Optimizing Logistics in India: A study on how to structure your D2C logistics.
Logistics is an integral activity for economic growth as it involves the management of the flow of goods from the place of origination to the place of consumption. The sector comprises shipping, port operation, warehousing, rail, road, air freight, express cargo and other value-added services. So there are various components that make a complete logistic stack. This article mainly focuses on shipping ( primarily the D2C part ) of the value chain and briefly talks about warehousing and value-added offerings that are integral.
Any brand that operates in the D2C space highly depends on the logistics to deliver its product to the customer. A basic forward flow of a shipment towards a customer has various touchpoints of logistics involved in it. Starting from when an order is placed in a brand store, the request to fulfil the order is first sent to the warehouses where the product is placed to locate the nearest warehouse to fulfil the order. After locating brands use various 3PL ( 3rd Party Logistics ) partners to deliver that product. In this, there are different SaaS products that a brand uses to efficiently allocate warehouses and 3PL for the delivery of that product. The process might look simple but since it invoices various touch points from Warehouse to logistics it makes it difficult to operate in a manual environment.
The above diagram is a broader-level depiction of how shipping happens on a D2C brand. From a Shipping point of view, we can further divide the service into multiple categories.
- Surface Shipping
- Express Shipping
- Full Truckload (FTL)
- Partial truckload (PTL)
In India Surface shipping is a dominant mode of shipping when it comes to any D2C brand. This is due to the cost-effectiveness of this mode. Whereas currently FTL and PTL capture the largest portion of the pie of the Indian shipping industry and have a market size of $120Bn due to the sheer B2B cargo movement in India. However, as the D2C is evolving and consumers are starting to value the speediness of parcel delivery, the Express mode of shipping is gaining traction very fast. The Rise in demand for express shipping is also due to the rise in 10min groceries services which increases customer expectations from a brand plus there are other factors like a lesser shipment cancellation rate from a brand perspective which encourages brands to go for express shipping.
Warehousing is also an integral part and after COVID-19 Warehousing has got in traction, unlike any other industry with the boom in D2C brands. There has also been a major shift in warehouse operations and locations in specific. Broadly now we can categorize WH operations into 3 categories but the 3rd one is more of a feature and kind of subcategory of the second broad category.
- Large Scale WH
- In-city/Dark Store
- Cold storage
New age approach and opportunities for D2C brands
Logistics has been a massive beneficiary of the D2C boom in India. Historically Indian logistics was dominated by the B2B segment movement but after D2C brands increased in popularity the B2C vertical got expanded exponentially. There is no doubt that Indian logistics is now more and more dependent on B2C shipments thus they will shape more to suit the demands of the D2C brands. With the massive influx of new D2C brands coming from everyday legacy, D2C brands are exploring ways to have high customer retention and reduce CAC. New age methods like Omni channel presence and cross-border brand expansion are increasingly being part of a brand’s strategy.
Unlike the multichannel approach where brands divert their customers to different storefronts offline and online separately. Which involves separate inventory and shipping management for each stream, Omnichannel approach unifies all these aspects. Omni-channel customer acquisitions use the multi-channel approach to reach out to the customers and offer a superior shopping experience to the users at all touchpoints. India’s omnichannel business could swell five times, to $55 billion, by 2027, up from about $11 billion at present. Since omniChannel is a complex proposition there are open spaces to be filled in on the software solution offerings front.
Cross-border selling is something every D2C brand is trying to set up. As India is still a middle-income country with less purchasing power as compared to western countries, brands are exploring ways to ship their products to other countries to increase their margins, brand awareness and profits. Since cross-border shipping involves sending goods outside India there are various government and legal work that slows the process and makes it difficult to ship to other countries. There is also the factor of creating brand awareness and acquiring customers from the ground up. There is a void of companies that enable easy shipping and reduce complexities.
As mentioned in the beginning the increase in 10-minute groceries delivery increased customer expectations and increased the bar of delivery SLA, express shipping is gaining traction even though it comes with a premium price tag. This also helps maintain the company a greater customer satisfaction and virtually diminishes the difference between going to shop in malls and shopping via online stores. India is still in its very early stages of express service being used fully. Still, only 20% of shipments in total go through express delivery. However, companies are slowly and steadily opting for express services. The above chart quad chart explains how different modern logistics propositions can be used to optimize the cost and delivery times for any D2C brand. The dotted part is the optimum balance between the cost and a delivery time perspective.
Top Players
The Logistics industry is crowded with multiple companies. I’m listing a few below.
- BlueDart (Express )
- Swift ( Express )
- Woocommerce ( Omni Channel )
- Wherehouse.io (Warehousing Dark Stores)
- Vinculum (Omni Channel )
- DHL ( Cross Border )
- Dunzo ( Express )
- Blowhorn ( Express )
