Looks like Amazon has found a new way to capture a big chunk of Indian ecommerce and rake in the big bucks. The Jeff Bezos run company has:
- Dedicated major funds to warehousing
- Expanded its ‘I have space’ programme
- Planned to launch more warehouses in a few weeks
But, the delivery strategies don’t end there. Amazon’s latest logistics approach will involve the delivery of orders from rival platforms too.
Delivering orders placed on other marketplaces
The expanding logistics business under Amazon will cater to its own seller’s delivery requirements on the Amazon online retail platform and also their requirements on rival platforms like Flipkart and Snapdeal. In addition to this, Amazon will also dedicate its logistics services to sellers engaging in offline distribution.
According to three industry executives with knowledge of this development, a pilot version of this logistics service has been initiated with 300 online sellers registered on Amazon’s marketplace.
“Amazon wants to build ATS (Amazon Transportation Services) into an independent logistic service which competes against Flipkart’s Ekart and other independent logistic services like Blue Dart and FedEx. It has started with its own sellers, but eventually will even look at offering logistic services to brands and other businesses. ATS has recently hired a lot of executives from leading courier companies,” said one of the industry executives.
Amazon’s logistic services are carried out by ATS, which mostly fulfilled FBA seller orders with their products stored in Amazon warehouses. Now, the etailer will be using this logistics arm to control a major section of Indian ecommerce. It has priced ATS competitively for sellers, (that is lower than courier services from third-parties), mentioned another executive.
He said, “Amazon wants to control each and every segment of the e-commerce value chain, since they also sell packaging materials for online shipments.”
What is the logistics sector worth?
When it comes to logistics in Indian online retail, this sector was valued at $0.46 billion in 2016. But in the next five years, it is expected to see a CAGR of around 48% which will take its worth to $2.2 billion by 2020, a KPMG and CII report stated.
ExclusiveLane co-founder, Dhruv Goyal believes that given its large and extensive sellers portfolio, Amazon would want to make money off of the opportunity logistics services for sellers on multiple marketplaces bring.
“They would also be extending these services to sellers to send their FBA and Cloudtail shipments which are currently fulfilled by logistic companies such as BlueDart, DTDC and FedEx. These companies are going to have a hard time competing with Amazon,” Goyal stated.
Flipkart has logistics plans too
Flipkart’s logistics arm, Ekart partnered with third-parties to ensure it focuses on its core business. This is working well in Ekart’s favour. Currently, Flipkart group companies utilize 90% of its services while the rest are provided to external clients and businesses. The logistics division is looking to tap into offline networks to help its business scale up further.