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State of E-logistics in India

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State of E-logistics in India

  1. 1. www.redseerconsulting.com Query@redseerconsulting.com 2011 RedSeer Consulting Confidential `and Proprietary Information © | www.redseerconsulting.com Query@redseerconsulting.com 2017 RedSeer Consulting Confidential `and Proprietary Information © Flexible in Approach, Firm on Results Flexible in Approach, Firm on Results Q1-CY17 Edition State of E-logistics in India • A comprehensive performance review of the E-commerce logistics sector • Assessed through a regularly tracked set of performance indicators • Published quarterly 1 Published in May 2017
  2. 2. | What is in this report? 2 1. This report includes a comprehensive assessment of Indian online e-logistics sector performance across five key dimensions 2. Each key dimension is rated on whether the sector performed above expectations (Bullish ), broadly as per expectation (Neutral ) or significantly worse than expectations (Bearish ) on that dimension 3. Each key dimension is further built up from multiple sub- dimensions, which are also rated for the sector using the above criteria RedSeer’s Integrated Research ApproachTM incorporating the following: 1. Mystery shopping on 20,000+ items every year 2. Expert interviews on E-logistics industry providing comprehensive coverage of captive logistics of e-tailers (eKart, ATS), New Age 3PLs (Delhivery, Ecom Express) and traditional 3PLs (Blue Dart, GATI) Sector Assessment Approach Integrated Research ApproachTM Research Methodology
  3. 3. | SN Key Dimension Sub-Dimensions 1 Shipment Performance 1. Overall Industry Level Volume Performance 2. Captive Vs 3PL Performance 3. Forward & Reverse Volume Performance 2 Clientele Diversification 1. Share of Large Shipments 2. Share of Hyperlocal Shipments 3. Shipment Share of long tail clients 4. Shipment Share of non-ecommerce in New Age 3PLs 3 Infrastructure Backbone 1. FC count and Capacity Utilization 2. DC count and Capacity Utilization 4 Delivery Excellence 1. Delivery Reliability (Local) 2. Delivery Reliability (Zonal) 3. Delivery Reliability (Local) 5 Unit Economics 1. Share of Surface Shipments 2. Share of COD Shipments 3. Share of Shipments served through alternative modes of delivery (ADM) 4. Cost per shipment 5. 3PL Revenue Overall Performance Five Key Dimensions for Assessing Sector Performance 3
  4. 4. | Glossary 4 Key Word Description RTO Return to Origin- Shipments which are returned without being delivered to end customer (includes post-shipment cancellations) RVP Reverse Pick Ups- Shipments which are returned by customers post delivery COD Cash on delivery ADM Alternative modes of Delivery, like Amazon utilizing Kirana stores to provide last mile services Delivery Reliability Difference in delivery speed between the fastest and the slowest logistic player Glossary Note 1. The report broadly covers the trends in E-logistics B2C market in Q1 CY17 2. Trends in the online B2B logistics market are not covered in this report 3. Trends in the offline logistics market (both B2B and B2C) are also not covered in this report
  5. 5. | Big-5 E-tailers Hyperlocal Long-tail Clientele 0% 100% Q1'16 Q2 Q3 Q4 Q1'17 COD Surface Shipments Executive Summary 5  Q1-CY17 saw the industry return to Q1-CY16 level in terms of shipments  The industry experienced a slump from Q4-CY16, primarily due to post festive slowdown in e-tailing industry  E-logistics industry continued to diversify itself in terms of type of shipments, end users and clientele. Hyperlocal shipments increased by 500 BPS from Q1-CY16 while share of long-tail clientele increased by 700 BPS  E-logistics industry continued to invest in expanding their infrastructure despite lower than expected capacity utilization  Stagnation in e-tailing industry coupled with increased dominance of captive logistics reduced the potential 3PL market  On the positive side, stagnation forced e-logistics players to improve their unit economics through increasing share of surface shipping and experimenting with ADMs Overall, Q1-CY17 followed the cyclical nature of industry and returned to levels seen in Q1-CY16. Although shipments volume and 3PL revenue reduced, e-logistics companies further diversified their portfolio and improved their unit economics 1.8% Q1’16 Q1’17 Shipment Profile (in Mn) Cost Optimization Trends State of the E-logistics Market Q1-CY17- Executive Summary 164 161
