interest in e-commerce remains high in India. However, because of the economic slowdown in the country, India is eyeing foreign investments to stimulate growth. In September 2012, the Indian government allowed 100% foreign investment in single-brand retail companies, and up to 51% in multi-brand retail companies. However, the policy excluded foreign investment in the country’s e-commerce sector. As a result, international e-commerce companies such as Amazon and eBay have only been able to operate as online marketplaces in India meaning they are only allowed to offer products from third-party sellers. Now, the government is reconsidering the ban on foreign investments in the country’s e-commerce sector and has invited feedback from the industry before making a decision. Once the ban is lifted, it is possible that inefficiencies will be reduced and India’s e-commerce market will blossom at a much more rapid pace.
Estimates of the size of the e-commerce market vary with $22bn by 2015 to $70bn in 2020. Much of the market still remains focused on services with travel making up about 70% of e-commerce with e-tailing comprising 16%. Still, it is e-tailing that is growing the fastest at a 59% CAGR 2009 to 2013 according to Macquire Equities Research.
Due to various hurdles, many e-commerce companies operating in India choose to keep logistics in-house. Even those international companies entering the Indian market are deciding to keep this function in-house. For example, Amazon announced that within two years it will use its own logistics network to deliver nearly every product sold on its Indian portal.
Meanwhile, Flipkart recently announced plans to deliver packages for its competitors, as the company’s logistics division, eKart Logistics, opens services to other e-tail businesses. Currently the service is in a trial period. Right now, the network can reach consumers in about 150 cities but plans are to expand further into Tier 2 and Tier 3 cities. The move is part of Flipkart’s plan to diversify its business portfolio. It has also launched an online payment gateway solution, called Pay Zippy, which allows customers to save their credit card details. This service is now used by other online companies as well.
In 2013, Snapdeal launched SafeShip, a fulfilment platform for sellers listing their products in the marketplace. The service can be used in two different ways by sellers. First, sellers can ship products directly to the customer through Snapdeal’s logistics partners. Second, orders can be routed through Snapdeal’s fulfilment centres and then shipped to the customer. It also handles aspects like pre-shipping verification, track and trace and returns/replacement/refunds processing as well as product quality control.
Even though many e-commerce companies are opting to handle their own logistics needs, other companies, such as Delhivery, are specialising in e-commerce logistics. Delhivery provides omni-channel, store management, fulfilment (warehousing) and logistics services. It has 60,000 sq ft of fulfilment space in 3 cities along with a dedicated call centre and its own express delivery network across 120 cities and 150 distribution stations. It also has developed an online fulfilment and transportation management system that provides real-time tracking, routing and scheduling.
To be successful in India’s e-commerce market, logistics will be not only be important but necessary in order to create differentiation within the crowded e-commerce market.