Festival season propels demand for third-party logistics players

Further penetration into smaller cities will only add to this dependence on third-party delivery partners

The festive sales for e-commerce players touched a new high at $5.7 billion this season, while the e-commerce industry has seen a surge in growth, the rub-off effect is seen on the third-party logistics (3PL) companies.

Players such as ShadowFax, Xpressbees, and Ecom Express have seen a prodigious increase in demand this festival season owing to a surge in delivery orders.

The SoftBank-backed e-commerce company Meesho recently beat out Amazon to become the second largest player by festival order volume behind Flipkart. With 100 per cent of orders fulfilled through 3PL logistics players, Meesho stands as the largest contributor for these 3PL players.

Meesho relies on 3PL companies like Delhivery, Shadowfax, Xpressbees and Ecom Express to deliver orders.

“In addition to our existing third-party logistics partners - Delhivery, Shadowfax, Xpressbees and Ecom Express, Meesho partnered with DTDC, Loadshare Networks and rural-focused Elastic Run ahead of the festive season to further augment our delivery infrastructure,” said Sourabh Pandey, CXO, Fulfilment & Experience, Meesho.

Pandey believes that third-party delivery partners allow the company to boost its delivery capabilities in high-demand regions, “these partnerships also supplement our efforts of fulfilling Bharat’s festive shopping aspirations and elevating customers’ online purchase experiences. This also plays an important role in creating a seamless delivery experience for all serviceable pin codes in India,” he added.

Numbers too tell the story. Redseer’s e-commerce festive season 22, week one estimates found that 40-50 per cent of the total orders were fulfilled through third-party logistics players. On the back of high demand, 3PL logistics players added a workforce in Tier 2+ cities to fulfil the expectation of the platform in a seamless way.

This is reflected in the growth of revenue of third-party players as well as demand. Logistics unicorn Ecom Express witnessed a 50 per cent increase in both demand and revenue this festival season.

“Demand increased by 50 to 60 per cent from last season whereas the BAU has doubled. There has been an increase of 50 per cent in revenue since the season of last year,” said T A Krishnan, CEO and co-founder of Ecom Express.

“Productivity of all miles combined increased by more than 50 per cent during the festival season, even at a 40 per cent higher manpower base,” he added.

The logistics unicorn also saw a spike in shipment volume in Tier 3 and beyond compared to Metro, Tier 1, or Tier 2 cities, with volume growth of 2.3x.

Shipping platform iThink Logistics also recorded 680,000 shipments this festival season. This is an almost 20 per cent increase from the pre-festival season period which recorded around 575,000 shipments. In terms of revenue, the platform raked in Rs 5.40 crore during the festival season, up 17 per cent from Rs 4.6 crore before the season began, Zaiba Sarang, co-founder of iThink Logistics, told Business Standard.

According to a report by consulting firm Redseer, India’s eLogistics sector has become one of the largest and fastest growing logistics markets globally and is all set to become a $9 billion industry with a compound annual growth rate of 35 per cent. In addition, the sector’s total shipments are expected to grow by 4x in the next five years.

Within that, the third-party logistics players will become more preferred, especially as e-commerce players start to penetrate into smaller cities and towns. According to the recent festive sales story by Redseer, almost 65 per cent of shoppers came from tier 2 cities.