Supply Chain Innovation fuelling e-commerce growth in India

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Leading global professional services firm, Alvarez & Marsal (A&M) India and CII Institute of Logistics has recently released a white paper titled ‘Enabling the Next Wave of E-commerce in India Through Supply Chain Innovation’.

The paper sheds light on the differential growth expected by different e-commerce categories in India in the next five years with evolving operating models and the implications for logistics service providers.

The white paper reveals the exponential growth of the Indian e-commerce landscape over the last decade. The sector that accounted for less than US$ 1 billion in 2010 has grown to more than worth US$ 30 billion in 2019.

This can be attributed to the rise in logistics companies that has enhanced their network and capacity, and has made the access of goods and services easier throughout the country.

However, it is estimated that the market is still at just about 3% penetration as of 2019 which is far lesser compared to mature markets like the U.S. (~15%) and China (~20%).

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The e-commerce industry in the past few years have witnessed a wave of change when it comes to consumer buying behaviour. Furthermore, the industry has also seen more suppliers selling online and the growing selection online at rates competitive with brick and mortar retail.

All these changes that have been happing in a swift and smooth manner will lead the e-commerce retail categories towards growth.

Further in regards to the expected growth in online groceries, the paper reveals that the rise of online fresh groceries, led by the two leading incumbents, which had a combined market share of ~70% in CY19, along with growing numbers of prepared food delivery companies entering this space, could propel this category’s growth by five times in the next five years.

“While bulk of e-commerce volumes come from top 30 cities, more than 60% of e-commerce volumes are likely to come from Tier II and III cities in the next five years. It is imperative for e-commerce businesses to build their seller base and delivery reach in smaller towns. A study of different operating models helps us evaluate the ecosystem and the expansion requirements for e-commerce companies to level up in times of high demand. These insights underpin our expertise to maximize value for clients through actionable results.”

~ Manish Saigal, Managing Director, Alvarez & Marsal India

“The last five years in India have been about e-commerce channel becoming a mainstream channel (as important as traditional and organized retail) for companies to design their sales strategy. The next five years will be about these four models (covered in the report) gaining meaningful value share in the e-commerce delivery market size. For logistics industry incumbents and investors, these ideas offer the next wave of growth”

~ Sudeep Mehrotra, Senior Director, Alvarez & Marsal India

As per the white paper, the operation of e-commerce will evolve as and when there comes a change in customers’ requirements & changing buying behaviours and the availability of appropriate technology and logistics partners.

The next wave of anticipated online retail growth drivers for categories such as fast-moving consumer goods (FMCG), groceries and apparel will be through social media, chat engines and artificial intelligence (AI) bots.

The paper mentioned order to store for apparel; dark store for FMCG/ grocery and meat/pharmaceuticals; store to customer deliveries for FMCG grocery and omnichannel presence for retailers as some of the key evolving models for e-commerce,

It said, to ensure these models function seamlessly, e-commerce companies will have to work with technology and logistics partners that can deliver across all stages of the customer journey as well as service level agreements (SLAs).

Courtesy: India Retailing

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