E-commerce logistics to become $9 bn industry by FY26

India’s e-logistics sector is predicted to grow multifold to a US$ 9 billion industry from US$ 2 billion in FY21, according to Red Seer strategy consultants. The booming e-commerce sector and supporting logistics policies are expected to unleash unprecedented growth in this industry.

India’s e-logistics (logistics of internet sales) sector is predicted to grow multifold to a US$ 9 billion industry from US$ 2 billion in FY21, according to Red Seer strategy consultants. The number of e-commerce logistics shipments is expected to grow by 4 times over 5 years with Amazon accounting for around 3 million shipments per day, followed by Flipkart and Myntra making 55% of the total, as of fourth quarter 2020.

India’s e-Commerce market is also forecasted to be around US$ 350 billion by 2030 from $45-50 billion now with online shoppers from current 100 million to 350 million by 2025.

A spotlight on the reasons driving this compound annual growth of 35%, brings many factors at play. Currently around 40% of shipment volume is driven by the nation’s top 500 to 700 postal codes, those of India’s largest cities and suburbs. However, we are expected to see an accelerated shift towards Tier 2 and the rest of the country with proliferation of smartphones and localization of the internet in non-English languages. This is increasing both suppliers and consumers in e-commerce from non-metro locations.

New models added such as D2C (Direct-to-commerce), social commerce, and video and influencer based commerce are expanding the consumer base. Multiple payment options such as UPI, no-cost EMI and BNPL (buy now, pay later) have further driven the adoption of digital commerce.

Existing initiatives to improve ease of doing business like paperless EXIM trade process through e-Sanchit, faceless assessment for customs, provisions for e-way bills, FASTag, unified taxation system (GST) and connecting upgraded drone policy with PLI scheme have greatly increased the efficiency of logistics sector. The New Logistics Policy launched last month will focus on current bottlenecks.

Unified Logistics Interface Platform (ULIP) will bring all the digital services related to the transportation sector into a single portal, freeing the exporters from a host of very long and cumbersome processes. The new digital platform Ease of logistics services – E logs, set up under this policy, will facilitate direct resolution to the matters which are causing problems in their operations and performance with the government agencies.

Gati Shakti – a National Master Plan for Multi-Modal connectivity launched last year will also help in rapid logistics infrastructure development. It will bring all 16 Ministries including Railways and Roadways together for integrated planning and will incorporate infrastructure schemes like Sagarmala, Bharatmala, inland waterways, dry/land ports, UDAN, etc. Smooth connectivity has grown shipment volumes and declined shipments costs about 25% to about Rs 75 per shipment.

Middle- mile costs typically involving the cost of intercity transportation, has also come down over the years as Amazon and Flipkart, the dominant e-commerce logistics players in India, have opened more warehouses around the country. The last mile delivery network expects a growth as tech enabled logistics players venture into hyper local delivery, express delivery, trucking and more.

The booming E commerce sector and supporting logistics policies are therefore expected to unleash unprecedented growth in e-logistics industry.