Last mile, the ultimate frontier
Amazon is working hard on beefing up its delivery muscle as global rival No 1 throws its hat into the ring
Amazon is working hard on beefing up its delivery muscle as global rival No. 1 throws its hat into the ring. SHUBHOMOY SIKDAR writes
As familiar foes Walmart and Amazon, the table topper and the eighth ranked among the Fortune 500 companies, prepare to meet on the Indian online retail battlefield, reaching the customer fast and without any damage to his shipment could be make or break.
The consumer base here may be huge but in a land which is vast and also diverse — in terms of geography, purchasing power and even infrastructure, all of which influence logistics in different ways — the last mile is often the toughest to cross.
With its recent announcement of geo-tagging the country through maps, that is, obtaining coordinates such as the exact latitude and longitude of the customer’s address and hence ensuring deliverability even if PIN code is confusing or the user may have entered an incorrect pin code.. The announcement of geotagging came days after the company declared that it was delivering in 100 per cent serviceable pin-codes in the country and goes on to show that further innovation is needed to bridge the last mile.
Explaining the strategy of “package consolidation, delivery accuracy, address technology and route optimisation”, Akhil Saxena, vice-president, customer fulfilment, Amazon India, says geo-tagging and setting up more fulfilment centres (FCs) have helped the company bridge the last mile better and enabled sellers to reduce the defect rate which is a metric of undelivered or returned products.
“In 2017, Amazon had 41 FCs with a storage capacity of 13 million cubic feet. In 2018, Amazon.in added 26 FCs, increasing its network from 41 FCs to 67 FCs with a total storage capacity of 20 million cubic feet. This is one and a half times increase in storage capacity from 2017 to 2018. Fifteen of the 26 FCs added in 2018 include 15 specialised FCs exclusively for the fulfilment of orders from the furniture and large appliance category,” says Saxena.
These fulfilment centres are in Coimbatore, Pune, Lucknow, Gurgaon, Mumbai and Bhopal and 25 additional delivery stations exclusively for fulfilment of orders from the furniture and large appliance category, according to Amazon.
So what is the impact of the improved delivery on the business? Does it translate top better demand and supply? Since these new centres were announced in March, the business of summer specific products could be a good way to gauge the impact of an improved network. In an email questionnaire sent to Saxena, BS had asked what kind of progress had the sale of summer-specific products registered and the company said it had gone up three-fold.
“This summer season, customer demand for large appliances especially refrigerators, air conditioners, air coolers and washing machines from across the country witnessed a three-fold growth on Amazon,” says Saxena. Besides building capacity and owning delivery stations that are completely self-managed, Amazon has also tweaked its delivery model by introducing service partner programmes, working with neighbourhood stores who deliver for Amazon under the ‘I Have Space’ programme.
This has helped Amazon reach its products in remote pin-codes, such as Havelock Island in Andaman and Nicobar and Majuli, the riverine island in Assam. “As part of the service partner programme, Amazon India works with entrepreneurs, many with prior experience in logistics and transportation. Our service partner network swelled to cover close to 350 stations in 2017, which is 40 per cent more than the 250 we had in 2016. For example, we work with Monica Enterprise run by Rupak Chanda as our service partner to support our last mile delivery requirements in and around Jorhat city (Assam) and they also deliver Amazon packages in unique locations around Jorhat such as Majuli and 21 other pin codes in and around the city including regions such as Dergaon, Kaziranga University and New Sonowal,” says Saxena.
Similarly, since partnering with Amazon in Andaman and Nicobar Islands, entrepreneur Sabiha has seen 18 times increase in her sales volume and now delivers in over seven pin codes including Havelock Islands. The other programme called “I Have Space” has given Amazon 17,500 stores in 225 cities including Dehradun, Amritsar, Ajmer, Bharuch, Salem and Raipur.
“These local entrepreneurs understand their area well and have immense goodwill in their neighbourhood. Our programmes allow them to supplement their regular income and generate more footfall in their stores. On an average, Amazon India’s store partners deliver between 20 and 30 packages a day, earning a fixed amount per delivery,” says Saxena.
It appears that the service partner and IHS programmes will be at the core of Amazon’s delivery network expansion programme. Saxena goes on to add that IHS is an India-first innovation which could be tweaked and adopted by other emerging markets too.
Harminder Sahni, founder and managing director of business consultant company Wazir Advisors, says that the difference between Amazon and its competitors lies in the experience that it has globally, which also gives it an edge over Flipkart in terms of delivery. With the entry of Walmart, Sahni expects some shake-up but believes Amazon will continue to build on its experience of warehouse management.
Our programmes allow local entrepreneurs to supplement their regular income and generate more footfall in their stores AKHIL SAXENA Vice-president, customer fulfilment, Amazon India