LOGISTICS AND ECOMMERCE IN INDIA AND CHINA                    KAUSHIK RAJA R                    II – YEAR, MBA            ...
CONTENTS 1. World Market For E-Commerce 2. Obstacles for the Development of E-commerce 3. Goldman Sachs Report On Ecommerc...
1. WORLD MARKET FOR E-COMMERCEGlobal Ecommerce sales will reach $963 billion by 2013, growing at anannual rate of 19.4% - ...
3. TABLE      BASED      ON    GOLDMAN        SACHS        REPORT        ON      ECOMMERCE SALESSNO     Country       or 2...
economy to that of non-service activities, like, manufacturing and  food-processing etc – Aarkstore Enterprise• The market...
4.2 FRAGMENTED INDIAN LOGISTICS MARKET4.3 GROWTH DRIVERS OF THE LOGISTICS SECTOR
4.4 MAIN CHALLENGES IN LOGISTICS  1) Short product life cycles - Increased global competition has    shortened product lif...
4.5 FOLLOWING FIGURES ARE BASED ON A REPORT – AGILITYEMERGING MARKETS LOGISTICS INDEX 2011    4.5.1 TOP TEN POTENTIAL LOGI...
4.5.2 FACTORS BEHIND INDIA’S EMERGENCE AS POTENTIAL    LOGISTICS HUBS
4.5.3 INVESTMENTS ANTICIPATED IN THE NEXT 5 YEARS
4.6 SWOT ANALYSIS OF LOGISTICSSTRENGTHS  • Most enterprises, by virtue of being owner driven, tend to offer    personal co...
• Lack of use of state of art technologies, if suitably addressed can    boost the international competitiveness of the In...
• The impact of global market conditions on logistics business by way    of decline in international trade can be curtaile...
• There should be an appropriate credit policy developed as per the    convenience of the organization. As a higher credit...
4.10 ESTIMATES FROM INTERNET AND MOBILE ASSOCIATION OFINDIA (IMAI)  • During 2011 India’s e-commerce market grew 47% to ar...
4.13 CONTRIBUTION OF TIER-II AND TIER-III CITIES TO INDIANECOMMERCE  • Small towns are contributing up to 40% of all e-com...
4.14 EXPRESS INDUSTRY IN INDIA  • In India only 50% of the Express Industry is organized - Edelweiss       Research study ...
• Blue Dart Express Limited, South Asias premier No.1 express air and    integrated transportation, distribution and Logis...
4. “All verticals are growing at over 60 per cent, and online is the fastest     growing. Within online, the focus now is ...
with a monthly transaction value ranging from Rs 75 lakh to Rs 1     crore.  2) Delhivery – It offers a complete set of se...
• Apparel retailer Zovi.com too has its own logistics team of 50 people      to deliver in 10 cities where it had issues w...
4.20 CASH ON DELIVERYCash on Delivery is a very important feature for Indian market simply forthe reason that India is sti...
4.21 ADVANTAGE OF USING A NAME-BRAND SHIPPING COMPANYOnline stores want to outsource their transportation of the goods to ...
5. CHINA5.1 ECOMMERCE IN CHINA  • The e-commerce market in China has experienced a compound    annual growth rate (CAGR) o...
• China is the worlds third-largest express market, behind only the  United States and Japan. The annual sales will reach ...
