A report on D2C logistics by Redseer Strategy Consultants.

1. September, 2023
A Redseer D2C report
Logistics needs of
Indian D2C
@ 2023 Redseer Strategy Consultants confidential and proprietary infomation

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Glossary
Term Definition
E-tailing Shorthand for Electronic Retailing which refers to the sale of goods through the internet
D2C brands
Vertical players
Horizontal Players
Social commerce
Quick commerce
GMV
3PL
Captive
Aggregators
AOV
RTO
Direct-to-consumer brands are independent brands which have more than 50% revenue from online channels, and they
must have own website /app
Quick commerce is a type of e-commerce that focuses on delivering products to customers within minutes or hours
Gross merchandise value (GMV) is a metric that measures the total value of goods sold through a particular marketplace or
platform over a certain period
A third-party logistics (3PL) provider is a company that provides logistics services to other businesses. These services can
include but are not limited to warehousing, transportation, order fulfillment, and customer service.
Captive refers to a situation where a company owns and operates its own logistics or transportation services
Shipping aggregators are companies that integrate with multiple courier partners to streamline the shipping needs of
ecommerce sellers
Average Order Value (AOV) is a key metric in e-commerce and retail that represents the average amount of money a
customer spends on each transaction or order with a business
RTO or Return to origin refers to any order that isn't delivered to the customers and is returned to its origin
E-tailing players which sell (mostly single) specific categories
E-tailing players which sell multiple categories
Social commerce is the use of social media platforms to promote and sell products and services

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India’s US$ 30 Bn+ D2C market is giving rise to massive
third-party logistics opportunity

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India’s D2C market is expected to be up to US$ 35 Bn by 2027
Source(s): Redseer IP
Note(s): 1. D2C or Direct-to-consumer companies/brands are independent companies/brands which have 50%+ revenue from online channels and have
own website /app; The market size here includes online and offline revenues of the D2C brands; 2. Aggressive scenario estimates
2
3
5
6
30-35
2019 2020 2021 2022 2027P
Indian D2C¹ market size (GMV)
CY 2019-2027P, US$ Bn
GMV CAGRs
2022-2027P
India has a burgeoning D2C market,expected to be up to US$
35 billion by 2027
The D2C market’growth is 3x+ of the overall retail market and
1.6x of the eTailing market
Overall retail
eTailing²
D2C
11%
25%
40%
~40%
+50%
1.6x

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D2C brands are proliferating through differentiated propositions,
carving out niches within large markets
Source(s): Desk research
Examples of how D2C brands tapping on market niches
Fashion
Fast-changing,trendy
Holiday-wear,
Activewear
Custom tailoring
and support
Eco-friendly,
responsible clothing
Ethnic wear
BPC
Formulation based (vegan,
natural,ayurvedic)
Gender specific
E.g.Mens’Grooming
Issue-based (Dry skin,
anti-aging etc.)
Bundled Derma-
consultation
Packaged
foods
&
beverages
Health conscious
International appeal /
Regional products
Homemade,
Ready to cook / eat
Kaamik

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And with brand creation getting easier and increasingly
incentivized in India
Source(s): Desk research
Note(s): 1. The list of players is inexhaustive
Average time taken to scale to INR 100 Cr revenue¹
Years
On one hand,scaling brands in India is increasingly
getting easier…
...and on the other hand,traditional businesses are on
the lookout for attractive D2C brands,further incentivizing
brand creation and scaling
BPC
Electronics
Packaged
F&B
Fashion
14-18
3-5
7-11
3-5
15- 19
4-7
13-17
4-7
Traditional brands D2C brands

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The journey of D2C brand creation in India is only getting
started
Source(s): Desk research
# D2C brands
India and USA, as of end of 2022
Journey of India’s brand landscape
Read of top to bottom in chronological order
India will witness massive brand creation as it
is a significantly brand-deficient country
12000
8000
4000
0
PSU and international
brands (till 1990s)
Major brands came in
through liberalization
(till early 2000s)
The large FMCG/retail
houses diversified their
brand portfolio (till early
2010s)
Online-enabled D2C
brands explosion
(later part of 2010s
to current)
8x+

