Ecommerce retail logistics market pegged at $6.3 billion by 2026

When you order a product from Amazon or Flipkart, have you wondered about what goes on behind the fulfilment of this order. There is a complete combination of stocking, restocking, assorting, delivery, feedback etc that has to be managed. Most of the ecommerce players do not manage these logistics themselves but outsource it to specializes. In India, Delhivery and ECOM Express are two of the largest such logistics players that literally manage the entire supply chain for these ecommerce companies.

Now it is not just the ecommerce business that is being seen as a business opportunity. Even the provision and management of the logistics back-end for these ecommerce companies is emerging as a distinct class of business in India. Popularly referred to as the ecommerce retail logistics segment, it is expected to burgeon at the rate of 24% and growth to become $6.3 billion in size by the year FY26. According to a recent report by PGA Labs, the size of the ecommerce logistics market was just about $2.2 billion in FY21.

No prices for guessing but the growth in ecommerce logistics companies like Delhivery and ECOM Express will be primarily driven by the booming ecommerce retail market. This ecommerce market is expected to touch approximately $145 billion by FY26 and handling about 15 million daily shipments. That would mean a huge focus on the logistics. Here the ecommerce logistics is about handling third-party logistics (3PL) providers to manage delivery, inventory, packaging, shipping, warehousing and also tracking issues.

Thanks to players like Delhivery and ECOM Express, the coverage of ecommerce and its reach has today covered a record number of pin codes across the length and breadth of India. Both are onboarding thousands of delivery partners and both follow asset-light models that are built on outsourcing. This has resulted in the reach of ecommerce even touching smaller tier-2 and tier-3 cities, which were not traditionally served by the ecommerce segment. That has been brough about by ecommerce retail logistics.

What you need to know about the ecommerce logistics market?

Behind the impressive projections, there is an exponential growth in ecommerce logistics that is entirely built on growth of ecommerce. In fact, it is a symbiotic relationship with both helping each other. Here are some numbers for you to keep a track about ecommerce logistics business in India.

The size of the Indian ecommerce logistics market (likes of ECOM Express and Delhivery) stood at $2.2 bn in FY21. However, this number is exponentially set to nearly triple by the year FY26 at $6.3 billion. That is the potential for growth in the ecommerce retail logistics space.

- To understand the magnitude of the opportunity, consider that nearly $145 bn worth of ecommerce transactions will be executed online by FY26. Now, this kind of ecommerce volumes would automatically assume about 15 million daily shipments. Ecommerce retail logistics would be all about managing this entire value chain and ensuring the service delivery at the right place time, place and manner.

- Currently, nearly 60% e-commerce logistics market is outsourced and that provides a huge headroom for specialised logistics service providers and consolidators to offer their services. This outsourced logistics business will gradually grow from 60% to closer to 70% as ecommerce companies appreciate the merits of specialization.

- The big story of ecommerce logistics will be about handling Tier 2 and Tier 3 towns since it is estimate that 46% shipments will be to these smaller towns. We are also looking at close to 860 million smartphone using consumers so the market potential gets expanded by the network effect.

- Today, the effect return in the ecommerce retail business is around 18-25%. As the market expands, that is unlikely to come down too sharply. However, we could see more of in-house logistics companies shifting to outsourcing if the costs come down further. That should happen as a logical next step.