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Logistics and ecommerce in india and china

  1. 1. LOGISTICS AND ECOMMERCE IN INDIA AND CHINA KAUSHIK RAJA R II – YEAR, MBA DMS – PONDICHERRY UNIVERSITY
  2. 2. CONTENTS 1. World Market For E-Commerce 2. Obstacles for the Development of E-commerce 3. Goldman Sachs Report On Ecommerce Sales 4. INDIA 4.1 Logistics In India 4.2 Fragmented Indian Logistics market 4.3 Growth Drivers of The Logistics Sector 4.4 Main Challenges in Logistics 4.5 Report - Agility Emerging Markets Logistics Index 2011 4.5.1 Top Ten Potential Logistics Hubs 4.5.2 Factors Behind India’s Emergence as Potential Logistics Hubs 4.5.3 Investments Anticipated in the Next 5 Years 4.6 SWOT Analysis of Logistics Sector 4.7 Challenges 4.8 Recommendations 4.9 Ecommerce in India 4.10 Ecommerce Estimates From IMAI 4.11 FLIPKART 4.12 EBAY INDIA 4.13 Contribution of Tier-II And Tier-III Cities To Indian Ecommerce 4.14 Express Industry In India 4.15 Express Industry Of India From Moneycontrol.Com 4.16 About Indian Logistics - Straight From The Horses Mouth (Ecommerce Top Management) 4.17 Emerging Niche Ecommerce Logistics 4.18 E- Commerce Companies Having Their Own Logistics 4.19 Ecommerce Spending On Logistics 4.20 Cash On Delivery 4.21 Advantage Of Using A Name-Brand Shipping Company 4.22 Venture Capital In Indian E-Commerce 5. CHINA 5.1 Ecommerce in China 5.2 Express Industry In China
  3. 3. 1. WORLD MARKET FOR E-COMMERCEGlobal Ecommerce sales will reach $963 billion by 2013, growing at anannual rate of 19.4% - Goldman SachsBy 2015, companies will generate 50 percent of Web sales via their socialpresence and mobile applications – Gartner 2. Three main obstacles that hindered the development of E- commerce 1) Logistics, 2) credit, and 3) paymentTo some extent the obstacles of credit and payment have been removed,logistic, the essential physical component of E-commerce remains thedevelopment bottleneck of the industry.Currently, the development of E-commerce is 5-6 times faster than that ofthe logistic and express delivery industry.
  4. 4. 3. TABLE BASED ON GOLDMAN SACHS REPORT ON ECOMMERCE SALESSNO Country or 2010 2013 2010 to 2013 Region Revenue Revenue Growth Rate in (in billion $) (in billion $) %1 US 165.8 235.3 12.42 Europe 195.2 283 13.23 Asia 155.7 323.1 27.54 Rest of the 55.8 55.8 29.7 world5 Global 572.5 963 19.4 4. INDIA 4.1 LOGISTICS IN INDIA • The sector has been witnessing double digit y-o-y growth rate since 2002 and is expected to be more than USD 120 billion by 2015 – Deloitte • Indias logistics market is pegged at $40 billion and is expected to grow at 15-20 per cent over the next five years. Only 25 per cent of the total logistics business is outsourced, while the rest are handled by companies in-house - Ernst & Young (2010) • Logistics cost, as a proportion of GDP, stands at 13 per cent which is set to rise as the Indian economy shifts from service oriented
  5. 5. economy to that of non-service activities, like, manufacturing and food-processing etc – Aarkstore Enterprise• The market is anticipated to witness a CAGR of around 27% during the forecast period (2012-2014), harvesting a total revenue of nearly US$ 5.8 Billion by 2014 – RNCOS• The market earned revenues of $75.19 billion in 2009, representing about 6.2 percent of the countrys GDP. The market is expected to reach $120.42 billion in 2014, witnessing a CAGR of 9.9 percent between 2009 and 2014 - Frost & Sullivan LOGISTICS MARKET IN INDIA
  6. 6. 4.2 FRAGMENTED INDIAN LOGISTICS MARKET4.3 GROWTH DRIVERS OF THE LOGISTICS SECTOR
  7. 7. 4.4 MAIN CHALLENGES IN LOGISTICS 1) Short product life cycles - Increased global competition has shortened product life cycles and compelled companies to release products as quickly as possible 2) Complex Global Supply Chains - The growing prevalence of outsourced manufacturing and logistics services have made it more difficult to get a clear picture of what’s happening in the supply chain. 3) Technical Challenges - The challenges of short product life cycles, global supply chains, and low margins, make business process automation and integration imperative for companies involved in the physical movement of goods.
