As ecommerce booms in India, startups and giants rush to $300b logistics business

A shopper in India can sign on to an ecommerce site and buy a product with the click of a button. How much does that click cost the store?

According to Indian consulting firm Technopak, India’s ecommerce startups spend as much as 30 percent of their net income on logistics. In the US, Amazon is reported to spend 11.7 percent. On Alibaba’s marketplaces, the cost is entirely paid for by merchants and buyers.

Flipkart and Snapdeal, two of India’s largest ecommerce companies, spend so much money on logistics that they don’t expect to be profitable for the next few years.

For T.A. Krishnan, founder of Ecom Express, a well-funded logistics startup, logistical planning is too big of a challenge for a company to handle alone.

“Outsourcing your strategy to a logistics company means that you can focus on your product,” he explains. “The challenge of logistics is difficult and needs to be handled by a dedicated player. Things like regulatory frameworks, airports, road networks, highways are all hindrances to growth in India. These are huge challenges that need to be tackled by a smart solution.”

Flexible journey

This “smart solution,” for India’s booming logistics industry – US$300 billion by 2020 and 14% of the country’s current GDP – can mean several different things.

Delhivery is an ecommerce logistics service in India that raised its latest round of US$85 million from Tiger Global. In laymen’s terms, the startup takes care of the things that happen between ordering something online and having it delivered to your place by creating a business strategy for its transport.

“Conventional logistics solutions don’t work any more in India,” explains Sahil Barua, CEO of Delhivery. “The old world of things like mail cargo and strictly B2B solutions are not flexible enough to fit a customer’s demands.”

In order to create an efficient strategy, Sahil explains that a successful logistics supply chain company should solve three main issues:

1. Visibility: A package’s journey should be transparent from end to end.
2. Scale: The backend technology of a logistics model should be scalable and replicable across borders.
3. Payment: Whether it’s offline or online, payment should not be an issue.

Sahil explains that there are two ways to approach these issues. “The first is to think about creating the largest possible logistics company for a specific vertical, like auto parts, where you figure out everything out from sourcing to delivery. The other is to take each of these verticals and create a common, flexible stack that can handle multiple demands. We focus on the latter.”

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