The Indian e-commerce landscape has grown manifold over the last decade, accounting for less than US $ 1 billion in 2010, to more than US $ 30 billion in 2019.
This is a result of access to goods country-wide, made possible by the growth in capacity and network of logistics companies. However, the market is still at just 3 per cent penetration as of 2019, far lesser compared to mature markets like the US (15 per cent) and China (20 per cent), creating growth potential in India, 6 per cent by 2024.
Leading global professional services firm, Alvarez & Marsal (A&M) India and CII Institute of Logistics, have released a white paper titled ‘Enabling the next wave of e-commerce in India through supply chain innovation’.
The paper notes how different e-commerce categories are expected to witness differential growth in the next 5 years with evolving operating models and the implications for logistics service providers.
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According to insights mentioned within the paper, e-commerce retail categories are expected to witness a spike in growth due to increasing number of suppliers selling online, the growing selection of products and services available online at rates competitive with bricks-and-mortar retail, as well as changing consumer buying habits enabled by well-funded vertical e-commerce players.
“While bulk of e-commerce volumes come from top 30 cities, more than 60 per cent of e-commerce volumes are likely to come from Tier-2 and Tier-3 cities in the next 5 years. It is an imperative for e-commerce businesses to build their seller base and delivery reach in smaller towns. A study of different operating models helps us evaluate the ecosystem and the expansion requirements for e-commerce companies to level up in times of high demand. These insights underpin our expertise to maximise value for clients through actionable results,” said Manish Saigal, Managing Director, Alvarez & Marsal India.
Operating models for e-commerce will evolve depending on various factors including customer requirements and changing buying behaviour and the availability of appropriate technology and logistics partners. The next wave of anticipated online retail growth drivers for categories such as fast-moving consumer goods (FMCG), groceries and apparel will highly be driven through social media, chat engines and artificial intelligence (AI) bots.
Commenting on the same, Sudeep Mehrotra, Senior Director, Alvarez & Marsal India said, “The last 5 years in India have been about e-commerce channel becoming a mainstream channel (as important as traditional and organised retail) for companies to design their sales strategy. The next 5 years will be about these four models (covered in the report) gaining meaningful value share in the e-commerce delivery market size. For logistics industry incumbents and investors these ideas offer the next wave of growth”.
The paper attributes the growth of e-commerce over the last decade to internet penetration, smartphone adoption and category expansion. It also states that categories such as electronics have been led by horizontal marketplaces, while penetration in groceries, furniture, pharmacy and cosmetics has been led by specialists.
Some of the key evolving models for e-commerce include order to store for apparel; dark store for FMCG/ grocery and meat/pharmaceuticals; store to customer deliveries for FMCG grocery and omnichannel presence for retailers.
The white paper also suggests that in order to ensure these models function seamlessly, e-commerce companies will need to work with technology and logistics partners that can deliver across all stages of the customer journey as well as service level agreements (SLAs).