  8. 8. 4.5 FOLLOWING FIGURES ARE BASED ON A REPORT – AGILITYEMERGING MARKETS LOGISTICS INDEX 2011 4.5.1 TOP TEN POTENTIAL LOGISTICS HUBS
  9. 9. 4.5.2 FACTORS BEHIND INDIA’S EMERGENCE AS POTENTIAL LOGISTICS HUBS
  10. 10. 4.5.3 INVESTMENTS ANTICIPATED IN THE NEXT 5 YEARS
  11. 11. 4.6 SWOT ANALYSIS OF LOGISTICSSTRENGTHS • Most enterprises, by virtue of being owner driven, tend to offer personal commitment and quality services to their clients • Relative ease at filling up vacancies in operations abundantly reflects availability of adequate labor • With operations & agency network of unorganized companies primarily concentrated in a particular region, they enjoy regional dominance and can provide services at economical rates compared to their counterparts • Low attrition, partly aided by the current downturn, can be further exploited by focusing on training & employee friendly HR initiativesWEAKNESS • The fragmented nature, an inherent weakness of the industry, can be effectively addressed through consolidations, partnerships, and segment specific forums aimed at providing integrated services to the clientele • A common problem faced by companies is that of limited access to affordable credit, and can be overcome by ploughing back profits (self funding) and optimizing operations so as to qualify for SME loans
  12. 12. • Lack of use of state of art technologies, if suitably addressed can boost the international competitiveness of the Indian logistics industry, as a whole • Inadequate controls & cost consciousness • Paper work • Delivery staff need trainingOPPORTUNITIES • Supportive regulatory changes from government • Ongoing Infrastructure rollout/buildup improves long term prospects • Large potential domestic and international market • New specialist applications • Progressive reforms such as introduction of single Goods and Service Tax (GST) will help rationalize the warehousing set-up in the country • Exciting growth in the coming years. Due to the growth in manufacturing, retail, and real estate sectorTHREATS • Competition from large foreign players can be guarded against by adopting advanced technologies, collaborations and leveraging on regional strengths & resultant cost advantages • Liquidity risk • The price sensitive nature of Indian markets compels the courier companies to charge lower rates, whether affordable or not, for fear of losing out customers to competition
  13. 13. • The impact of global market conditions on logistics business by way of decline in international trade can be curtailed by concentrating on domestic markets, which are still quite promising • Continued increase in oil prices will hamper margins • Higher operating expenses leading to margin contraction • Bad roads4.7 CHALLENGES • Cut throat Competition • Heavy Maintenance Cost • Changing government policies • Heavy advertisement cost • Entry of foreign companies • Increasing Fuel prices • Creditor’s collection period • Inadequate infrastructure facilities4.8 RECOMMENDATIONS • Conduct a systematic market research to understand and explore the potential markets where more business can be generated and it should cover the supply and demand pattern. • Need to indentify the following through different studies 1) Who are the customers 2) Where are they located and how can they be contacted 3) What quantity and quality they want • Timely supervision of vehicles