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As brands scale, the complexity of their operations increases
multi-fold
Source(s): In-depth discussions with Indian D2C brands
Complexity of operations
As depicted
Inbound
supply-chain
Suppliers
(Number of
suppliers)
3x
Core
operations
Product
SKUs
(#)
5x
Order
Fulfilment
Monthly
Shipments
(‘000)
20x
Customers
base
(Mn)
10x
Typical increase in complexity with scale
From Year 2 to 6
“Logistics is essential to customer’s perception of the
brand. Logistics is brand agnostic but vice-versa is not
true. Logistics experience should match end-customer’s
expectations and they now expect same-day /next-day
delivery”
- GM, large BPC brand
“We have been careful in selecting our Logistics partner
from the start. We needed a reliable partner to ensure
consistency of logistics experience both for us and to
the end-consumers as we scaled up”
- Cofounder, Large Electronics brand
“Scaling has required us to adjust our policies basis the
competition; resulting in changing logistics priorities.
For instance, our easy refunds policy comes with very
high emphasis on speedy returns.”
- Logistics Manager, Sleeptech brand

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Enablers have helped brands scale, and played a significant role
in the evolution of India’s brand landscape
Source(s): Redseer IP, Desk research
Discovery is much more efficient with
digital marketing across various content
types and platforms
Order management is done through
SaaS enablers; They also do inventory
mgmt. across channels and value-added
services like marketing, design etc.
Payments solutions drive convenience
and over time, they have taken measures
to increase trust – this has led to scaled
adoption, directly impacting eCommerce
Digital platforms and advertising increased
product discovery and engagement.
Digital Ad Spend has grown 4x from
2018-22
SaaS liberates businesses from auxiliary
duties
E-commerce SaaS has grown multi-fold in
2018-22
Digital payment solutions expand the
convenience value-prop for customers
Digital Retail payments have grown 6.6x
by volume from 2018-22
The penetration of social media and
short-form video in India is growing
every year
Increasingly, India is becoming on of the
hubs for global SaaS and is witnessing
proliferation of players in the space
Indian fintech is setting global standards
and is driving volumes for eCommerce
400
2019 2020 2021 2022
300
200
100
0
80
FY21 FY22 2020 2021
2021 2022
60
40
20
0
Monthly active users (Mn) Indian SaaS market (US$ Bn) Number of UPI transactions (Bn)
Short-form video
Social Media
8
6
4
2
0
~ 1.6x

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A direct impact of growth of D2C in India is higher 3PL volumes –
up to 3 Bn annual D2C shipments by 2027
Source(s): Redseer IP and analysis
D2C shipments
Bn shipments
Applicability of 3PL and Captive by type of online player
Descriptive
up to 3
0.5
0.4
0.3
0.2
2019 2020 2021 2022 2027P
Specialisedmass
focusedHorizontals
Specialized Mass
focused D2C
Verticals
Other Horizontals
High applicability of 3PL
Bubble size represents CY22 GMV
High
Across city tiers
Low
Concentration of demand
Logistics
investment
per
unit
shipped
Metro/Tier 1
concentration
up to 45%

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With the market evolving, which are the key success factors for
3PL players?
Source(s): Redseer IP and analysis
Rapidly expanding Indian D2C market
India is undergoing massive brand creation
Up to US$ 35 Bn by 2027
Growing at 40% annually, 1.6x times that of the
broader etailing market and 3.6x times the growth
of the overall retail market
India isasignificantlybrand-deficientmarket– has
1/8th the number of D2C brands as in the USA
The rate of brand creation is intensifying
Enablers are growing in tandem
Up to 3 Bn D2C shipments by 2027
While there are ~500 Mn D2C shipments
happening currently, they are expected to grow up
to 45% annally to be up to 3Bn shipments by 2027
3PLs are ideal for D2C brands
With the market evolving
so rapidly,what will it take
to win as a 3PL player?