  6. 6. | Sector Assessment Scorecard: Q1-CY17 Performance 6 SN Key Dimension Industry Performance Assessment Rationale 1 Shipment Performance • After two successive quarters of growth, the Indian E-logistics market experienced a slowdown in Q1-CY17 • E-logistics slowdown mirrors the stagnating trend seen in Indian e-tailing market • E-tailing driven logistics stagnation has affected both forward and reverse shipments; increasing share of captive orders has further hurt 3PLs 2 Clientele Diversification • 3PLs have responded by diversifying into new segments; large shipments are on an upswing despite a hiccup in Q1-17 while hyperlocal continues to grow • 3PLs have also been able to grow the share of long tail clients and increase their non- ecommerce business 3 Infrastructure Backbone • Despite industry stagnation, e-logistics players have continue to build FCs- which has resulted in failing capacity utilization • Last mile DCs have also been growing for industry- but again with falling capacity utilization 4 Delivery Excellence • Growth in FC and DC network for industry has had limited impact on the delivery reliability of the industry 5 Unit Economics • However, growing FC count has helped to increase % of (low cost) surface shipments; industry has also performed well on other key cost levers • Better management of cost drivers has helped industry bring down its CPS steadily; however revenue has been stagnant 6 Overall Sector Performance • Overall, the past quarter largely suffered from post festive quarter slump and stagnation in e-tailing industry has forced companies to venture out of e- commerce industry Bearish Bullish Neutral
  7. 7. | 164 151 155 179 161 Q1 CY16 Q2 CY16 Q3 CY16 Q4 CY16 Q1 CY17 7 Source: RedSeer analysis  Government regulations led to e- tailers moving their focus away from improving sales  Quarter was spent in tackling these regulations  Quarter was relatively stable with e-logistics players still coping from new regulations  End of Quarter 2 saw first big sales event in 2016  Return of sales events in July and August saw increase in shipments  Hyperlocal continue to improve quarter on quarter • Festive sales held in October and overall strong performance in Q4 from e-tailing sector ushered in growth • Demonetization significantly boosted hyperlocal shipments  Decline in shipments post Q4 is due to non- festive period  In spite of the decline, the overall shipments were almost equal in numbers to Q1 CY’16 After two successive quarters of growth, the Indian E-logistics market experienced a slowdown in Q1-CY17 Indian E-logistics Market- Shipments Count in Millions E-tailing, hyperlocal & reverse shipments for 3PLs & Captive Shipment Performance ~2%
  8. 8. | 14,0 13,0 13,5 17,0 14,7 Q1 CY16 Q2 CY16 Q3 CY16 Q4 CY16 Q1 CY17 Indian E-Tailing Market- Gross GMV Annualized Run-Rate (For Each Quarter, In USD Bn ) 5% 8 Source: RedSeer analysis E-logistics slowdown mirrors the stagnating trend seen in Indian e-tailing market Shipment Performance
  9. 9. | 0 200 Q1'16 Q2 Q3 Q4 Q1'17 Forward Reverse 9 E-tailing driven logistics stagnation has affected both forward and reverse shipments; increasing share of captive orders has further hurt 3PLs Source: RedSeer analysis Bearish Bullish Neutral Decrease in # of shipments served through 3PLs • Major e-tailers have started focusing more on their captive logistics to have a better operational control on delivery experience • Leading players like FK and AZ are delivering only 15-20% shipments through 3PLs Forward volume has reduced by a greater extent than reverse shipments • Forward volume reduced due to decline in e-tailing orders which were placed in Q1 CY’17 Shipment Performance 0% 100% Q1'16 Q2 Q3 Q4 Q1'17 Captive 3PL Forward Vs Reverse Volume Performance (in Mn) 1 Captive Vs 3PL Volume Performance (as % forward shipments) 2 Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17