  14. 14. • There should be an appropriate credit policy developed as per the convenience of the organization. As a higher credit collection period can lead to idle funds and contribute to the inefficiency of the organization.4.9 ECOMMERCE IN INDIA • India’s Internet penetration was 8.4% in June 2011, which is 100m Internet users and China having a penetration of 36.3%. • Non-travel e-commerce, which is 30 per cent of the total E- commerce industry, is estimated to grow 10 times to $6 billion by 2015 - Edelweiss Securities • The domestic e-commerce market has the potential to grow between $125 billion and $260 billion by 2024-25 - First Data Corporation and ICICI Merchant Services • Online retail constitutes only 1 per cent of the overall Indian retailing pie. This however, is slated to grow at about 100 per cent - Research consultancy, Technopak • India’s online retail to hit $70 billion by 2020 - Research consultancy, Technopak • E-commerce accounts for 0.12% of all retail sales in India, compared with over 4% in China and America – The Economist( Apr 2012) • Indias ecommerce market to quadruple in size to $24 billion in 2015 - Avendus Capital
  15. 15. 4.10 ESTIMATES FROM INTERNET AND MOBILE ASSOCIATION OFINDIA (IMAI) • During 2011 India’s e-commerce market grew 47% to around Rs47000 crores and online retailing accounted for an estimated Rs1500 crores. • It has been growing at a CAGR of 54.6% since 2007. • Metros in India contribute to 51% of all online transactions, Tier 2 and 3 cities contribute about 40% and rural India 9%.4.11 FLIPKART - POSTER BOY OF E-COMMERCE in INDIAFlipkart sells 20 products per minute and shipping close to 30,000 itemsper day. In the year ended March 2011, sales totaled US$11m. Thecompany expects that to increase tenfold this year, and reach US$1bn by2015.4.12 EBAY INDIASix items are sold on eBay India every minute and their target is to takethe six transactions a minute to 12 over the next year. The online retailmarket, barring travel, is pegged at Rs 3,000 crore currently and isexpected to more than treble to Rs 10,000 crore by 2015 – EBay India
  16. 16. 4.13 CONTRIBUTION OF TIER-II AND TIER-III CITIES TO INDIANECOMMERCE • Small towns are contributing up to 40% of all e-commerce transactions in India. – EBay India. • Letsbuy, Naaptol and Flipkart also says that about half their sales come from non-metropolitan cities across the country. • "Fetise get 500-700 orders a day on an average of which about 150- 220 are from the non-metros" - Siddharth Puri, Senior Marketing Manager Fetise.com • Out of the 13,000 orders that e-commerce portal Yepme.com received in July and August, about 69 per cent were from Tier-2 and Tier-3 towns spread across 500 towns. The rest were from six major cities. • In India, it’s about penetration. Most of the logistics providers restrict themselves to Metros and Tier1 cities. But the real ecommerce lies in the tier2 and Rural India. • Lenskart.com, Bagskart.com and Watchkart.com get around 50% of their business from non-metro cities • Online shoe store Fashos.com and consumer durables selling website Greendust.com get 70 and 28 per cent of their business from non-metro cities respectively.
  17. 17. 4.14 EXPRESS INDUSTRY IN INDIA • In India only 50% of the Express Industry is organized - Edelweiss Research study • India allows 100% FDI in courier services with government approval. This may suggest that Amazon plans to handle logistics and distribution for Junglee retailers. • The Indian Express Industry is valued at Rs. 10,000 crores and is growing at around 25% annually - Express Industry Council of India (EICI) • India’s logistics technology market is set to grow at 19.8 percent between 2010 and 2015 to cross $600 million - Frost & Sullivan research • The expected market size of non store retailing in India by 2015 (which includes ecommerce, TV shopping, print catalogues) would be around USD 2 billion. Now assuming that Logistics and warehousing cost would be about 6 to 8 percent of turnover – would mean the market size of about USD 150Million.4.15 DETAILS OF EXPRESS INDUSTRY OF INDIA FROMMONEYCONTROL.COM • The Rs 4500 crore-courier industry [lower estimate since they might have considered only listed and organized players] offers wide range of products and services. The industry is growing at a pace of around 20-25% annually.
