How big is the opportunity e-commerce represents for Indian logistics companies?
It’s hard to say since e-commerce is growing at breakneck speed. By the time you finish researching the market, it again changes.
But here’s a perspective: Most e-commerce revolves around direct-to-home deliveries, so what companies would have saved running a retail outlet, is what they end up spending on marketing and logistics. And logistics is a huge component – and therefore, presents a huge opportunity to logistics companies, too.
In real-terms, the costs of logistics, depending on the product, can range from 8 percent to 40 percent of a product’s sale value. That includes overall supply chain costs including warehousing, reverse logistics, and delivery, among others.
The opportunity is humungous and ever-growing.
Do you believe e-commerce logistics start-ups like Ecom Express have beaten entrenched players like Safexpress to this gold mine?
To answer that question, I’ll have to go back a little in history. That way, you’ll realize that what we’re offering is very different from what they are – and why we aren’t in competition because we aren’t even playing the same sport.
In the first few years of e-commerce, most transactions were small packages, including books, movies, or T-shirts. Most of this was moved by air, and were declared as courier packages of non-commercial value.
So a laptop being shipped from Mumbai to Delhi was bunched together with other courier documents, all of it in a big bag, and declared as a document and shipped. The legality of doing things this way wasn’t very clear.
Most logistics companies that were formed at the time, and which focused on e-commerce, operated under this grey legal cloud.
Safexpress always wanted to get in this business with thorough legal clarity. Then two things happened. First, state governments warmed up to e-commerce, making legalities less of an issue. Then, customers started buying more than just books and music CDs. They started buying 12-piece crockery sets, 8-seater dining tables, 50-inch TVs, and so on.
The new players could no longer throw these into a big and ship them. And since they hadn’t established large networks of their own, they used the networks of others. If you asked them to describe their networks, they’d say they have 1,000 people making deliveries with bags on their backs. By the way, the legality of using a private two-wheeler for commercial operations is still unclear.
The point is, if Safexpress, was going to get into this business, we wanted to do a good job of it. We wanted to ensure that from the point a parcel is picked up at the seller’s location to the points it’s delivered to a customer’s house, it’s on our fleet. This ensures that at no point has a parcel been handed over to an unknown third-party, nor is it vulnerable to security issues, or inclement weather, as a bag on a bike is.
So we went ahead and ordered 1,000 Maruti Eecos for delivery services. We launched Safexpress B2C 2013. Today, all B2C deliveries are executed on our own branded fleet of four-wheelers. The order on Maruti meant that it had to start a separate line for us.
If you look at how logistics has evolved in the west, even a letter is delivered by a courier in a four-heeler. We are aligning ourselves to the fact that in the long run there will always be a need for four-wheeler operations, a need for branded delivery service, for a proper fleet, for an operation which can be controlled end-to-end.
Now, to answer your question. While e-commerce logistics start-ups may have done alright so far, the fact is they will not be able to deliver, say, a 40-inch TV safely, securely, and on their own fleet. On the other hand, Safexpress is far ahead in the game due to its innovative four-wheeler delivery model and can deliver all kinds of products. We even use customized delivery vehicles for any-size shipments like furniture. This will become increasingly relevant in the times to come when the market will hugely evolve towards shipments of all kinds of shapes and sizes. To that extent, Safexpress is future-ready for e-commerce.
Our services are scalable, secure and reliable. We have India’s largest supply chain and logistics network. We have 25 massive logistics parks spread all over the country. We have a fleet of over 4,000 vehicles for our regular B2B logistics operations. We have a Safexpress B2C presence in over 500 cities, where we have at least one B2C representative. And we deliver to 5,204 pincodes across India.
To build this kind of a network takes time, dedication and a determination. We have created something that can be sustained for decades. For the new e-commerce logistics players to reach this level, it will take a huge amount of time, effort as well as investment.
Why do you believe you need an exclusive B2C set-up? Surely, your current B2B set up can deliver packages safely, securely and reliably.
The requirements of delivering an e-commerce consignment are very different from the needs of traditional B2B deliveries.
Take a B2B example. If, for instance, you were making deliveries for an auto component manufacturer. This manufacturer has a fixed number of dealers in a city. These dealers receive consignments at a pre-determined frequency. The delivery team is used to making these fixed deliveries; there’s a good relationship between the dealers and the delivery executives. That’s not the way B2C deliveries work, where you need to deliver products practically every time to a new person.
There are other differences as well. B2B deliveries are made to a city’s commercial hubs, whereas B2C deliveries are made to residential areas. Residential complexes won’t allow trucks (which B2B operations use) as easily as they would allow smaller delivery vehicles. Also lanes are narrower and parking is an issue in residential areas. And odd-time delivery is an altogether different ball game in itself.
Additionally, executives who make B2C deliveries have different skills from those making B2B deliveries. Their demeanor, outlook, and the way they present themselves are far more refined.
So, clearly our vision is long-term and we are focusing on developing systems, processes and infrastructure, which will help create new standards in the field of e-commerce logistics. Being an industry leader in supply chain and logistics and having brought about numerous innovations in the field, we would like to follow the same ideology in the field of e-commerce logistics as well.
How much revenue does Safexpress make from its B2C business, as a percentage of its overall revenue?
Presently our focus is on strengthening our fundamentals and aligning ourselves completely with the very dynamic e-commerce market, rather than concentrating too much on revenue. That said, we strongly believe that Safexpress B2C business can potentially become as large as our B2B business.
This year, that’s 2015-2016, we are targeting a business turnover of Rs 100 crore. That’s a very nominal target we have taken, because we would not like to deviate from our focus on building capacity steadily and continue doing a good job for our e-commerce customers.
Most of our e-commerce customers want us to carry more. But we’ve asked them to be patient as we grow our business and continue to offer them world-class services. We are creating capacity for 1 million packages a month. We will reach there very soon.
How different is it working with e-commerce companies? What’s your one big challenge?
The biggest challenge is that the business model of e-commerce companies is still evolving. What an e-commerce company wants changes fairly often. And you can’t blame them. Their own models are continually changing. They are evolving from being sellers to operating on a marketplace model, for example.
Some of these models do not make financial sense. Take four-hour deliveries, as an example. It makes for a great advertisement, but if you were to send someone to deliver a book, for example, across the city, that person is going to end up spending about Rs. 400 to get there and back. There is a cost associated with deliveries of this type, and it’s a cost that keeps increasing.
Going forward, we will continue to work closely with e-commerce companies and ensure that we are closely aligned to them.