India Post targets 50-fold growth in ecomm revenue
Athira
A Nair & Harsimran Julka Bengaluru: Internet retailers may have
been the bane of the brick-and-mortar retail trade and a pain for the
old order of things, but for one relic from the past, they are a proving
to be a veritable godsend. For India Post, a 240-year-old straggler
long fighting for relevance in a digital economy, the explosive growth
in this new-age business has offered it a fresh lease of life and given
it the luxury of dreaming big. These dreams have been bolstered by firms
such as Flipkart and Amazon signing up for its services and with the
theatre of activity for the fastgrowing ecommerce sector now moving to
the country’s remote corners.
The Department of Posts is targeting a seemingly implausible 50-fold increase in ecommerce revenues.
“With
decline in document shipments, ecommerce is our department’s new
focus,” a top official at the Department of Posts, told ET. “We are
targeting .` 5,000 crore in revenue from this segment alone in the next
24 months.” It won’t be an easy task given that in the previous fiscal
year to end-March 2014, it earned .` 10,750 crore in overall turnover.
This year, it is on course to earn .` 100 crore as delivery revenues
from ecommerce firms, giving the department’s claims a dark ring of
incredulity as it is looking at a 50-fold jump in just two years.
But
officials point out that India Post had managed to expand ecommerce
delivery revenues from Rs 20 crore to Rs 100 crore in just a year, and
given the explosive growth the sector is seeing, an exponential increase
in revenues is not impossible.
The
department started cash on delivery pilots with Amazon in 2013. But the
service picked up steam only in 2014, when it signed up players such as
Flipkart, Snapdeal and Shopclues. Karnataka and Haryana currently
account for most ecommerce shipments followed by Delhi, Maharashtra and
Andhra Pradesh.
India’s online retail
industry is expected to soar to $23 billion (.`1.4 lakh crore) by 2018
from about $2 billion in 2013. The overall ecommerce sector, including
online travel bookings, is projected at $43 billion by 2018, according
to Nomura.
To be sure, India Post will not
have it easy, competing as it will be with several large logistics
firms such as FedEx, DTDC, Blue Dart and DHL as well as a rash of
startups such as Ecom Express and Delhivery that have jumped on to the
bandwagon.
Leveraging its Vast Network
India
Post, founded as an arm of the East India Company, was a vital
strategic institution for decades but its relevance declined
dramatically as the rise of the Internet and use of emails for
communication made its postcards and inland letters increasingly
redundant.
But despite its mainstay
business staring at oblivion, the department continued to have several
advantages over its competitors, most notably its vast network of 1.5
lakh offices and an army of about 5.5 lakh employees across the country.
India
Post has begun leveraging that strength now. It has begun training its
postmen in ecommercespecific requirements, such as accepting cash or
card payments on delivery – crucial for online retailers in India – and
handling same-day shipments. It also plans to open about 60 so-called
fulfilment centres, where goods are stored and sorted before deliveries,
across the country this year for its ecommerce business. For instance
in Bengaluru, India Post will invest .` 1 crore to decentralise
packaging and ecommerce parcel services by establishing warehouses
across the city, according to MS Ramanujan, Chief Post Master General,
Karnataka Circle. To compete with DHL, India Post plans to buy land near
the airport to establish a warehouse-cumparcel centre, he said. In
Bengaluru and Gurgaon, India Post is already handling about 13,000 and
20,000 shipments, respectively, every day. “We are currently stretched
to our limits. Opening ecommerce specific warehouses will lessen the
load on post offices,” said the official of the Department of Post,
quoted earlier.
Lessons from the West
India
Post can take heart from the experience of other countries where
explosive growth of ecommerce has changed fortunes of their state-run
postal departments. In the West, government postal services have gained
the most from the ecommerce sector. “The US Post is expected to earn
half of its revenues from ecommerce package deliveries by 2020. Deutsche
Post in Germany and Australia Post have also done well,” said Arvind
Singhal, head of retail advisory firm Technopak.
Its
customers, many of whom are now looking to spread their wings in the
hinterland to tap the market potential in India’s small towns and
villages, have good things to say.
“Given
the vastness of our country, India Post plays a key role in offering a
seamless experience for our customers who are located in the most remote
parts of India,” said Neeraj Aggarwal, senior director, supply chain,
at Flipkart, which has been working with India Post since last year in
addition to its own logistics firm Ekart. India’s ecommerce logistics
market is expected to gross over .` 7,200 crore ($1.2 billion) this
year. According to consulting firm PricewaterhouseCoopers, e-commerce
firms will need about 15 million sq ft of warehouse space by 2017, up
from about 1.7 million sq ft available now.
“Getting
manpower for last-mile delivery and high expectations of same-day
delivery due to technology integration are major challenges for us,”
said an official at a large ecommerce logistics player, declining to be
identified. Shrinking air cargo space and rising costs have also put
pressure on private companies to increase shipment rates.
The
value of overall ecommerce sector, including online travel bookings, is
projected at $43 billion by 2018, according to Nomura
Economic Times-