  18. 18. • Blue Dart Express Limited, South Asias premier No.1 express air and integrated transportation, distribution and Logistics Company, with 42% market share. • Gati, is well renowned leader in the express Industry. Gati has the largest fleet of over 2100 vehicles on road, with a nationwide network unmatched in the industry and has a delivery capability of delivering to 603 out of 611 districts in India. Today Gati has an established presence in China, Hong Kong, Singapore, Sri Lanka, Thailand, Dubai and Nepal.4.16 ABOUT INDIAN LOGISTICS - STRAIGHT FROM THE HORSESMOUTH 1. “Firstflight, BlueDart and Aramex are the most used logistics companies by e-commerce companies. In our experience, BlueDart is more reliable & transparent. Aramex too comes pretty close” - Sathish Balakrishnan, Co-founder, Jumadi.in 2. “Although the growth of ecommerce, estimated to be a $10 billion industry in India today, what could prove to be a dampener is the non-serviceable areas by courier companies. Almost 50 per cent of our sales come from non-metros and we hope logistics companies invest in improving their reach to rural India.” - Ms Deepa Thomas, Head, Pop Culture, eBay India 3. “Most logistics players have a transport industry background and do not understand how retail supply chain works, leading to delivery delays” - Mr. Dietmar Jobst, sourcing director, Fashionandyou.com
  19. 19. 4. “All verticals are growing at over 60 per cent, and online is the fastest growing. Within online, the focus now is to increase products, like artificial flowers, gifts and chocolates, delivered by courier to over 1,000 destinations” - Mr. Vikaas Gutgutia, Managing Director, Ferns n Petals. Ferns N Petals launched bookmyflowers.com – an online platform for florists to route orders to multiple cities. 5. “Logistics and payments are the two challenges that the e-commerce industry is going to have to deal with. The good news is that these supporting services see e-commerce as a big opportunity and are moving fast to build the right capabilities and capacity” - Mr. Vijay Jumani, CEO and co-founder, Hoopos.com 6. “Logistics in India suffer because the third party ecosystem is not yet sufficiently mature.” - Bansal of Myntra.com 7. “Logistics remained a challenge that everyone in the industry was grappling with” Ashish Hemrajani, Founder and CEO, Bookmyshow.com4.17 EMERGING NICHE ECOMMERCE LOGISTICS 1) Chhotu (or Santa Claus Couriers) is a startup based in Delhi. The startup claims to be ecommerce friendly as it is technology driven and wants to be an extension to the E-commerce sales channel. Their clients are Myntra, GKB Opticals, 99labels, Snapdeal.com, GrouponIndia, Fashionandyou.com, Zovi.com, Urbantouch.com, Healthcar.com, and Lenskart.com…. Etc With around 30 ecommerce companies as partners it is handling around 800 transactions daily,
  20. 20. with a monthly transaction value ranging from Rs 75 lakh to Rs 1 crore. 2) Delhivery – It offers a complete set of services to manage the entire E-Commerce supply chain - from procurement to warehousing to packaging to Indias fastest last mile delivery system. 3) “Palande Courier (http://www.palandecourier.com/) is quite popular with Pune companies for ecommerce” - Navin Kabra, first time entrepreneur and creator of www.punetech.com 4) Gharpay is a cash payment network company. It is an advance payment option as against cash on delivery. It helps e-commerce sites to improve their cash flow and working capital“DTDC is also planning to strengthen the business by servicing e-commerce and other Cash-on-Delivery (COD) businesses specifically.” -Chairman and Managing Director, Mr. Subhasish Chakraborty4.18 E- COMMERCE COMPANIES HAVING THEIR OWN LOGISTICS • Flipkart Logistics started by Flipkart in October 2010. Flipkart Logistics expanded its logistics to 37 cities; it is roughly doubling its logistics reach every 5-6 months. • The Fashionandyou gets its logistics support from group company Ecommerce Express which has a group of 350 people delivering across India.
  21. 21. • Apparel retailer Zovi.com too has its own logistics team of 50 people to deliver in 10 cities where it had issues with third-party providers. In other cities, it relies on service providers. • “In India you have to build your own logistics. Everything that we do is built in-house. We dont follow the outsourcing model at all,” - Ashish Hemrajani, Founder and CEO, Bookmyshow.com • Futurebazaar.com works with Future Supply Chains, the groups logistics arm, to create the back-end for e-tailing and works with external partners for home delivery.However, as logistics requires a substantial investment, an in-house modelis not an option for a lot of startups and thats why infrastructural challengescontinue to bother the industry. There are obvious advantages associatedwith having one’s own logistic and warehousing capabilities but it divertsthe focus of the company. It is not just capital investment but also focusand business priorities that are keeping some of the players away frombuilding their own logistics and delivery organizations.4.19 ECOMMERCE SPENDING ON LOGISTICS“In the e-commerce segment, currently, we spend close to 10 per cent ofour sales on logistics cost. In the next one year, we want to bring it downto 5-6 per cent range.” - Kashyap Deorah, President, Futurebazaar.com
  22. 22. 4.20 CASH ON DELIVERYCash on Delivery is a very important feature for Indian market simply forthe reason that India is still not geared up for the payment through Internet.COD is quite tricky to manage and requires a lot of monitoring and control.Handling huge amounts of cash is a challenge at every level fromcountry office to courier.The expenses involved in physically collecting cash, higher rejection ratesand longer turnaround time to receive money make cash on delivery a lessefficient model to sell merchandise online. • "Cash on delivery defies the e-commerce model; it locks up working capital and increases your risk exposure. No merchant likes it," said Akhilesh Tuteja, executive director at audit and advisory firm KPMG. • "Cash on delivery is the most inconvenient payment option. It allows customers too much time to change their mind," said K Vaitheeswaran, the founder of Indiaplaza.com • Online retailers incur an additional expense of Rs 35-65 for every transaction involving cash on delivery - Avendus Capital. The expense could be as high as Rs 100 if there is rejection or if multiple trips are needed to deliver the order. There is also the risk of fraud by cash collection partners. • Cash on delivery blocks working capital that could be better used for growth. That means only E-commerce players who can afford the cash burn will likely to survive in the medium term.