  10. 10. | 10 3PLs have responded by diversifying into new segments; large shipments are on an upswing despite a hiccup in Q1-17 while hyperlocal continues to grow Source: RedSeer analysis Bearish Bullish Neutral Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17 0% 20% Q1'16 Q2 Q3 Q4 Q1'17 Share of large shipments in Q1 CY’17 have reduced from Q4’16 but its share is better than Q1’16 • Lack of offers on large appliances, a typical feature of festive sales in Q4 led to decline in share of large shipments • However, despite the decrease, overall large shipment share is expected to grow further Share of Large shipments (in %) 1 0% 20% Q1'16 Q2 Q3 Q4 Q1'17 Hyperlocal shipments grew by ~35% in Q1-CY117 over previous quarter primarily due to higher adoption of online food delivery services • Although, number of orders per customer has declined by 15% in Q1-CY17, influx of new customers has offset the decline Share of Hyperlocal Shipments (in %) 2 Clientele Diversification
  11. 11. | 11 3PLs have also been able to grow the share of long tail clients and increase their non-ecommerce business Source: RedSeer analysis Bearish Bullish Neutral Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17 0% 50% Q1'16 Q2 Q3 Q4 Q1'17 With more long tail clients, New Age 3PLs’ dependence on big e- tailers have started to reduce • Diversified clientele nullifies increased cost pressure faced in case of consolidated client base • For example,~45% of Delhivery’s shipments are contributed by diverse clients such as Myntra, Jabong, Zivame, W for Women, Lime road among others Shipment share of long tail clients (in %) 3 0% 20% Q1'16 Q2 Q3 Q4 Q1'17 New Age 3PLs are moving towards alternative modes of revenue • New age 3PLs are experimenting with serving traditional markets such as couriers and offline B2B • For example, 10-15% of Delhivery’s shipments and ~40% of Xpressbees’ shipments come from non-ecommerce (Q1’17) Shipment Share of non-ecommerce in New Age 3PLs (in %) 4 Clientele Diversification
  12. 12. | Despite industry stagnation, e-logistics players have continue to build FCs- which has resulted in failing capacity utilization 0% 100% Q1'16 Q2 Q3 Q4 Q1'17 Captive New Age 3PL 0 120 Q1'16 Q2 Q3 Q4 Q1'17 Captive New Age 3PL Traditional 12 Source: RedSeer analysis Overcapacity in warehousing along with stagnating demand has led to falling utilization of around 55% • Expansion of warehouses has also taken place in low demand regions has led to lower utilization • Low demand of large shipments in e-tailing sector has also led to decreasing utilization in dedicated warehouses pulling down the industry average There has been steady expansion in number of FCs with e-logistics players  Most of the warehouses being established are relatively smaller in size and spread across the country  Additionally, establishing dedicated warehouses for large appliances and furniture has been the focus of the industry Bearish Bullish Neutral Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17 FC Count (#) 1 FC Capacity Utilization (in %) 2 Infrastructure Backbone
  13. 13. | Last mile DCs have also been growing for industry- but again with falling capacity utilization 0% 100% Q1'16 Q2 Q3 Q4 Q1'17 Captive New Age 3PL 0 5000 Q1'16 Q2 Q3 Q4 Q1'17 Captive New Age 3PL Traditional 13 Source: RedSeer analysis Increasing DC footprint has led to overcapacity and low utilization • % utilization in Metros and Tier 1 cities have steadily increased • However, increasing Tier 2+ DC count has offset that increase as they operate much lower than overall average There has been a steady expansion in number of DCs with e-logistics players  Most the DC expansion has taken place in Tier 2+ cities which are expected to contribute bulk of e-tailing orders in future  Certain captive logistics are expanding in East zone where ADM deliveries have failed to pick up pace Bearish Bullish Neutral Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17 DC Count (#) 3 DC Capacity Utilization (in %) 4 Infrastructure Backbone
