The post-pandemic rise of in-city warehousing Augmented by the headway of e-commerce in the country

E commerce and large online sellers now focus on having more control over their Warehousing and Logistics set-up to ensure efficient operations and better customer experience.

Oct 11, 2021 01:10 IST India Infoline News Service

For years, warehouses have existed as “a simple storage facility” until a few recent developments disrupted the Indian Logistics Sector. With the GST (Goods & Service Tax) implementation in 2017, warehousing is undergoing a radical change in India. Along with that, the Central Government’s decision of granting ‘infrastructure status’ to the logistics sector, including warehousing, also led to its formalisation and consolidation and most importantly, E commerce and large online sellers now focus on having more control over their Warehousing and Logistics set-up to ensure efficient operations and better customer experience. These factors have brought significate new developments to Warehousing. One such development is IN-CITY WAREHOUSING – i.e., Last Mile logistics.

From make-shift commercial buildings/godowns to compliant Grade-A warehouses, in-city warehousing is witnessing a paradigm shift. Operating on manual material handling - initial godowns do not maintain a dedicated parking space. Without primary fire protection, such non-compliant make-shift commercial buildings are unsafe too. The warehousing situation slightly improved a few years ago, when Grade-B warehouses handled the material with hand pallet trucks, forklifts and other docking equipment. Yet, these warehouses are not compliant with regulatory/building norms, maintaining only a minimal fire and electrical infrastructure and poor ventilation; also the parking space is only limited to the roadsides.

Here are some things a good In-City warehouse could offer:

1. SAFETY in terms of segregating Truck movement from Pedestrians and Goods inwards and outwards – to minimize risks of accidents and pilferages.

2. COMPLIANCE to all Building norms and Local norms to ensure uninterrupted operations.

3. CONVENIENCE in terms of being located close to customers so the delivery time is quick, Employee access, Movement of trucks and goods, Good ventilation and public transport.

With the focus of warehousing shifting towards safety, compliance and the right location; in-city warehousing has come to mean facilitating secure and convenient storage and delivery mechanisms for last-mile logistics.

Presently, warehouses in most Indian cities are chiefly restricted to their peripheries, at a significant distance from their customers’ residences. In-city warehouses are gaining traction and being utilised as small distribution hubs located close to customers, principally due to the evolution of e-commerce in the country and a competitive race to be quick to deliver goods to customers. Same-day deliveries are no longer a flex, online sellers are now talking about delivery in ‘hours.’

E-commerce and third-party logistics hold a predominant position in the demand pie, contributing to the rise of in-city warehousing. Although e-commerce was flourishing in the country even before the COVID-19 pandemic-resultant lockdown, the closure of malls and physical stores further accelerated its growth. Approximately over 20,000 pin-codes across India are now serviced by e-commerce. A surge in online orders also significantly increased the requirement of essential goods online. Meanwhile, growing urbanisation has resulted in customers demanding faster and timely fulfilments. Reports suggest that 80% of customers today want same-day delivery, while 50% are willing to pay a marginally higher price for faster delivery.

The e-commerce sector is rapidly transforming from a two-day delivery to a two-hour delivery model for select SKUs. Currently, this is becoming popular for grocery, e-pharma, FMCG and other time-sensitive SKUs. A two-hour or 90-minute delivery is possible if an e-commerce operation boasts a solid supply chain network, with in-city warehousing being a critical component.

Considering the advantages of being close to customers’ doorsteps, e-commerce companies are stocking substantial inventory closer to their customers’ locations for quick deliveries. The time of delivering products is the sole opportunity to physically interact with online shoppers. Through quicker deliveries, trained delivery staff, neat and conscious packaging and smooth management of returns and damages, online sellers can build a great customer experience with their buyers. This can be managed through self-operated Last mile delivery stations close to customers.

According to sales figures of some online sellers, 2020 saw more than 80% year-on-year increase in festival online shopping value and the year-on-year increase in online shoppers count was as high as 65%. An upward trend such as this is expected to continue.

A market for more than a thousand such last-mile delivery stations across major cities such as Bangalore, Mumbai, Delhi, Kolkata, Pune, Chennai and Hyderabad is estimated.  This trend is expected to soon pick up in Tier 1 and Tier 2 towns.

The author of this article is Anshul Singhal, Managing Director, Welspun One Logistics Parks

The views and opinions expressed are not of IIFL Securities,

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