The changing landscape of express delivery in the last mile delivery sector

As the e-commerce market matures, the delivery business has matured too as a segment in the logistics sector. Express delivery which was once restricted to food has now seeped into each sector marking the e-commerce territory. With this, parcel deliveries are becoming faster, and new trends are coming up.

   
The changing landscape of express delivery in the last mile delivery sector

After emptying your shopping cart, the next thing you see is the notification that says you’re getting your order the next day…and that is simply music to your ears…

In the current scenario, when people are swarming the e-commerce platforms for almost everything, the last thing online consumers would want are late deliveries. But thanks to the express delivery services, home deliveries are getting quicker and hassle free, unless and until something drastic happens that throws a spanner in the works.

But you might ask, what’s so new about express delivery services? They have been around for a long time after all.

Indeed, it’s not a new concept but in case you haven’t noticed, express deliveries have become very important in many senses. Firstly, consumers clearly appreciate same-day deliveries or express deliveries, prompting them to attach greater value to the brands. Secondly, awareness of this fact has led to a number of companies piloting and operating new models around same-day express deliveries, which has done the logistics sector a big favour—enhancing opportunities and growth in the process. Thirdly, last mile delivery times have reduced drastically, which benefits online vendors in their sales and growth. Fourthly, with a good distribution network in place, in the long run a stakeholder can operate at a lower cost.

That is why many consumer-focused e-commerce players especially in the FMCG sector, have been taking great strides in this field and have transformed the whole paradigm of express deliveries. For instance, BigBasket is testing on express deliveries under an hour; 1mg also wants to foray into express delivery, while Grofers has launched their 15-minute delivery service in Gurugram.

We spoke with several logistics players to discuss the importance of express delivery, especially in today’s world where everything must be ‘quick’. But first, let’s take a look at the current state of the parcel logistics market.

India’s last mile—a profitable market

Businesses need logistics services for reaching out to their customers within their tight timelines and for delivering their products, hence, the logistics sector is said to be the backbone of many industries.

Not to forget the fact that it’s a large industry which includes shipping, port operations, warehousing, rail, road, air freight, express cargo and many other value-added services too.

Keeping this in mind, in this article we would be concentrating on the last mile segment which is mainly responsible for express deliveries and is a part of the road logistics industry. The road logistics market size is around $240 billion with a 75 per cent share in the overall market.

According to a RedSeer analysis, the last mile delivery segment is witnessing an upward surge and is expected to become a $6 billion profitable market by 2024. “India’s last mile delivery market is moving in a similar direction to markets like China and the USA where the penetration has reached more than 10 per cent. Following this growth trajectory, India is set to touch a market size of $6-7 billion by 2024,” says the RedSeer report.

But the idea of same day delivery or express delivery has catapulted not only in India but globally as well.

According to an analysis by Brandessence Market Research, it is estimated that the global same day delivery market size was valued at US$ 4,810.1 million in 2020 and is expected to reach US$ 16,739 million by 2027 growing with a CAGR of 19.5 per cent.

Inside article1-The changing landscape of express delivery in the last mile delivery sector

E-commerce was a shot in the arm

Experts say that this is happening mainly on account of the rapid surge in e-commerce.

Although the economy was stalled due to rampant supply chain disruptions in the past year owing to the pandemic induced lockdowns, home delivery became an essential need for people as it is a matter of safety and convenience.

As a matter of fact, quick commerce or Q-commerce is another emerging trend which is serving the need for faster delivery among convenience seeking customers. With high fill-rates and 30–45-minute delivery services for unplanned orders, mid-to high income households in the Metros are increasingly replacing traditional kiranas with Q-commerce platforms like Swiggy, Instamart and Dunzo.

RedSeer states that due to this impetus, the overall e-commerce shipments have grown from 817 million shipments in 2018 to 1364 shipments last year and are expected to grow to over 5000 shipments by 2025.

“The concept of express delivery is not new; more e-commerce brands are deploying this model to meet heightened customer demand,”

says Rhitiman Majumder, Co-founder & CEO at Pickrr, an e-commerce logistics and shipping aggregator.

Initially, express delivery was limited to online food orders, as can be attested to by the popularity of platforms like Swiggy and Zomato. Similarly, express deliveries are now gaining immense traction across other e-commerce categories such as FMCG, fashion and wellness, “The pandemic has brought in a visible shift in customer behaviour and expectations – they want a superior purchasing experience, faster deliveries and a hassle-free return process,” said Majumder.

