When it comes to the online retail market, there is no challenge like the logistic challenge.
That said, it is no wonder why FabFurnish, a home décor and furniture retailer (one of India’s biggest) launched its very own logistics service called FabOne on March 15th this year. Apart from expansion plans worth over $60 million to raise its stakes against rivals Pepperfry and UrbanLadder, FabFurnish has also decided to invest over $15 million on FabOne. With the money raised, 4 warehouses have been built across India, with plans for many more. Currently 40% of its logistics (delivery in 7 cities) is processed under FabOne thereby guaranteeing better customer satisfaction, reverse shipping and professional assemblage of furniture. The rest, which could easily be more than 100 cities is still accessed by third party delivery channels.
“To cut down on delivery cost and to ensure a greater customer experience we have launched FabOne. In next 6-9 months, we plan to spend $15 million for its expansion,” FabFurnish Co-Founder and MD Mehul Aggarwal told PTI.
But FabFurnish isn’t the first to launch its own logistics service. In its own area of expertise, rivals UrbanLadder and Pepperfry have established private logistics services to work the tricky furniture and décor delivery. Pepperfry, unlike any other retailer in the segment delivers to 150 cities across the country. Major online retailers such as Flipkart, Snapdeal and Amazon have each launched their own logistics service. While Flipkart preferred to rely on third party delivery for a long time till last year, Snapdeal and Amazon had stopped relying on third party delivery as early as 2013.
The realm of furniture delivery just like the realm of food delivery is much trickier than delivering clothes or books. While the concern of damage is equally present, the propensity for damage is higher in furniture and other assemblage products. In a detailed report published by Inbound Logistics we find out that delivering furniture requires extra care in terms of loading and unloading as forklifts and other machinery can damage products. It is also important to notice that furniture should be shipped alongside other furniture and not miscellaneous goods in order to avoid damage. Our report on leading furniture retailers in India shows that going the extra mile in delivery and quality check has brought FabFurnish, Pepperfry, LivSpace and UrbanLadder to the forefront.
The keyword in today’s online retailing is ‘last mile delivery.’ The quicker the delivery date, the bigger the consumer base. But the lack of next day delivery through many third part deliverers has lost a considerable consumer base for several retailers. In the cases where next day delivery can be done via third party deliverers, the costs are unbearably high and with the number of products shipped every day, becomes unfeasible to shell out by retailers. “All large marketplaces have opened their own last-mile logistics arms in India as the capability to deliver goods next day doesn’t exist in India’s logistics sector,” said Ankur Bisen, senior VP at retail consulting firm Technopak. Hence, personal logistics services.
But it doesn’t stop there. Personal logistics are simply more reliable than the rest. Handling cancellation requests, returns and product assemblage are much easier with an in-house logistics service.
The in-house logistics set up by retailers are important to save income but they can also help generate income. By opening these in-house logistic services to other vendors, they themselves become third party deliverers for other retailers in the market. This will be an income generating move and all players, including FabFurnish have this goal on their mind. Even if this milestone will take a long time to reach, this income generation becomes an important reason to establish in-house logistics.
Inspite of many online retailers turning to creating their own logistics services, third party deliverers have seen a boom in market requests. Pepperfry which has access to 100 cities already, is hoping to expand its delivery services to more than 400 cities in the future. But not all e-retailers have the funding to carry out with such an extensive delivery chain or manage it. Many retailers still rely on third part deliverers to reach the Tier 2 & 3 cities which accounts for atleast 30% of their sales.
Bluedart, Gati, Delhivery, etc., are key players in third party delivery of goods for online retailers. Delhivery, a startup has bagged funding of $85million from Tiger Global and increased the number of its delivery boys from 4000 to 10000.
It has also come to light that creating a logistics service is not the end of all problems for retailers. Managing logistics services can be more difficult than third part delivery. This is evident in the case of Jabong which created a logistics service called JaVAS in 2012. But due to difficulties faced it was later sold.
Well there is no right answer to this question. Third party deliverers have their eye on the big bucks and will do everything in their power to perfect their delivery mechanisms. But with enough funding and a strict supply chain mechanism, online retailers can perfect their own logistics services to reach as many cities as possible, thereby ensuring reliable delivery of products and customer satisfaction.
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