How Indian E-commerce Firms are Ensuring Smooth Last-Mile Delivery

The advent of ecommerce firms in India and their impact on business operations have been
transformational. The sector, which was pegged at USD 38.5 Billion in 2017, is forecasted to break
the USD 200 billion mark by 2026 on account of a) rising internet, smartphone and debit / credit card
penetration; and b) increasing focus of international retailers to start operations in India. Over the
years, key industry giants such as Flipkart (now, Walmart-Flipkart), Amazon, PayTm and Alibaba have
invested heavily to enhance customer experience and ensure customer retention. Some of the key
initiatives include high focus on deep discounts and cashbacks, introduction of sale festival (Big
Billion Day and Great Indian Sale) and cash-on-delivery payment method, and roll-out of same day
delivery through their loyalty programs (such as Amazon Prime). While all these strategies have
resulted in higher short-term loyalty, challenges pertaining to smooth delivery to customers still
persist.

Although Tier 1 and other urban cities have strong delivery infrastructure / capabilities, the delivery
access to other regions, particularly Tier 2 and Tier 3 cities has been an ever-growing issue for
ecommerce firms to address. According to a survey1 conducted by Mahindra Logistics in
collaboration with IIM Raipur, the key issues observed were: a) no real-time visibility and customer
friction; b) delay in delivery; and c) inconvenient delivery slot for customers. While ~60% of
customers preferred same-day delivery, 72% of respondents highlighted that the average time for
delivery (after order) was 4-7 days.

Keeping in view the logistics complexities and the dampening impact of these issues on their
business model and retention level, all dominant players have started focusing on counteractive
measures to reduce these barriers. For instance, Amazon and Myntra have scaled up the use of mom
and pop, kirana and neighbourhood stores (PUDO centres) to expand reach and ensure quick
delivery. Over 1/3rd of Amazon’s deliveries are catered through these stores whereas, for Myntra,
60% of goods are addressed through this channel. The channel, which falls within Amazon’s I Have
Space and Myntra’s Mensa Network programmes, has enabled these firms to efficiently deliver
goods and build goodwill. Also, these firms have been able to reduce their staff count – for instance,
Amazon’s last-mile delivery staff has decreased from 16,000 in 2016 to 4,000 as of Jun 2018. Beyond
kirana stores, the firms have looped in neighbourhood outlets such as mobile accessories stores,
laundries and pharmacies in their delivery ecosystem. Reliance, which has been gearing up to
introduce its ecommerce platform, views kirana stores as a “key cog” in its intent to capture a large
share of the market. These stores also provide companies a comprehensive view on areas that are
currently not within their direct coverage.

Another emerging concept that is expected to sprout up in the Indian market is ‘omni-channel’.
Taking cues from global retailers such as Walmart and now Amazon, Reliance is planning to adopt an
omni-channel model that will connect both offline and online worlds. Customers would be allowed
to buy goods online and purchase them through Reliance or Reliance-partner outlets.

To address the issue of limited visibility into their orders, Amazon, Flipkart and PayTm have
revamped their app / website interface to help customers view the status of their orders. Customers
can stay abreast of several minute details, ranging from dispatch from mother hubs to delivery hubs
to package received by the delivery agent to expected shipment time. Although these shipment
timings vary based on the customers’ delivery subscription program or preference, the feature that
allows the customers to directly speak with the delivery agent has been instrumental, from both
customers’ convenience and retailers’ cost perspective. The customers can now coordinate with the
agents on their preferred timings (in case they are not available at the designated location) or could
ask them to deliver their package at a nearby location or a designated person such as security guard.

Moreover, these companies have extended their business model to deliver goods with low shelf life
such as groceries. For instance, Amazon Now, which is a part of the Amazon ecosystem, enables
customers to deliver groceries, personal / oral care products (via their partner stores such as Big
Bazaar and Now) within hours. Building on the success of Amazon Now, Amazon has introduced
‘Faster-than Same Day’ program, which is geared towards delivering smartphones to customer
within 3 to 5 hours. Although it was in the pilot phase in Delhi-NCR region as of Oct 2018, the plan
will be rolled-out across different regions in the country. Also, the firm is prioritizing customers’ top
product choices that can be covered under this program.

Lastly, several eCommerce are now partnering with logistic companies that are providing a secured
parcel locker facility. These lockers are placed at strategic locations, allowing customers to collect
them within a stipulated time-frame.

Given various steps introduced by Indian eCommerce firms to address the issue, Mahindra Logistics
proposed various steps such as usage of GPS-enabled vehicles (for real-time tracking) and
customers’ live location (to minimize the hassle and frequent calls) that could further lead to higher
satisfaction.

The next set of innovations for a smooth last-mile delivery is expected to be without human
intervention. Several developed nations have started testing the use of drones (Amazon Prime Air to
deliver goods within less than 30 minutes), pick-up towers and driverless cars for parcel delivery. The
implementation of these tools / technologies, coupled with analytics, IoT and automation, could
make their operations more agile and deliver a superior customer experience. While these
technologies in India are very much desirable, their feasibility and viability may not be ideal currently
owing to significant investment costs and regulatory concerns.
Note: 1The survey participants included 189 eCustomers and 20 Logistic Service Providers

References

1. https://www.pwc.in/assets/pdfs/technology/ecommerce-in-india-drivers-and-challenges.pdf
2. https://yourstory.com/2014/08/indian-e-commerce-ecosystem
3. http://www.mahindralogistics.com/logiquest/pdf/white-papers-2018/IIMRAIPUR-RAIPUR-
INVICTUS-CHALLENGE2.pdf
4. https://economictimes.indiatimes.com/industry/services/retail/kiranas-deliver-the-goods-for-
ecommerce-giants-like-amazon-myntra/articleshow/64535250.cms
5. https://economictimes.indiatimes.com/industry/services/retail/ril-at-heels-flipkart-rushes-to-
step-up-reliance-on-local-stores/articleshow/69122767.cms
6. https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/amazon-pilots-faster-than-
same-day-delivery-service-of-smartphones-in-delhi-ncr/articleshow/66361182.cms
7. https://assets.kpmg/content/dam/kpmg/in/pdf/2018/05/e-commerce-retail-logistics.pdf