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To identify the key success factors for 3PLs in D2C, we spoke
in-depth with 60+ brands of various sizes and across sector

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We evaluated the logistics needs of D2C brands along 5
parameters
Source(s): Redseer approach
Incidence of loss/ pilferage
Insurance cover provided and ease of claims
Shipment tracking and its accuracy
Return turnaround time
Non-delivery management process
Shipment protection
We assessed their logistics
needs across 5 core needs
With each parameter being further characterized by attributes as detailed below
Returns management
Pricing/Payment terms
Time reliability
Reach & availability
Total shipment cost (incl. insurance)
Settlement time
Payment Dispute resolution quality – response time, solution time, clarity on escalation matrix
Average delivery speed
Reliability of timely delivery (SLA adherence)
Pin code coverage in metro and tier 1 cities
Tier 2+ cities
Fleet size

14. Shipment protection
Returns management
Pricing/Payment
terms
Time reliability
Reach & availability
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Starting with Fashion D2C players, returns and reach &
availability are the most critical needs
Source(s): Brand in-depth interviews
Need assessment of fashion D2C brands
Criticality by scale of players
Small Mid Large
Special significance
in this category?
“Damage rate is as high as 16% during to
mishandling of products. It adversely affects
our profits ”
~SCM Manager, Small-scale brand
" Customerliketotryclothesbeforetheybuy
them.Returnsareusuallyhigh.Wehaveseenthat
productsarereturnedinnonsaleablecondition“
~ Logistics Manager, Mid-scale brand
“ We plan to expand into small cities. We need
3PL with higher pincode coverage.”
~Logistics manager, Large brand
criticality Low Mid High
Protection is not a concern
for most players, but smaller
players do need it
Returns are a very critical
part of the fashion supply
chain
Fashion D2C brands are
growing rapidly and need the
reach and predictable
availability

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For BPC D2C players, shipment protection, time reliability, and
reach & availability matter the most
Source(s): Brand in-depth interviews
Need assessment of BPC D2C brands
Criticality by scale of players
Small Mid Large
Special significance
in this category?
BPC products tend to be
temperature sensitive, so
need specialized chains
“To ensure client service facilities like cold
storage, anti-fragile packaging should be
provided”
~COO, Small brand
BPC is highly competitive;
hence delivery timelines
dictate platform choice for
customers
“Customer expect faster delivery because
our competitors also deliver faster. Delay in
delivery damages brand image”
~Ops head, Mid-sized brand
BPC has many scaled brands,
which have made wide-reach
a hygiene factor
“ Our focus is on scaling sustainably ”
~General Manager, Large brand
criticality Low Mid High
Shipment protection
Returns management
Pricing/Payment
terms
Time reliability
Reach & availability

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For Home & GM D2C players, shipment protection, pricing/
payment terms, and reach & availability matter the most
Source(s): Brand in-depth interviews
Need assessment of Home & General merchandise D2C brands
Criticality by scale of players
Small Mid Large
Special significance
in this category?
Need for extra security in
packaging is paramount in
Home & GM
“As home décor products are delicate,
additional protection via two layer bubble
wrap, foam padding should be provided.”
~Logistics Manager, Mid-sized brand
Weight mis-match is a major
concern for pricing disputes
“We have been consistently facing weight
discrepancies. It is leading to higher
shipment cost”
~COO, Large brand
Criticality of affordable and
reliable insurance
“Insurance is a must in this space”
~Owner, Small brand
criticality Low Mid High
Shipment protection
Returns management
Pricing/Payment
terms
Time reliability
Reach & availability