WareIQ, which specialises in one day delivery and fulfilment services, has experienced tremendous growth in their business. Harsh Vaidya, its founder & CEO says that e-commerce has been growing like never before and that has caused logistics businesses like them seeing greater traction. In fact, WareIQ witnessed a 100 per cent volume growth month over month during the duration of the lockdown. “Volume on our platform has expanded by 11.5 X in the last one year. This led us to accelerate our network expansion,” he tells us.

“As the business witnessed a surge in volumes across zones, we had to expand our fulfilment presence in all metros as a result. Also, we have seen a large percentage of offline commerce shifting to online in this duration. We spent a lot of time with traditional retail brands who had to make a quick transition to online where they didn’t have the supply chain required for faster speed,” Vaidya added.

With this, the few segments that picked up fairly well for the logistics business include—FMCG, personal care & cosmetics, nutraceuticals, healthcare etc.

Inside article2-The changing landscape of express delivery in the last mile delivery sector

Express delivery is what customers want

At one time, goods that you would order online would reach you within 7 to 10 days.

“The core reason behind this is that the distribution is centralised while demand is highly distributed for most e-commerce brands,”

says Vaidya of WareIQ.

However, due to the rapid evolution of technology, express deliveries are getting faster and myriad options are readily available to us at any given point in time.

And this has become the norm for consumers now.

Without having any idea about the inner-workings of the logistics sector, shoppers nowadays are only conversant with the mechanics of ordering an item online and are content with getting it the next-day or even on the same-day in many cases. Another fun fact is that we can say that e-commerce giant Amazon is responsible for turning this into a habit, as it is the original adopter of the same-day and next-day delivery model.

Also, the vast array of the products and services available due to the meteoric rise in e-commerce, have now also given rise to a greater demand for more advanced shipping options, promising faster and faster delivery. They want it faster and with more accuracy.

In this regard, data and statistics gathered by Invesp, a marketing agency are really interesting. It shows that 80 per cent of the online shoppers surveyed wanted same-day shipping, while 61 per cent wanted their packages even faster — within 1-3 hours of placing an order.

Meanwhile, 96 per cent of customers consider ‘fast delivery’ to mean same-day delivery. Whereas 49 per cent shoppers say that same-day delivery makes them more likely to shop online. Not only this, 56 per cent of young consumers between the ages of 18-34 years expect to have same day delivery. And if the retailer gives them the option to pay for same-day and express deliveries, 61 per cent consumers are willing to pay more for same-day delivery or for faster delivery.

“As express delivery has become a baseline expectation, monetising it specifically by brands is a little tough. Though it is a common trend by brands to charge for the fast-shipping, its bill-value is lower than a certain threshold. In our experience, we have seen this leading to a shift in consumer behaviour and their increasing their basket size to avail of the fast-shipping model. The other monetisation model is similar to Amazon-prime where loyal customers would be willing to pay a monthly subscription in exchange for value services like fast-shipping and new exclusive offers,” elaborates Vaidya.

There are two main reasons for wanting same-day delivery—the order was needed immediately, and the shipping was free.

And there are customers who will abandon a cart online, if they do not get the option of same-day or faster shipping. The data says that more than 25 per cent of shoppers would do that.

Operations large and small are all bound to adopt ways to meet the delivery options expected by customers—or else face the prospect of losing their business to a competitor. A survey conducted by ShipStation, an international logistics player, examining the effect of the pandemic on all thing’s logistics, revealed its impact on consumer behaviour.

According to the findings, the impact of a delivery experience lasts long and has a further impact on the brand’s perception as well. The survey revealed that 80 per cent of consumers believe that it is the retailers’ responsibility to ensure timely product delivery. And if the shipping goes wrong, the brands risk maligning their images in the minds of their customers. 90 per cent of consumers say that a bad shipping experience negatively impacts their overall shopping experience, and 87 per cent agree that it makes them less likely to shop with that retailer again in the future.

Commenting on these findings, Vaidya says, “Since Amazon’s India market entry in 2013, online shoppers have got accustomed to a next-day or two-day delivery service quality. That means if your online store doesn’t provide this, they shop elsewhere.”

