E-commerce is quickly moving to a time where same-day deliveries and instant deliveries will become the norm. How do logistics companies make it happen? The answer lies in strengthening hyperlocal deliveries. The Covid-19 pandemic has sent consumers flocking to online shopping platforms for everything - from food and grocery staples to pharmaceuticals, in addition to the earlier fashion and electronics segment, creating an on-demand market. Logistics companies have had to step up with a strong last-mile network facilitating hyperlocal deliveries to reduce delivery times to as less as 30-minutes, and same-day delivery, catering to consumer sentiment. In this quick read, we explore the rise of hyperlocal deliveries in the backdrop of the pandemic, and what it means for logistics companies in the coming months.
While online shopping is a relatively recent phenomenon, it is impossible to imagine life without it, and all the ease it offers. Be it food, fashion, electronics, even medication and more! If a product is available in the market, it can be delivered to you. Over the last year particularly, there’s been a noticeable increase in e-commerce activity for categories other than fashion and electronics. Food, pharma, grocery, and staples are the most ordered and delivered products, and the surge in demand for them is supplemented by the growth in hyperlocal deliveries.
There’s no dearth of memes on how customers wait for delivery, but Bernie Sanders on a chair in someone’s front lawn resonates. Since the pandemic and the lockdown became the new normal, these memes aren’t just jokes anymore. Customers have a very real expectation that food will be delivered instantly, groceries will be delivered the same day, clothes and electronics will be delivered within 24 hours. And while it may have felt unrealistic earlier, it is achievable and likely the only way forward for ecommerce in general.
The last two years have seen a lot of action in the on-demand and hyperlocal marketplace with several startups closing shop and more new entrants in the market. The investment outlook on hyperlocal deliveries remains bullish though, with both PE and VC firms investing over $533 million into startups operating in this space in 2020 alone, per a Tracxn report.
2014 and 2015 were truly magical years for Indian startups, ideas and capital were flowing in and disrupting the market was on everybody’s minds. This period of time saw the rise of a variety of hyperlocal delivery startups in multiple cities, using multiple business models. Prompted by the success of similar startups in the USA, VCs were happy to pump in funds.
However, in early 2016, The Hindu carried a report wondering if it was the end of the road for hyperlocal delivery startups in India. Grofers had scaled down operations despite raising $120 million in November the previous year. By 2020, a slew of well-funded hyperlocal delivery startups like PepperTap, Opinio, TinyOwl, and Foodpanda India closed operations, and others like Runnr, Scootsy, Grab, and Pickingo were acquired by Zomato, Swiggy, Reliance and Shadowfax respectively.
The rise and success of on-demand platforms is built on the backbone of the gig economy.
Hiring, training, and managing permanent delivery staff in what is a more or less a fluid environment has proven unsustainable for startups in the past. A BCG report estimates that India’s gig economy is capable of creating ~90 million jobs and generating ~$250 billion in terms of the volume of work.
These impressive numbers could be achieved more sustainably with creating more opportunities. The second wave of Covid, despite higher cases, has seen fewer migrations from cities and towns to villages, because more opportunities are available to people to earn and sustain themselves and their families. The availability of riders for deliveries is a major reason for the sustained growth of the hyperlocal delivery segment.
Last-mile Delivery Infrastructure
The turning point in e-commerce has been the consumer expectation of instant deliveries. It is no longer a perk, and awaiting your parcels as soon as you place an order is not just a meme anymore. Another offshoot of the pandemic, possibly, the expectation of instant deliveries has led to a lot of experimentation within the supply chain.
While last mile deliveries have been a challenge for several e-commerce as well as hyperlocal businesses, efficient and accessible solutions are found with the application of technology. AI and ML tools have evolved to optimise routing, batching, demand prediction, and rider allocation. The added logistical advantage of conveniently located distribution centres and scalable warehousing puts brands closer to the end customer and makes hyperlocal more sustainable than before.
Adding to the ease of home delivery, is the all-important safety factor that hyperlocal deliveries offer consumers, drastically reducing the risk of exposure to Covid in crowded marketplaces, while also offering contactless deliveries.
Perhaps it was a matter of time, or simply the market not being ready, that a sizable number of earlier startups never really took off. As the market has matured and consolidated, the surviving startups and the new entrants alike have developed a finer understanding of consumer behaviour and fine-tuned their business models.
While the pandemic rages on, e-commerce and hyperlocal businesses will continue to see growth, innovation, and some degree of consolidation too. The near instantaneous speed of delivery, added to the safety and convenience of it will draw in more customers, in tier 2 and 3 cities too. And logistics players will have to find ways of meeting customer expectations on speed and the delivery experience, across geographies in India.