Growth Strategies

Why the Indian Last Mile Delivery Sector is Witnessing Exponential Growth

Delivery on time is the most important thing on any front and what if you make profession out of it
Why the Indian Last Mile Delivery Sector is Witnessing Exponential Growth
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For any business, availability of materials at the time of requirement is far important than price. Availability of materials ensures continuity of production and business. This on time availability of material is highly dependent on the efficiency of last mile delivery. With an inefficient last mile delivery system, companies would end up accumulating stock at multiple points of supply chain, causing pseudo shortage of fund & subsequent loss of business opportunity.

In a country like India where locations and addresses are hard to find, house/block no.s don't follow a sequence and sometimes even GPS navigation goes for a toss, last mile as a sector holds paramount importance. In-spite of all this the consumer is very demanding and want their stuff delivered within 30 mins and we don't have culture of tipping the driver or paying the delivery fee.

Infinite Demand For Last Mile Delivery

According to Vivek Pandey, Founder and CEO, NOW Delivery, this makes it very hard/cost inefficient for restaurants /pharmacies and retail stores to do their own logistics which leads to a lot of them choosing not to do home delivery.

However, he maintained that for remaining competitive and with O2O (online to offline) picking up as a trend, stores are choosing to offload their order taking and critical last-mile logistics part.

“They are doing this for increasing their reach, improving customer serviceability while focusing on only one thing which is stocking /creating the right product which is liked by the customers. Furthermore the cost of maintaining/managing own logistics is prohibitive and with most of the stores being of small scale to invest in technology and assets it’s the best way to share delivery capabilities,” notified Pandey.

Revathi Roy, CEO, HeyDeedee and Zaffiro Learning, believes that the entire experience for the customer is how quickly the delivery can be got. “The USP for any e commerce or food delivery companies is going to be how quick and hence last mile delivery is going to be a sun-shine sector,” she opined.

Vinaya Varma, CEO, mjunction, feels an effective last mile delivery system ensures delivery to all pin codes of India within a short span of time, customized packaging, and end to end operational capabilities like redemption, fulfillment, delivery confirmation and complaints handling.

“At mjunction, we provide end-to-end channel management services for our customised loyalty programme and gifting services. Though the format is B2B, we provide all advantages of an efficient delivery system just like B2C services,” added Varma.

India has very large unorganized retail infrastructure with over 14M retail stores, 1.5M restaurants, 1M pharmacies – informed Pandey. With people getting into the habit of ordering almost everything from the comfort of their homes there is seems to be an infinite demand for last mile delivery.

“With India closely mimicking china in terms of retail and tech adoption, O2O models will take large shares of consumer spending. With retail market poised to hit $1.3 T and assuming a 10% spent last mile logistics implies a mammoth market,” he shared.

Advancement of Technology in this Sector

Smartphone penetration is now touching 60% of population and the arrival of 3G/4G data and better locational accuracy has further opened up the last mile sector.

The basic crowd-sourced rider model getting on demand orders on the app from a pool of merchants similar to the UBER/OLAs of the world is already in place. However, according to Pandey, there is a lot more work being done using advanced technologies like Machine Learning to increase yield per trip. “With the availability of a multitude of categories and differing SLAs (Service Level Agreement) - a bunch of orders could be carried on one trip as compared to a single customer trip in case of a Cab. Think of it as high frequency pool!” he enthused.

Furthermore there is also a ton of scope in further easing out the merchant ordering process using voice based ordering , making Merchant Driver and Driver Customer handshakes more seamless using IoT.

In India the market size for last mile delivery in B2B e-commerce sector is approximately six times larger than B2C ecommerce sector. The B2B ecommerce business is expected to reach USD 700 billion by 2020. The sector is using an optimum mix of technology along with its marketing strength to tap potential in the B2B ecommerce space.

“B2B ecommerce companies are reaching out to the end users faster with the help of technology. Experienced category managers, with a deep understanding of the offered products has uniquely positioned themselves as an e-marketplace for selling various products. Further, the B2B ecommerce companies are using latest machine learning tools that help in analysing the latest price trends and predicting the customer behaviour,” shared Varma.

According to Roy, good brick and mortar service combined with technology to improve services is a must which will make it a seamless experience.

Growth Rate of the Sector

The sector is witnessing tremendous growth much faster than that of e-com which at 57% CAGR looks like the poor cousin of last mile where growth is 3-400%.

“This is more because of the fact that the O2O market is opening up and in the Indian context where 98% of retail is still offline, and there is a lot more ground to cover. There is an overall market potential of 100Million deliveries a day,” enthused Pandey.

According to Forrester Researchan, about USD 1.2 trillion dollars of transactions is expected to take place on B2B platforms by 2021. “The growth rate is also directly linked to the customer experience on B2B ecommerce platforms and will play a pivotal role in driving business in the last mile sector,” opined Varma.

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