Inside article3-The changing landscape of express delivery in the last mile delivery sector

It’s good for business

Concurring with these findings, experts say that fast deliveries are the need of the hour.

One possible argument is that every seller is not an Amazon or a Flipkart, even if it has its own D2C website. That means to retain a customer, the D2C brand has to go the extra mile in their performance, including in the shipping of their products.

“For e-commerce giants, delivering a product within 1-2 days of order placement is possible because they have their own fulfilment centres. Now, small sellers and D2C brands don’t have the budget for setting up physical warehouses or invest in expensive WMS systems, which prevents them from offering next-day delivery,” says Majumder.

While e-commerce continues to grow exponentially as more and more people shop online, sellers simply cannot afford to take 5-7 days for deliveries. In fact, the industry projection is that same-day delivery will become the norm in the next few years, he argues.

“It is no longer an option but a necessity for brands to revamp their logistics and digitise their supply chain operations to survive in the cut-throat e-commerce space and offer a differentiated value proposition to customers,” asserts Majumder.

Thinking along the same lines as Majumder, other experts too agree that express delivery is the way to success.

“Express delivery is not only restricted to smaller parcels,” says Avinash Raghav, Co-founder & MD at Shift Freight, a movers & packers service provider. It has now seeped into the moving & packing business as well, and it is good for business in this particular segment as this what the customers love—fast delivery, he points out.

“While there has been a trend of express delivery or movement of smaller items, we have enabled these movements in a short span of time. In fact, with the outbreak of COVID we witnessed a bigger shift from one city to another. There have been instances where the move happened within a couple of hours of the booking. The challenge herein for us was ensuring planned moves. Also, due to a drop in property rentals, the moves have shifted from semi-urban to posh localities,” said Raghav.

Raghav claims that due to their quick service, they have been clocking more business. The lockdown phase has given them a boost and pushed their daily moves from 1 per day to over 30 moves per day while the scope is of 200 moves per day.

Meanwhile, Pickrr has recorded a 2x growth in order volume and is looking to close FY22 with a stabilised growth of 3.5-4x in terms of revenue. Their revenue target for this fiscal year is Rs 400-450 crores.

Others also argue that if the e-commerce players want to stay in the game, they have to adopt new models. That would require a modern methodology of tracking and returns management. But the present logistics infrastructure and software tools in India were not built for the speed and sophistication that is required for modern e-commerce.

That is why, retailers either end up setting up their own fulfilment infrastructure or rely on a network of third parties to provide services.

“Not having complete control over their supply chain, and huge overheads of fixed investments in infrastructure and tech tools have made Amazon’s faster speeds out of reach for competitors. But getting products to consumers faster will continue to be a trend that the industry will have to address,” highlights Vaidya.

He further says, “In India, e-commerce consumption is less than one packet per capita. In China it is 70; for Europe is in the 20s. As it goes from 1 to 10 or to 20 for us, and it is only a question of time before that happens, the need for express delivery is only going to rise, facilitating the need for on-demand fulfilment or a shipping infrastructure like WareIQ.”

Another stakeholder, Sanjeev Choudhary, Country Manager, sKart Global Express says, “Trends like these are making the whole sector more reliable and trustworthy.”

As not only does it satisfy the customer and builds the brand’s image, but it also contributes to the growth of the logistics brand as well as of the retailing ventures.

It is all because of technology

E-commerce logistics have undergone a digital overhaul over the last decade, and the pandemic has only expedited the pace of this process.

“When the crisis had just started to unfold last year, which was around March-April, e-commerce sellers and D2C brands had to face a multitude of challenges due to supply chain disruptions. As their logistics and fulfilment partner, we had to think on our feet and deploy innovative solutions to ensure delivery is not impacted and customer expectations have been met,” says Majumder.

Choudhary also adding in says, “The time was challenging for every sector and the demand to evolve and adapt to the new normal and logistics wasn’t an exception.”

For instance, the adaptation of instant and fast deliveries, Transportation Management Solution (TMS), End-to-end Digitisation, Internet of Things (IoT), Real-time Information, Multi-stakeholder Collaboration and Transparency, among many more such processes, ended up building a responsive supply chain that delivers not just efficiency but convenience as well, he adds.

“The key to any experimentation or innovation lies in technology,” says Raghav echoing the sentiments of the others.

It’s a fact that over the last 18 months, the industries have adopted modern technology, faster and far more than it was ever expected from them.

