Logistics Challenges Loom for India’s Online Retailers Ahead of Festive Sales
In anticipation of another record-breaking festive season, India’s online retailers are confronting significant logistics hurdles. Industry executives signal that the surge in demand has outstripped capacity additions in warehousing and last-mile delivery, casting a pall over preparations despite expectations of nearly doubled sales by platforms like Amazon, Flipkart, and Meesho this year.
According to a report by e-commerce consultancy Datum Intelligence, the gross merchandise value of this year’s festive sales is projected to escalate by 26%, reaching a staggering ₹1.2 lakh crore, up from ₹94,800 crore in the previous year. This growth rate surpasses the 17% recorded in 2024.
However, signs of impending bottlenecks have emerged, with warehouse delivery slots for September sales filling up as early as June or July—a concerning harbinger of potential complications as Diwali approaches, executives noted.
The demand surge has prompted e-commerce marketplaces, which have increasingly streamlined their logistics over recent years, to seek supplementary capacity from third-party logistics (3PL) firms. Yet, the 3PL sector is currently undergoing a phase of consolidation, thereby limiting viable options for platforms eager to augment their logistics capabilities.
“E-commerce marketplaces have turned to 3PL providers such as Delhivery and Blue Dart for additional capacity,” remarked a senior executive from the sector, preferring to remain anonymous.
“While these platforms have proactively expanded their in-house logistics, indicators point to extraordinarily high demand during the festive period. The impending threat to the supply chain is exacerbated by consumer delays in purchasing electronics, as many await anticipated GST adjustments and consequent price reductions.”
Flipkart operates its own logistics subsidiary, Ekart, while Amazon manages its Amazon Transportation Services. Meanwhile, Meesho has rolled out its logistics vertical, Valmo, to coordinate various service providers.
In response to inquiries, a spokesperson for Delhivery emphasized, “The festive season presents a rigorous test for India’s logistics framework. Our strategy involves establishing a resilient foundation capable of absorbing high volumes and maintaining quality for our partners and customers.”
Highlighting sectors like fashion, electronics, and home goods, the spokesperson affirmed that these categories exhibited positive growth, setting an encouraging precedent for the upcoming sales period.
“While seasonal challenges persist, our operations are tailored to ensure consistent delivery, whether on a common Tuesday or during peak shopping moments.”
To meet the demands of the previous year’s festive season, Delhivery augmented its temporary capacity by roughly 2-3% of its infrastructure, which encompasses approximately 19-20 million square feet. In contrast, this year’s adjustments are anticipated to widen to around 3-5% of temporary capacity, according to a source familiar with the situation.
As highlighted in a recent Economic Times report, businesses across various sectors—including automobiles, consumer electronics, and retail—are expediting their logistics operations to secure trucking resources for the festive season.
Amazon India’s Vice President for categories, Saurabh Srivastava, disclosed, “We have invested ₹2,000 crore to enhance our operational network throughout India. This includes new fulfillment centers, sortation hubs, and over 75 delivery stations, thereby improving delivery speeds, particularly in tier II and III cities.”
Market Dynamics and Consolidation
Supply chain pressures have heightened this year following Delhivery’s acquisition of Ecom Express, a strategic move that fundamentally shifted competitive dynamics. During its quarterly earnings call on August 1, Delhivery stated that a considerable segment of Ecom Express’s network was rationalized and decommissioned post-merger, completing client-side integration.
“The acquisition has empowered Delhivery with greater market influence, allowing it to dictate capacity terms,” one industry executive reported.
However, some analysts note Delhivery’s reluctance to indefinitely expand temporary infrastructure, driven by concerns over being utilized as a stop-gap solution by marketplaces that have progressively reduced their reliance on 3PL partners.
“Delhivery remains focused on optimizing its network without expanding capacity solely for fleeting festive peaks,” asserted a rival logistics executive. “This represents a notable decline in flexibility for e-commerce players accustomed to a more fragmented market.”
This scenario is already impacting brands and sellers, many of whom begin preparations for the festive season months in advance. A founder of a consumer electronics firm recounted, “We typically transport festive inventory by August, but this year, slots at pivotal fulfillment centers were fully booked. Consequently, we’ve been compelled to reroute stock to third-party facilities, escalating costs and complicating logistics.”
Both Amazon and Flipkart have initiated extensive seasonal hiring, with estimates suggesting as many as 400,000 temporary workers will be added, alongside an expansion of fulfillment centers to alleviate logistical pressures.
In a preceding earnings discussion, Delhivery CEO Sahil Barua noted, “The market dynamics are evolving. The competitive landscape has changed, prompting e-commerce players to recognize that low-cost 3PL providers face sustainability issues. Over the long term, high-quality logistics networks will gain the favor of clients.”
As the rapid proliferation of quick commerce continues, logistics pressures grow, with entities like Blinkit, Zepto, and Swiggy Instamart expanding their dark-store networks and vying for the same warehousing and delivery workforce.
Logistics providers contend that the trend of in-sourcing logistics activities by marketplaces has, in part, precipitated current dilemmas. By fostering in-house delivery networks, these platforms have diminished volumes for independent 3PLs, compelling a consolidation that undermines flexibility.
Presently, with Delhivery’s predilection dominating the field, bargaining power has shifted significantly.
“The industry is grappling with the reality that logistics cannot be toggled like a switch,” remarked a senior consultant focused on ecommerce supply chains. “Once capacity is exited from the system, it does not return rapidly.”
Source link: M.economictimes.com.
