1. LOGISTICS AND ECOMMERCE IN INDIA AND CHINA
KAUSHIK RAJA R
II – YEAR, MBA
DMS – PONDICHERRY UNIVERSITY

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 Horse's 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. 1. WORLD MARKET FOR E-COMMERCE
Global Ecommerce sales will reach $963 billion by 2013, growing at an
annual rate of 19.4% - Goldman Sachs
By 2015, companies will generate 50 percent of Web sales via their social
presence and mobile applications – Gartner
2. Three main obstacles that hindered the development of E-
commerce
1) Logistics,
2) credit, and
3) payment
To some extent the obstacles of credit and payment have been removed,
logistic, the essential physical component of E-commerce remains the
development bottleneck of the industry.
Currently, the development of E-commerce is 5-6 times faster than that of
the logistic and express delivery industry.

4. 3. TABLE BASED ON GOLDMAN SACHS REPORT ON
ECOMMERCE SALES
SNO Country or 2010 2013 2010 to 2013
Region Revenue Revenue Growth Rate in
(in billion $) (in billion $) %
1 US 165.8 235.3 12.4
2 Europe 195.2 283 13.2
3 Asia 155.7 323.1 27.5
4 Rest of the 55.8 55.8 29.7
world
5 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
• India's 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. 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 country's 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. 4.2 FRAGMENTED INDIAN LOGISTICS MARKET
4.3 GROWTH DRIVERS OF THE LOGISTICS SECTOR

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. 4.5 FOLLOWING FIGURES ARE BASED ON A REPORT – AGILITY
EMERGING MARKETS LOGISTICS INDEX 2011
4.5.1 TOP TEN POTENTIAL LOGISTICS HUBS

9. 4.5.2 FACTORS BEHIND INDIA’S EMERGENCE AS POTENTIAL
LOGISTICS HUBS

10. 4.5.3 INVESTMENTS ANTICIPATED IN THE NEXT 5 YEARS

11. 4.6 SWOT ANALYSIS OF LOGISTICS
STRENGTHS
• 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 initiatives
WEAKNESS
• 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. • 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 training
OPPORTUNITIES
• 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 sector
THREATS
• 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. • 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 roads
4.7 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 facilities
4.8 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. • 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)
• India's ecommerce market to quadruple in size to $24 billion in 2015 -
Avendus Capital

15. 4.10 ESTIMATES FROM INTERNET AND MOBILE ASSOCIATION OF
INDIA (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 INDIA
Flipkart sells 20 products per minute and shipping close to 30,000 items
per day. In the year ended March 2011, sales totaled US$11m. The
company expects that to increase tenfold this year, and reach US$1bn by
2015.
4.12 EBAY INDIA
Six items are sold on eBay India every minute and their target is to take
the six transactions a minute to 12 over the next year. The online retail
market, barring travel, is pegged at Rs 3,000 crore currently and is
expected to more than treble to Rs 10,000 crore by 2015 – EBay India

16. 4.13 CONTRIBUTION OF TIER-II AND TIER-III CITIES TO INDIAN
ECOMMERCE
• 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. 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 FROM
MONEYCONTROL.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. • Blue Dart Express Limited, South Asia's 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 HORSE'S
MOUTH
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. 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.com
4.17 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. 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 India's 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 Chakraborty
4.18 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. • 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 don't follow the outsourcing model at all,” - Ashish
Hemrajani, Founder and CEO, Bookmyshow.com
• Futurebazaar.com works with Future Supply Chains, the group's
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 model
is not an option for a lot of startups and that's why infrastructural challenges
continue to bother the industry. There are obvious advantages associated
with having one’s own logistic and warehousing capabilities but it diverts
the focus of the company. It is not just capital investment but also focus
and business priorities that are keeping some of the players away from
building 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 of
our sales on logistics cost. In the next one year, we want to bring it down
to 5-6 per cent range.” - Kashyap Deorah, President, Futurebazaar.com

22. 4.20 CASH ON DELIVERY
Cash on Delivery is a very important feature for Indian market simply for
the 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 from
country office to courier.
The expenses involved in physically collecting cash, higher rejection rates
and longer turnaround time to receive money make cash on delivery a less
efficient 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. 4.21 ADVANTAGE OF USING A NAME-BRAND SHIPPING COMPANY
Online stores want to outsource their transportation of the goods to a
shipping company with good brand visibility because using a name-brand
shipping company gives customers confidence in companies ability to
deliver their merchandise on time and undamaged — even if it is unknown
online player.
4.22 VENTURE CAPITAL
In 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. 5. CHINA
5.1 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
• China's 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. • China is the world's 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 - China's
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 China's express delivery industry.