The e-commerce industry, in the logistics department is on a roll due to the accelerated adoption of advanced technology interventions such as AI, ML and data analytics. AI-based inventory allocation, for example, has witnessed an uptick in demand as it can accurately forecast customer demand by analysing inventory performance across various locations, sales channels and marketplaces, thereby helping brands plan their inventories accordingly.

Talking about tech interventions, Majumder says that AI has enabled e-commerce sellers to accurately calculate the estimated time for delivery and helped them to notify their customers beforehand in case of a delay.

“During the second wave of the pandemic, we used data analytics to predict certain outcomes for brands. For example, we notified our seller partners that there might be a lockdown in the Northeast,” he avers.

“On Pickrr’s platform, we have also incorporated CALCULA – a smart algorithm that weighs in 20+ parameters to help brands select the best courier service provider as per their specific requirements (delivery time, product type, cost optimization). In addition to the AI-based courier recommendation feature, they also benefit from our data-driven insights that enable them to make quick informed business decisions and scale their operations rapidly. Moreover, Pickrr helps brands to reroute their logistics and increase their order turnaround times,” he says while talking about how his firm is assisting businesses in making their shipping durations quicker.

On the same note, Raghav feels that the logistics tech players by deploying tech-based solutions, are helping customers to receive the best quotes, an optimised route, the most apt transport vehicles and instant query resolutions. “To ensure customer satisfaction, we are providing standardised services and detailed training to our on-ground staff regarding their conduct during COVID. Similarly, we have SOPs in place to make sure that customers are regularly apprised via dedicate move managers, who are points of contact for the customers from the booking till the last mile delivery. We then have a happiness centre dedicated towards the better handling of clients post the move so that their feedback can be converted into a viable action,” he asserts.

Fulfilment centres ensure one day delivery

One-day delivery is a function of the proximity of the inventory to the demand centre.

Vaidya states that it can only be achieved if there is the right placement of inventory in a fulfilment centre that is proximate to the demand centre. “Hence, the role of a fulfilment centre becomes very important in the present scenario where same or next-day delivery has become a baseline expectation by the end users,” he explains.

But often small-scale e-commerce sellers do not have the resources to invest in dedicated warehouses.

Take this example– a Kolkata-based small-scale brand receives an order from a customer in Chennai. What happens then is that it takes the brand at least 5-7 days to deliver the order, which in turn affects the customer’s experience.

“But if a there is a strategically placed fulfilment centre, brands can ensure faster, seamless delivery pan-India without investing in a physical warehouse or expensive WMS solutions. We currently have 4-5 warehouses, through which brands can fulfil orders within 1-2 days across the country,” says Majumder.

Further, to improve their speed while keeping their costs under check, it is important that these fulfilment centres are set up closer to the urban demand centres. On this Vaidya tells us, “This will lead to the rise of new formats in FCs where centres are smaller in size and situated in urban centres unlike traditional FCs in the outskirts leading to the rise of micro-fulfilment which will continue to be a rising trend going forward.”

However, in the movers and packers’ segment this is not possible.

Talking about this perspective, Raghav of Shift Freight says that we need to look at aggregators like Ola and Oyo, which are operating in other sectors. The aggregators create services that are readily available at affordable rates with maximum customer satisfaction while creating many jobs.

“The movers & packers’ industry has been quite disorganized and there’s hardly any accountability if things go wrong. Nor is there any resolution to the queries by the customers. Hence, we are trying to bring the best of customer service in this sector to lift the cloud of uncertainty from the customers’ minds and to provide reliable service,” he tells us.

Inside article4-The changing landscape of express delivery in the last mile delivery sector

Like in any other industry, trends keep changing in the logistics sector as well. For express services too it’s the same logic. When it comes to the trends within the express delivery arena, the experts in this field shared quite a few insights with us.

They feel that the express delivery model is constantly evolving in line with the changing customer expectations. What worked in 2019, will not make the cut today. Some of the trends that we have observed within the industry are—

Brands stores acting as micro-warehouses – Brands with both an offline and an online presence are using their physical stores as micro-warehouses to offer one-day or same-day deliveries to their customers.

“With this ship from store model, they are utilising their in-store inventory to cope with increasing customer demand and high order volumes while cutting back on shipping costs,” says Majumder.

