Demonetisation Blocks the Last mile for Logistics Startups
Firms restructure business due to falling ecomm shipment volumes
Bengaluru: The reduced ecommerce shipment volumes due to demonetisation has seen multiple last mile logistics companies scale down operations. Over the past few months, logistics manpower companies such as IKYA Human Capital Solutions, owned by Quess Corp, G4S, and last-mile delivery companies such as Wow Express and Connect Indiahave reduced the number of centres. “All companies working on an employee outsourcing model took a hit. Between November and February, there was a 4045% drop in volumes from ecommerce companies,” said L Sridhar, founder of logistics network company Connect India, which works with local stores and pharmacies in tier-II and III cities and rural areas to create a partner network for delivery in these locations. He added that the company has scaled down operations from 95 cities and rural regions to 45 due to the reduction in ecommerce volumes and lower rates being negotiated by ecommerce players in an effort to reduce burning cash per delivery. “The volume has come down from 1 million to 4,00,000 shipments per month over the last three months,” said Sridhar, adding that the growth targets being followed by the company is now cautious. “We understand the seasonality of the ecommerce business and are now entering into short-term contracts for the peak delivery seasons with the ecommerce players. The planning of manpower in these companies is aligned to the peak. When our contracts end at the end of the peak season, we are moving our delivery staff to other verticals such as agro or FMCG to ensure that they are not out of jobs. We are doing this for the first time in the year 2016-17,” said Guruprasad Srinivasan, president - special projects and logistics at IKYA. IKYA works with Amazon India to provide manpower for its logistics operations. The last filing for compliance by the company with Amazon is dated April 2016. The group company also owns ecommerce last mile delivery service company Dependo Logistics launched in June 2016. Srinvasan added that the service contracts under Dependo, based on performance of the delivery associates, have not been affected by the fluctuating demand. G4S, which provides delivery associates to ecommerce companies on contract basis, has also stopped working with multiple ecommerce clients such as Amazon Transportation Services, the captive logistics unit of Amazon India since November 2016. The company had also suspended contracts with Flipkart and Vector Ecommerce, the main seller on the Myntra platform from 2015. “Rationalisation is part of normal business operations. We exit unprofitable and non-viable client contracts where commercial agreement could not be reached,” said a G4S spokesperson in response to queries sent by ET.