Retail News India: “Mobile penetration has ensured demand from most regions, but servicing this demand is not easy,” said Abhishek Chakraborty, executive director at DTDC Courier & Cargo. “A number of issues like lack of physical infrastructure, security concerns and local tax laws prevent complete coverage.”
Currently estimated at $2.3 billion (about Rs 13,800 crore), online retail is expected to gallop to almost $38 billion (Rs 2.27 lakh crore) in the next five years, according to a report by retail advisory firm Technopak.
But almost all states in the country have regions that are not serviced by ecommerce companies. Uttar Pradesh, Bihar, Jharkhand, Punjab, Madhya Pradesh, Himachal Pradesh and West Bengal are among those that have least coverage despite having highly populated towns with high demand. For online retailers this is a lost opportunity.
“Ecommerce growth could have been much more,” said Praveen Sinha, managing director at Jabong. “In these locations people demand the product but are not able to get it.”
This lack of reach becomes critical when ecommerce companies are looking to smaller cities and towns for further growth. A study by Technopak last year showed about 50% of online sales are from consumers outside the top eight cities in India.
“Almost 30% of our sales come from mobile-based shoppers and a lot of this is from tier-II and tier-III cities and towns,” said Ganesh Subramanian, chief operating officer at Myntra.
Marketplaces like Snapdeal that only work with third-party logistics firms are dependent on the network of these firms. Through these logistics companies Snapdeal provides pick up service to sellers in 200 locations and delivery to over 4,000 cities.
Those like Flipkart, which has its own logistics subsidiary, decide on the pin codes they service on their own. However, Flipkart’s logistics subsidiary ekart has a reach of 200 cities. Beyond this, Flipkart too works with third-party delivery companies.
Even many suburbs of big cities are not serviced. Parts of Greater Noida and Faridabad in Delhi-NCR are not covered, as delivering to these parts is not cost-effective, said the head of an online portal who did not want to be named.
The non-standardisation of postal addresses is also a major problem. “There are heavily populated parts in large cities where even having door numbers is not good enough,” said Ashish Jhalani, head of advisory firm eTailing India. Slums in Dharavi and Antop Hill in Maharashtra are areas where order volume is large but finding the right house is next to impossible, said DTDC’s Chakraborty.
“We have issues around pin codes not being defined and customers not knowing the right pin code,” said Rahul Chari, vice-president of engineering at Flipkart, who focuses on supply chain. Flipkart, which crossed $1 billion (Rs 5,990 crore) in sales last fiscal, takes feedback from its logistics partners on the correctness of the address and pin code after delivery. Last year, Flipkart had stopped deliveries over Rs 10,000 in Uttar Pradesh.
The company, however, refused to specify the locations where such restrictions are still imposed. “These are purely business decisions and change from time to time depending on circumstances,” said a Flipkart spokesman.
Local tax rules also lead to restrictions. In states like Kerala, cash-on-delivery is considered a sale, resulting in state taxes being levied. “Many ecommerce companies do not touch Kerala or restrict cash-on-delivery because of this,” said the ecommerce company head.
“West Bengal and Haryana are states that have entry restrictions over a certain amount. In states like Chattisgarh, beyond Raipur our logistics partners do not offer cashon-delivery,” said Saurabh Goyal, vice-president of supply chain operations at Snapdeal that is targeting $1 billion (Rs 5,990 crore) in sales this fiscal.
Myntra’s Subramanian said the company built up its own network in parts of the North East.
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