Market Trends of India Intra-city Logistics Industry
Growing Demand for Intra-city Logistics from Tier-2 and Tier- 3 Cities
E-commerce volume growth in India's tier-2 and tier-3 cities surpasses in tier-1 cities. Further, smaller Indian cities now account for more e-commerce sales. The volume share of these smaller cities in India's e-commerce sector climbed to 21.5% in Q4 FY22 as compared to FY19. Furthermore, online spending per customer in tier-2 and tier-3 cities has increased, with these cities accounting for 46% of e-commerce sales value in Q4 2021, with a Y-o-Y growth from 28%.
During the festival season, all major e-commerce brands saw a considerable increase in new clients from these cities. During its month-long festival sale, global e-commerce giant Amazon witnessed 79% of recent buyers from towns such as tier-2 and tier-3 cities, such as Ernakulam, Guntur, Krishna, Godavari, and others.
During its month-long festival sale, value e-commerce company Snapdeal reported a 93% increase in demand from tier-3 cities. The company also added that tier-3 towns accounted for 58% of all orders, while tier-2 and tier-1 cities accounted for 15% and 27% of all charges.
Growing e-commerce demand in tier-2 and tier-3 markets has increased income for intra-city logistic startups like LetsTransport and Cogos, who provide logistic fleets (trucks and three-wheelers, among others) to companies like Amazon, Flipkart, Blinkit, and BigBasket.
LetsTransport said that an increase in delivery to tier-2 and tier-3 markets contributed significantly to the company's growth. In 2021, the company's revenue increased by more than two to four times, with tier-2 and tier-3 markets accounting for 55% of this growth. The companies are capturing this opportunity to expand their services in the country.
Demand From D2C Companies Driving Intra-city Logistics
The D2C model is becoming so popular in India that MamaEarth took only four years to generate an income of INR 100 crore (USD 13.9 Million), whereas globally recognized beauty firms have previously required 20 years.
Companies such as Sugar and MamaEarth benefited greatly from the digital D2C model, which resulted in the exponential growth of this industry. Additionally, established FMCG brands such as Himalaya, ITC, Hindustan Unilever, and others are experiencing severe competition from D2C businesses, such as MamaEarth, Pee Safe, Moms Co., and others.
The holiday season is the most profitable time for small, medium, and large merchants to generate sales and the need to meet growing demand becomes more pressing. As demand patterns are good and sellers are aware of the items that are certain to see increased customer demand, i.e., seasonal inventory, they concentrate their efforts primarily on segregating inventory for easy order pickup and delivery.
Small D2C sellers may lack the resources to manage end-to-end operations on their own, so they turn to third-party logistics and fulfillment companies for effective order administration, streamlined operations, and flawless last-mile delivery. 'Last mile,' as the name suggests, refers to the final stage of delivery and continues to remain a challenge. This is where efficient intra-city logistics and last-mile delivery services are gaining prominence.
Owing to the widespread popularity of online shopping, 3PL aggregators in India have come a long way. The majority of these firms provide full-service logistics solutions, such as inventory management, warehousing, shipping, and last-mile delivery.
Businesses like Shiprocket, Shipway, Pickrr, and others, often known as D2C enablers, have assisted hundreds of firms in streamlining these procedures to scale up quickly. The growing D2C sector is creating more opportunities within the intra-city logistics sector in line with changing customer preferences for shopping and delivery.