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For Packaged F&B D2C players, shipment protection, affordable
pricing as time reliability matter the most
Source(s): Brand in-depth interviews
Need assessment of Packaged F&B D2C brands
Criticality by scale of players
Small Mid Large
Special significance
in this category?
The need for protection/
specialization depends on the
type of F&B item.
“Packaged food such as mithai easily get
damaged when product is not handled
properly.”
~Logistics Manager, Mid-sized brand
Low-margins dictating supply
chain/logistics cost
optimization to the fullest
“PFB category is a low margin industry.
Logistic prices severely affect the profitability
of small-scale brandsNo frills service is the
key to tap into such segment
~SCM Manager ,mid-sized brand
F&B is typically
time-sensitive.
Needs local warehousing
“ Customers don’t wait for 2-3 days for food
product.”
~Ops Manager, small brand
criticality Low Mid High
Shipment protection
Returns management
Pricing/Payment
terms
Time reliability
Reach & availability

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Summary - While clients have specific needs, shipment protection,
affordable pricing/clear payment terms & on-time delivery are critical
expectations, with reach being a minimum expectation
Source(s): Brand in-depth interviews
Summary of logistics needs by category
Criticality by category
Fashion BPC Packaged F&B Verdict
Home & GM
criticality Low Mid High
Critical for most categories
Concern for most, highly
critical for Fashion
Critical for low-margin (F&B)
and high value (Home & GM)
Critical for hyperlocal (F&B)
and competitive BPC space
It is a hygiene factor for most
D2C brands
Shipment protection
Returns management
Pricing/Payment
terms
Time reliability
Reach & availability

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Delhivery, followed by Bluedart, have emerged as the highest
ranking 3PL partners for D2C brands

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We followed a 4-step methodology to rank the 3PL players –
D2C logistics index framework
Source(s): Redseer approach
Methodology of development of Redseer’s D2C Logistics Index
In-depth interactions with‘
D2C brands
As mentioned earlier, we had 60+ in-depth interviews with D2C brands across 4 categories to
understand the criticality of their needs (or 3PL capabilities) on 5 core areas (each core area being
characterised by attributes as laid out in the previous section)
Prepare the parameter weights
for the logistics Index
Based on the criticality of the 5 core 3PL capabilities for D2C brands per category, we assigned
weights to the capabilities per category
Scoring 3PL players
We asked the brands to rate their 3PL partners on a scale of 0-10 on the attributes (that
characterise the core capabilities) to arrive at final scores for the 5 core capabilities for
each player
Computing the weighted average
ranks of the 3PL players
We used the weights for the capabilities by category and the scores given by the 3PL brands to
arrive at the final rankings for brands

21. 3PL quadrant
Based on ratings by D2C brands, as depicted
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Below is the 3PL quadrant mapping the 3PL partner preference of
D2C emerging new-age D2C brands
Source(s): Redseer analysis, Ratings by D2C brands
Preferred by brands looking
for affordable partners in
the major Indian cities
Preferred by brands looking for
superior tech, quick and reliable
delivery across more pin codes
Known for reliable delivery
across the largest number of
pin codes in India
Cost
weighted
experience
Speed and Reach
Shipment
protection
x
Returns
management
x
Tech
stack
Costs
Reach &Availability X Time reliability

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Beyond the core capabilities, the top 3PL players differentiate by
being ‘one step better’ at multiple things (few examples below)
Source(s): Redseer Research and Analysis
Winning capabilities of the top 2 3PL players
Faster COD
Remittance
Advanced tech
stack
Value added
services
Low delivery
time
Most of the 3PLs players
take a week for COD
remittance.
Faster COD
remittance improves
customer satisfaction
Channel integration feature
allows clients to effortlessly
manage orders from multiple
sales channel
Customer information such
as RTO, COD etc should be
readily available on to clients
Warehousing facility allow
sellers to automate and
manage their e-commerce
logistics processes
Services like packaging,
labelling enables clients to
focus on core operations
Faster delivery options like
SDD, NDD are becoming
essential part of customer
service
3PLs can reduce return rate
by adhering to delivery
timelines

23. 2023
Bangalore, Delhi, Mumbai, Dubai, Singapore, New York