E-Commerce & LogisticsSubmission By:

Indian Institute of Management, Shillong

Romulans

Chaitanya Beera

Nishesh Bhasin

Rakind Gupta

Shreyas Pai

Executive Summary

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1. Amazon beginsoffering USAmazon Prime(two-day delivery

2. Amazonstarts Freshpilot in Seattle

3. Launch ofsame-dayservice Shutlin the UK

4. Amazonintroducesbrandedparcel boxes

5. AmazonlaunchesAmazonSupply

6. Amazon rolls out Fresh

7. Google pilots Shopping Express

8. Alibaba launches China Smart Logistics Network(CSN)

9. eBay acquires Shutl

10. Amazon begins Sunday delivery in the US

11. Amazon begins Sunday delivery in UK

12. Alibaba signslogistics/deliverycooperative dealwith China Post

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

1 2 3 4 5 6,7,8,9,10 11,12

Rapidly Evolving E-Logistics Scenario – No longer a support function

Other Characteristics

Last Mile Delivery

Home Delivery

Parcel Lockers

Post Office

Re-routing

Drop at neighbour

Cross Border

Offline vs. Online

Amazon recently opened a brick & mortar store in USA

Most top retailers have e-commerce presence

Omni-Channel Retail

e-Commerce Strategy

Streamline logistics and end-to-end visibility

Interactive consumer feedback system

Recyclable packaging to reduce costs in returns

GST ready logistics vendors and supply chain

Streamline COD – courier to deposit in bank account

Multi-channel visibility -apps, social media

Characteristics of e-Commerce that put spotlight on Logistics

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The Business Model Logistics is the only physical link between the e-retailer and the consumer

Consumer

Virtual Connection

Physical Connection

44%

44% of shoppers abandoned carts due to unsatisfactory

estimated delivery times – A study conducted by UPS and

ComScore in 2014

• Logistics is the critical link between consumer and an e-retailer.

• It has the power of either delighting the consumer or forcing him to change the consumer altogether

Logistics – The Critical Bottleneck in e-Commerce

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Lack of logistics infrastructure and the systems, processes and

technology required to grow the burgeoning e-retail business

Cash on delivery (COD) mode of payment is regarded as a

drawback

High rate of return is another big problem in this regard

High competition leading to price war is also a hurdle.

Rather than the traditional end-to-end distribution model, a new ecommerce-led “line-haul +

regional distribution centre + last mile delivery” model is booming

As e-commerce continues to grow, most shippers, particularly multi-

channel shippers, are still only just beginning to work out what this will entail for their distribution

network infrastructures

Logistics – The Critical Bottleneck in e-Commerce

E-commerce logistics models have led to a wave of new demand for four distinct

types of logistics

Mega e-fulfilment centres where the merchandise is stocked and picked at item

level

Parcel hubs/sortation centres which sort orders by zip or

post code

Parcel delivery centres which handle the ‘last mile’ delivery

to the customer

Seamlessly integrated technology where shopping carts connect via API, web

xml or some other connection to a

transportation management system

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Challenges related to delivery timelines, cash management and returns management

The central area, relying on rivers, lakes and railways, does not have many advantages for export-oriented economic conditions, and has a low level of technology, equipment and logistics standardization, affecting the logistics efficiency

Last Mile Delivery

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Significance Last mile delivery accounts fro 30% of all e-logistics cost – The biggest chunk of cost

The Problem A constant tussle between service levels and uncertainty

Factors affecting last mile delivery

Service Levels Profitability

Quick Delivery Time

Visibility such as Tracking

Free Delivery

Customisations such as re-routing

Free Returns

Expansion in Tier II cities

Unavailability of the recipient

Merchandising till the last stage

Last Mile Delivery is a nightmare for planners due to the fact that it is very difficult to strike a perfect balance between the service levels and the profitability of the entire supply chain

E-Commerce – Porter’s 5 Forces Analysis

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Industry Rivalry

Bargaining Power of Suppliers

Threat of Substitutes

Bargaining Power of Buyers

Threat of New Entrants

High:- Brick & Mortar moving to Click

& Mortar- No requirement of a - Less complex/absent legal

framework- Higher outreach

Moderate:- Brick & Mortar don’t have the

same outreach- Higher cost of substitutes- Touch-and-feel vs. Free Return

Policy- Convenience – at the store

vs.at the door

High:- Demand driven model- Giving best deals to garner

higher customer turnover- Multiple options to choose from

Low:- Serves as a platform for

suppliers- Helps the supplier reach

more customers, thuslowers bargaining power

High:- Intense competition - Discount offers- Speed and convenience

of delivery, try-n-buy, return policy

Will We Start Our Own E-Commerce Business?

A space that is fast becoming cluttered – existence of ventures that address the masses as well as those that look at the niches

Capital Intensive – No investment in showrooms, but high warehousing, transportation, and logistics cost

Low Profits – Very small margins, high competition, high expense

IT Competence – E-Commerce is more than just a website

Vendor Selection and Management – sourcing material in time, from the correct vendor is a hassle

Dependence on others to deliver on your promise

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NO!

Our E-Commerce Strategy

• Customer Feedback is crucial – walk the extra mile

• Tightening logistics and enhancing terms with logistical partners, while developing our own independent capabilities

• Improving quality control measures in sourcing and packaging, to deliver on customer expectation, while developing reverse-logistics

• Direct deposition of COD collections into bank account by courier service, thus reducing the cash collection cycle, and adhering better to the Government and VAT guidelines

• Planning cheaper transportation means keeping in mind the much-awaited application of GST in India

• Streamlined and consistent multi-channel visibility – presence on multiple channels, communicating the same message – social media, apps, duty free areas, multiple countries

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Online Players Going Offline vs Offline Players Going Online

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Why?

Online Players Going Offline Offline Players Going Online

• The key reasons for online players to open physical stores are multisensory consumer experiences, better logistics and consumer service offerings and strong, lasting brand relationships

• Even if consumers prefer buying online, nothing beats the experience of feeling a product, holding it and seeing it

• These stores also serve as logistics centres for home delivery – Overall reducing cost in the supply chain

• Prominent examples – Amazon in NYC, Birchbox, Frank & Oak

• The key reasons for a physical store to open e-commerce websites are –Changing consumer behaviour, opportunity to engage with larger segment of the target market

• Showrooming – The phenomenon which describes the tendency of a consumer to browse for products in physical stores but buy online due to the price differential. Physical stores do not want to loose out on the business

Who will win in the long

run?

In the long run both the physical and online retailers will have Omni channel strategy. We believe that online retailers will have an edge over Brick-and-Mortar retailers, because of –high consumer penetration, attractive marketing strategies, and brand agnostic consumers

Hope You Found This Interesting

Thank You For Your Attention

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