Post­man to be Pass­word for On­line De­liv­ery

In­dia Post tar­gets 50-fold growth in ecomm rev­enue

Economic Times - - Front Page -

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

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