Source: The Hindu Business Line, Feb 26, 2017
New Delhi: Many global firms are testing the Indian market by tying up with logistics firms that have built fulfilment centres, before they foray into the Indian market, according to DTDC, an Indian firm in the courier business in which GeoPost, Europe’s second largest player in the courier express market, has a stake.
Direct marketing technique
The €6.2-billion GeoPost is Express Parcels’ business unit of €23.3-billion postal network of France — Le Groupe La Poste.
“(There are) many international brands, which want a presence in India — but are not looking to build infrastructure. There are brands entering with an aim to reach the retail sellers directly without any need to have traditional channels,” Abhishek Chakraborty, Executive Director, DTDC, toldBusinessLine.
Declining to share names of such clients, Chakraborty said the examples include mobile handset manufacturers — a Chinese player; firms in apparel segment; appliances, and home appliances where popular brands in cookers and mixers which served a local market, are now looking to test other regions. “Then there are sellers — brands — that have never gone online, who say we would like to do something online instead of having separate inventory for that,” shared Chakraborty.
Own fulfilment centres
On why such clients would not choose an Amazon, which also has fulfilment centres and thus poses competition to players such as DTDC, Chakraborty said Amazon fulfilment centres function with a very specific purpose — largely with an aim to serve Amazon as an entity.
“Players like Amazon are huge and generate enough volumes to have their own facilities. But, they usually limit themselves to faster, large volume, heavy turnaround stock keeping units (materials), which is mostly commoditised,” he said.And there are huge sellers on multiple platforms such as Paytm, Flipkart, Snapdeal, Amazon, who prefer a neutral logistics player. DTDC has invested ₹8-9 crore in its fulfilment centres in 2016-17.
DTDC has about 15 fulfilment centres across the country. Four of these would be of an average size of 50,000-75,000 square feet range, which were built this year; five to six would be in 25,000- square-feet range; and four-to-five would be in 10,000-15,000 square-feet range, located strategically.
The company is witnessing a sharp revenue growth this year, although the growth would have been steeper had India not faced a cash crunch due to demonetisation, given that e-commerce was largely a cash-driven business.
“We are seeing a 15-per-cent growth on the domestic segment, 20 per cent in international growth — both from India and abroad. Profits have gone up by 45-50 per cent. We saw a dip in November and part of December due to demonetisation — now that has stopped,” he shared.
The growth is supported by a mix of increase in tariffs and volumes. With a large share of e-commerce business being cash-based, the whole industry would have been impacted by demonetisation. “We are providing cash on delivery across 6,000 pin codes. Individual consignees can also pay through multiple wallets,” he added.
‘Zero toll a blessing’
While demonetisation initially led to a lot of confusion, DTDC also saw an improvement in transit time during the period, when tolls were not being collected on national highways.
“We did see an improvement of 10 per cent of service levels when toll collection was stopped.But, delays at toll booths are far less than border clearances,” said Chakraborty.
The company, which is in a growth phase, has plans to raise funds and is considering all options including going public or raising funds privately over the next two-three years.