How the growing last-mile delivery space rides on the Indian e-commerce boom
Last-mile delivery firm Dunzo is on a mission to deliver convenience, choice, and control to everyday living. It wants to deliver a grocery buying experience far better than any offline experience that requires one to wait or walk to one's local store or wait for slots from other online platforms.
Kabeer Biswas, Dunzo's CEO and co-founder, says that by leveraging micro-fulfilment centres it can facilitate the delivery of the top 2000 products users want on a daily or a weekly basis, in flat 19 minutes. “This is currently the fastest and the most efficient way to get daily and weekly groceries delivered in Bengaluru. We are seeing users shop through Dunzo Daily an average of two times per week. As demand from users continues to grow 25 per cent week on week, it has assured us that the Dunzo Daily experience we building is going to shape the grocery buying experience of 2021 and beyond,” says Biswas
The last-mile delivery segment is seeing huge traction due to the rise in e-commerce transactions. There are reports that the last mile delivery firm Delhivery is planning to launch its $1 billion IPO in October. Earlier, the company acquired Bengaluru-based Spoton Logistics.
“Last-mile delivery is set to grow on the back of increasing penetration of e-commerce, especially during the pandemic. Alongside growth, the market will also see increasing penetration of connected vehicles, telematics technologies as well as the increasing influx of Electric Vehicles. In terms of player actions, while most will benefit from the growth of the market, it is also vital to think about differentiated offerings to be able to command a premium in the segment and this differentiation is bound to come through the intersection of the service offering, the underlying cost structure and the enabling use of technology,” Ashim Sharma, Partner and Group Head, Nomura Research Institute (NRI) Consulting and Solutions India Private Limited, told THE WEEK.
Last-mile logistics is a part of the supply chain that caters to issues caused by freight traffic in the city by governing distribution patterns based on the characteristics of the city. The urban logistics and last-mile logistics spaces aim to optimize the delivery of goods and identify solutions to lower fulfilment costs and cater to customers' demands. These spaces operate primarily for e-commerce, grocery, non-grocery, retail and omnichannel players.
“The e-commerce sector is expected to grow three times its current size by 2027. As of 2020, out of the entire global trade, e-commerce is increasingly moving towards faster delivery. 'Last mile is the costliest Mile’, when it comes to the cost of transportation. According to JLL research, 10-15 per cent of total vehicle kilometres travelled in urban areas contributes to 47 per cent of total transportation costs. Last-mile delivery centres can significantly reduce that,” observed Chandranath Dey, Head -Operations, Business Development, L&I Consulting and PAGI Logistics and Industrial, JLL, India.
Experts observed that over the last decade, buying behaviours of people are changing because of multiple reasons such as convenience, ability to research information online and seek inputs from social media. The practice of shopping from physical stores has been changing at the same time as more sellers have been offering door delivery to compete with the online platforms. COVID-19 has accelerated the shift towards online purchases.
“In the months ahead, COVID-19 will be ubiquitous as a flu-like disease. However, the buying behaviours are unlikely to transition back to the pre-COVID-19 days. FMCG, electronics, food, clothes, footwear, jewellery and many others would be bought online. Companies will revamp their sales and marketing strategies to include a significant focus on online channels. Hence, supply chain management functions and processes will undergo major changes. Last-mile delivery efforts would become more remarkable and significant than what they are today,” remarked Aditya Narayan Mishra, Director and CEO of CIEL HR Services.
Experts say that though the volumes have surged the biggest challenge in fulfilling the supply chain is the last mile which is the most expensive of all its components as the parcel volume begins to dwindle when last-mile segregation starts taking place.
“Industry in this space is not able to find a solution out of the traditional methods of delivery. The use of technology assumes immense importance. Last-mile delivery firm Delhivery is aiming to be not just a services company but is aiming to offer solutions to address this important concern. Small and medium businesses will find it very difficult to deliver directly to a consumer in the absence of a technology platform. Dominant players such as Amazon may have an advantage unless an alternate is in place,” said Subramanyam Sreenivasaiah, CEO at Ascent HR
Increasing use of technology in last-mile delivery is also seeing huge traction and many players are adopting new high-end automation and other scalable technology solutions. There have been attempts to reduce costs for last-mile delivery and make it more agile. “We have always been intrigued by the potential of automation and using analytics to identify opportunities to optimize and reduce costs in the supply chain.
Automation has positively impacted our supply value chain far beyond the walls of the warehouse and sorting centres and has changed the pace and how parcels flow across our system. As we move forward with new end consumer habits, the upward trend in online shopping will continue, and with it, our supply chain will take significant steps towards automation and further improvement to meet the ever-changing needs of our customers,” pointed out Manju Dhawan, Co-founder, Ecom Express Private Limited that specialises in last-mile delivery.
With the growing significance of the last mile delivery segment in India, the ecosystem will further expand as many of the e-commerce giants are not experts in last-mile delivery and rely heavily on these firms to deliver their packages to the end consumers. “Covid has exposed the fragility of the last-mile supply chain & distribution, specifically for rural India as we relied largely on centralised models. With distributed models emerging, thrust on hyperlocal commerce and acceleration of digital access, the last mile will play a much more pivotal role in connecting villages and growing the economy,” observed Madan Padaki, Chair—Rural Mobility, IET Future of Mobility and Transport Focus.
The future of the last mile delivery segment looks very positive in the future in the country and will further grow in the time to come. “The last mile logistics output has become extremely promising in the country as a result of the increased at-home consumption. The perception towards it has seen a major change- from being a mere comfort provider to being a necessity now. The last-mile logistics industry is currently valued at around $40 Billion and is projected to reach $100 Billion by 2024,” said Ratnesh Verma, Founder and Leader, Pidge.