  14. 14. | 0 4 Q1'16 Q2 Q3 Q4 Q1'17 0 3 Q1'16 Q2 Q3 Q4 Q1'17 14 Growth in FC and DC network for industry has had limited impact on the delivery reliability of the industry Source: RedSeer analysis 0 4 Q1'16 Q2 Q3 Q4 Q1'17 Delivery reliability has stabilized in past two quarters for national orders  Delivery reliability has increased as certain logistic players have switched to surface shipping while others are still carrying air shipping Bearish Bullish Neutral Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17 Delivery Reliability- National (in days) 3 Delivery Performance Difference between fastest and slowest player has decreased significantly in past year  Increase in number of DCs has allowed to decrease time spent in last mile, the major component for local shipments Delivery Reliability1- Local (in days) 1 Delivery reliability has seen fluctuations for intra-zonal deliveries  Warehouse expansion across zones has increased delivery speed for zonal shipments-as distance travelled by shipments has decreased Delivery Reliability- Zonal (in days) 2 Note: 1. Delivery Reliability is the difference in delivery speed between the fastest and the slowest logistic player
  15. 15. | 50% 100% Q1'16 Q2 Q3 Q4 Q1'17 15 However, growing FC count has helped to increase % of (low cost) surface shipments; industry has also performed well on other key cost levers Source: RedSeer analysis 0% 20% Q1'16 Q2 Q3 Q4 Q1'17 Increased dependence on Kirana stores and other local stores are being used for last mile delivery  Pioneered by Amazon, use of local shops’ workforce for last mile delivery for nominal fees has helped in improved delivery performance and reduced costs Bearish Bullish Neutral Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17 Shipments served through alternative modes of delivery (ADM) (in%) 3 Increase in share of local/intra- zonal shipments has increased share of surface shipments Q-o-Q  Widespread FC footprint has helped reduce the distance travelled by a shipment  Surface shipping can now provide same shipping speed Share of Surface Shipments (in% Forward shipments) 1 COD share of orders has been relatively stable for the past year  Growing confidence among consumers in e-tailing is primary reason for slight decline in COD share  Demonetization did not have a long term impact on the industry Share of COD Shipments (in%) 2 0% 100% Q1'16 Q2 Q3 Q4 Q1'17 Unit Economics
  16. 16. | 1,0 3,0 Q1'16 Q2 Q3 Q4 Q1'17 Captive 3PL 16 Better management of cost drivers has helped industry bring down its CPS steadily; however revenue has been stagnant Source: RedSeer analysis 0 150 Q1'16 Q2 Q3 Q4 Q1'17 As a result of increasing regional utilization, lower COD and greater share of ADM deliveries, CPS has fallen for the industry  Moving forward, more logistic companies will try to utilize ADMs to reduce costs  New Age 3PLs have been better at reducing cost compared to traditional 3PLs While revenue per shipment has remained broadly stable y-o-y, 3PL’s revenues have fallen due to lower share of e-tailing orders due to captives expansion  Other revenue sources like hyperlocal and non-ecommerce are yet to contribute meaningfully to revenues  Decline in revenue has affected both New Age and traditional 3PLs equally Bearish Bullish Neutral CPS1= Cost per shipment for logistics (in USD) 4 3PL Revenues (in USD Mn) 5 Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17 Unit Economics Note: 1. Cost includes both forward and reverse logistic costs along with shipment processing cost at warehouses and delivery centers
  17. 17. | www.redseerconsulting.com Query@redseerconsulting.com 2017 RedSeer Consulting Confidential and Proprietary Information © Flexible in Approach, Firm on Results Thank You ! query@redseerconsulting.com 17 Bangalore HQ: Indiqube Sigma, Plot 3/B, 7th C Main, 3rd Block Koramangala, Bangalore - 560034 Mumbai Office: 25/b 4th Floor Usha Sadan Near Colaba PO, Colaba Mumbai - 400005 Dubai Office: 42Seer Technologies FZE G-D-Flex G089 C-Thub Dubai Silicon Oasis, Dubai, UAE Delhi Office: INHWA Business Center Sector 48, Sohana Road Gurgaon -122018 RedSeer is the leader in the internet advisory space 90% Indian GMV as clientele >USD 5 Bn Investments Diligence Completed 400+ Engagements in internet space 50+ Leading global funds as clientele

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