When it comes to online-only brands, they are increasingly relying on 3PL (third-party logistics) companies for storing, inventory and warehouse purposes to decrease their order fulfilment time, minimise logistics expenses and improve customer satisfaction. 

Vaidya adds here, “On-demand fulfilment platforms like WareIQ are extending access to networks with express courier integration on a pay-as-you-go basis.”

Increased automation for efficient last-mile delivery – Efficient last-mile delivery is essential for customer satisfaction.

With e-commerce players becoming more cognizant of this fact, there is an increased use of technology to improve the efficacy of last-mile delivery operations. For example, sellers are leveraging AI-based smart routing systems for the automatic allocation of orders to the warehouse that is nearest to the customer. 

Vaidya says that technology solutions such as QR codes, and payment links are slowly replacing COD.

Emergence of hyperlocal delivery services – Over the last few years, hyperlocal delivery service providers are mushrooming, which enables e-commerce sellers to guarantee one-day delivery.

Hyper delivery services have proven to be extremely successful in the online food and grocery aggregator space, and now brands in categories like FMCG and fashion are leveraging this trend to offer quick deliveries. 

Future of the express delivery segment

Next thing you know, in the near future it’s going to be a drone at your doorstep delivering your pizza or your groceries.

Zealous about the role that drones will play in the future of retail, the researchers in this field expect that both the number of last-mile warehouses and the delivery speed of drones will increase as the technology matures. In other words, last-mile delivery networks will become more decentralised, with drones operating at increasingly faster speeds.

“It would be reasonable to assume that drone technology is maturing quickly. The COVID-19 pandemic will perhaps hasten this process,” said Dr Milind Dawande, professor of operations management at The University of Texas at Dallas’ Naveen Jindal School of Management.

In their study on drone delivery in retail logistics, they point out that a hands-free delivery to one’s doorstep will be an advantage that drones can offer in the post-COVID era. 

In the future if drone delivery is going to be a reality, the study predicts that the perfect customisation of delivery-time guarantees is going to be more profitable. Retailers can capture a sizeable portion of their profit by partitioning their market into a few zones and offering the best-possible delivery-time guarantee for each zone.

“If a retailer promises each customer a different delivery time based on the customer’s location, that would be perfect customisation,” Dawande said. For example, a retailer could give any customer who is 1.5 km away a delivery-time guarantee of five minutes and a customer 2 kms away a delivery-time guarantee of seven minutes.

But perfect customisation seems impractical. “Instead, the retailer might offer all customers less than 6 kms away a guaranteed delivery time of 15 minutes. In other words, limited customisation is good enough,” Dawande explained.

Further, experts say that faster delivery through drones implies more demand and hence more profit. But only if it is accompanied by an increase in the number of last-mile warehouses. “Therefore, in congested markets, where the number of warehouses cannot be increased, the retailer may find it best to offer a delivery speed that is lower than the highest possible speed,” said the report.

Moving on, after the drones come into the picture, the future of express deliveries is definitely going to be huge. And a couple of e-commerce players such as Amazon, Dunzo, etc. have already started pilot projects and testing. While Swiggy has collaborated with ANRA Technologies for drone services.

Even the logistics players are keenly focusing on the drone option.

Delhivery, an e-commerce logistics player has partnered with SpiceXpress, an air cargo firm to build drone delivery capability. Media reports say that pilot projects will soon commence in three to four months.

In fact, the government too is enthusiastic about the usage of drones for various activities and has been working on the draft rules to ease the usage of drones in the country.

According to the ‘Drone Rules 2021’ draft, drone corridors will be developed for cargo deliveries and a drone promotion council will be set up to facilitate a drone-friendly regulatory regime in the country, according to the draft rules.

Considering the fact that the last mile delivery sector is evolving with greater tech interventions and more demand for impeccable services and on time facilities, it’s going to create more strides.

This sector is growing fast in India, and it is opening up more and more opportunities for the stakeholders. It’s imperative for the players to develop strategies that suit the market environment and play to their company’s strengths. Finally, it’s important to bear in mind that this arena is rife with competition, with at least three groups of companies battling for predominance in the last mile segment in the future. These are-the incumbents, the e-commerce players, and the highly dynamic start-ups that are disrupting the marketplace.

A bright future, holding the promise of immense growth and exponential monetary gains is definitely awaiting this sector.