  23. 23. 4.21 ADVANTAGE OF USING A NAME-BRAND SHIPPING COMPANYOnline stores want to outsource their transportation of the goods to ashipping company with good brand visibility because using a name-brandshipping company gives customers confidence in companies ability todeliver their merchandise on time and undamaged — even if it is unknownonline player.4.22 VENTURE CAPITALIn 2011 investors ploughed more than $450m into Indian e-commerce. According to estimates by VCCEdge, which keeps tabs on venture capital and private equity investments, about 48 e-commerce companies raised $427 million till November in 2011, compared with just 11 deals worth $58 million in 2010. In just two years Snapdeal’s venture-capital (VC) backers have stumped up $52m. Myntra, a popular seller of fashion products, has managed to tap investors for $40m since its launch in 2007. Flipkart has attracted $31 million in financing from the US venture capital firms Tiger Global Management and Accel Partners.
  24. 24. 5. CHINA5.1 ECOMMERCE IN CHINA • The e-commerce market in China has experienced a compound annual growth rate (CAGR) of 90 percent since 2008. In 2014 estimated total market size of e-commerce market will be 770 billion Yuan. - Roland Berger Strategy Consultants • Less than 10 percent of China’s urban population shopped online in 2006. That figure jumped to 23 percent by 2010, and will nearly double to 44 percent by 2015 – BCG • Chinas online retail sales are on track to triple to $360 billion by 2015, making it the largest global e-commerce market - BCG • Taobao—part of the Alibaba group - More products were purchased on Taobao in 2010 than at China’s top-five brick-and-mortar retailers combined, making it the biggest retailer in China. It sold 48,000 items per minute.5.2 EXPRESS INDUSTRY IN CHINA • “The domestic demand for express services will far exceed supply in China for at least the next five years” - Da Wa, secretary-general of the China Express Service Association • 2011, express delivery services continued growth rate of more than 30%. Among them, e-commerce business accounted for a large volume of business of courier service companies, 50% ~ 60%. - Shanghai Postal Administration
  25. 25. • China is the worlds third-largest express market, behind only the United States and Japan. The annual sales will reach 143 billion Yuan and the value of processed packages will hit 6.1 billion Yuan by 2015 - Ma Junsheng, director-general of State Post Bureau of China• The revenue of express companies engaging in online shopping business hit 40 billion Yuan in 2010. And in 2011 their revenue is expected to surpass 70 billion Yuan - China E-commerce Research Centre• Daniel Zhang, president of Taobao Mall, said recently the combined number of packages from Taobao Mall and Taobao.com - Chinas largest consumer-to-consumer online shopping site - reached a record high of 28.5 million on Nov 11. "The figure exceeded the total number of packages that all the Chinese courier firms can deal with in one day," said Zhang, underlining the logistical challenge faced by Taobao.• 360buy.com receives over 300,000 orders every day, 72 percent of which are delivered by the company itself. Over 80% of transactions of 360buy (China’s largest e-tailer) were Cash on Delivery (CoD)• Shengtong Express, YTO Express, Zhongtong Express, Huitong Express and Yunda Express with combined revenue of 25.6 billion Yuan, accounting for half of Chinas express delivery industry.

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