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Ecommerce industry likely to spend addl. 500 to 1000 mln USD on Infrastructure, Logistics & Warehousing till 2017-2020: study
Tuesday, August 19, 2014

Indian e-commerce industry is expected to spend an additional 500 to 1,000 million USD on Infrastructure, Logistics and Warehousing, leading to a cumulative spend of 950 to 1900 million USD till 2017-2020, according to an ASSOCHAM-PWC joint study.

The total spend on warehousing and sortation centers could be as high as 3 to 6% of top-line revenues, which represents an cumulative spend of over 450 to 900 million USD of spend in warehousing till 2017-2020. The industry is expected to spend an additional 500 to 1000 million USD in the same period on logistics functions, leading to a cumulative spend of 950 to 1900 million USD till 2017-2020, according to a study titled, ‘Evolution of e-Commerce in India,’ jointly conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and PWC at the ASSOCHAM ‘e-Commerce India Conclave’ here at New Delhi.

The study has mapped the enormous positive impact of the sector on infrastructure, logistics and warehousing. E-commerce providers are now entering a different paradigm of operations, where efficient management of the supply chain is core to the business.

The study further indicates the investments that the Ecommerce companies will have to make in building large fulfilment centres and warehouses, downstream parcel and sorting centres, equipping these nodes with state-of-the-art technology and modern warehousing practices promoting viability across the logistics chain.

The study estimates that over the next three to four years, there will be an addition of 7.5 to15 million square feet in the form of fulfillment centres indicating an additional 6 to 12% of all the space available in the form of organised warehousing in India and almost 25 to 50% of all incremental addition of consumption-driven warehousing space in the same period.

To enhance the reach further, additional sorting and delivery centers will also be critical. Such additional centers with each measuring around 10,000 to 20,000 square feet will be added, said Mr D.S. Rawat, secretary general of ASSOCHAM while releasing the study.

Commenting on the report, Saurabh Srivastava, Director, Operations, PwC said: “The growth of the Ecommerce industry has a huge potential in the country translating into beneficial effects for the manufacturing industry, infrastructure and jobs. In our white paper we have tried to highlight the spill-over effect of the growth of Ecommerce on infrastructure and logistics investments which will include more warehouses, sortation and delivery centers and employment. The potential of the sector and the likely liberalisation in the form of FDI could be a vital factor in attracting significant investments resulting in better infrastructure and robust supply chains.” 

While addressing the conference Mr. Kalyan R. Krishnamurthy, CFO of Flipkart Internet Pvt. Ltd said, eMarketplaces provide many benefits to the retail ecosystem like job creation & skills training, Innovation ecosystem and access MSMEs, women & rural entrepreneurs build own brand and sell to new customers across the nation without stepping out of their workplace via e-marketplaces.

As per the study, currently, India operates at a very low level of air cargo penetration characterised by only a few airports equipped to handle large volumes of express delivery parcels. As the race to the market moves to the Tier 2 and Tier 3 cities a day may not be far off when there is an increasing demand of expanding air cargo connectivity to smaller towns through various merry-goes round aircrafts using charter airplanes and general aviation. Airport operators including the Airport Authority of India(AAI) needs to carefully evaluate this particular category of air cargo on par with other categories of airport infrastructure development.

Fact sheet of the study

  • Study estimates cumulative spend of USD 950 to 1900 million by 2017-2020 on logistics, infrastructure and warehousing
  • FDI policy corner stone of future growth
  • Warehousing capacity could be up by 12%
  • Air cargo, transit routes, aircraft will see big boost
  • Service industry and employment to rise exponentially
  • Size of the e-retail industry poised to be USD 10 to 20 billion by 2017-2020

 

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