India's e-commerce logistics space on the fast track for growth

'Around 14.4 per cent of the GDP is accounted for by the logistics industry'


The growth of India's e-commerce logistics space is on the fast track and is expected to exceed more than 10 billion parcels in the next five years (by FY 2028-- the financial year 2028). It is expected that specific business models in the segment are better positioned to emerge stronger in the coming years. According to a report by Redseer Strategy Consultants, India's e-commerce logistics space recorded more than 4 billion parcels in FY2023, and given this trend it is expected to comfortably exceed 10 billion parcels by FY28-- riding on new categories, direct to consumer (D2C) brands along with continued growth in tier II and III cities. In FY23, the e-commerce logistics market in India saw the intensifying competition and some pressure on yields from e-commerce players. 

Besides e-commerce logistics, overall, the sector has seen a rebound after the pandemic years. Credit rating agency ICRA had also forecast 11-13 per cent growth in the road logistics sector this fiscal year. In comparison to the previous estimates of 7-9 per cent, ICRA had revised its growth estimates for the Indian Road Logistics sector to 11-13 per cent for the current fiscal. The rating agency had stated that as the FY22 had a weak first quarter due to the second wave of the pandemic the growth is supported by a strong demand environment, coupled with the continuation of firm freight rates, and to some extent supported by the base effect. 

Experts point out that around 14.4 per cent of the GDP is accounted for by the logistics industry and a large amount of the population is employed in this sector. The value of the logistics sector in India is expected to reach $380 billion by 2025 and there is immense potential for this industry in the country. 

The Redseer report observes that among the e-commerce logistics, Delhivery remains the largest player in the segment by a comfortable margin, also more insulated from recent e-com pressures compared to their peers given their significant non-e-commerce clientele exposure. The report observes that the Indian e-logistics market continues to see meaningful growth in FY23. Total shipments (forward plus reverse) for e-commerce logistics grew to $4 billion in FY23 (ex of hyperlocal shipments). Within this pie, in-house logistics vs third-party players had a roughly equal share. 

The Redseer report points out that during the year, the industry saw intensifying competitive trends from smaller incumbents with yields also being challenged. However, despite this, the market is an attractive long-term bet with the overall e-com logistics opportunity to grow at a minimum CAGR (compound annual growth rate) of 20 per cent to comfortably exceed 10 billion parcels by FY28 on the back of steady e-commerce growth. 

The report observes that the D2C (Direct to Consumer), as an opportunity has emerged as a strong growth segment within e-commerce. D2C brands across channels are expected to grow overall GMV at 35 per cent in the next few years, with accounting for a significant share of this growth. A total of $ 33 billion of GMV (gross merchandise value) is expected to be generated from D2C brands across all channels by CY2027 (the current year 2027). As such logistics players with relevant and customized offerings for D2C brands are well positioned to capture market share in this high-growth segment as well as have a stronger yield profile going forward. 

The report says that despite intensifying competition threats, Delhivery remains the clear market leader in FY23 within e-commerce third-party logistics parcels as per the Redseer data. Further, its wide set of offerings for D2C brands along with its fast-growing non-e-commerce business also makes it better insulated from the recent macro trends in the e-commerce space and a more resilient logistics business overall. 

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