Same Day Delivery- Has the E-Commerce Market Arrived in India?
Posted in Operations & IT Articles, Total Reads: 4063
, Published on 07 September 2014
The ‘same day delivery’ e-commerce retail has arrived in India with a bang. The competition levels have gone up and the major players have been fighting tooth and nail to keep a hold on their market share by increasing their service levels. Players like Amazon, Myntra, Flipkart, Jabong have gone ahead with the implementation of this idea and this has hit the traditional retailers very badly. In the current scenario, speed of ordering and subsequent speed of delivery are the parameters which will help retain customers and gain their loyalty. This level of service will help enhance brand image.
The same-day-delivery idea requires a lot of extra efforts to be put in. E-retailers must have the financial muscle and stamina to maintain the supply chain required for it. They must understand the varying customer needs and whether the same-day-delivery is adding value to the existing customers’ purchases. The logistics required to implement this idea are complex. They require things like a precise supply chain, better customer support, faster delivery, advanced level of e-commerce software and warehouses.
The risks involved are based on execution, inventory management and co-ordination among the various levels of the supply chain. It is also quite expensive and the only way through which it could be made cost-effective is providing the service for small items which give high margins. Leveraging the delivery costs is an important aspect to focus on to manage same-day-delivery. The model has to be created by using latest technology and efficient methods in order to minimize the costs associated with it.
This implementation of this idea requires the players to employ a cross-functional approach which requires deep planning, investment in IT and good rapport and ties with transportation partners. Inventory management must be thorough to a microscopic level where the level of transparency is such that every SKU is accounted for and easily located. There must be fulfillment systems which can direct and decide with minimum time delay which distribution center can cater to a requirement. This requires an optimal solution which considers balancing of parameters like proximity, current inventory, capacity of staff, packaging and selecting capability. Training must also be imparted to the staff to use the new technology to take orders. The most critical aspect is to select a transport partner who would specialize in same-day-delivery. The next important step is to market the service effectively on a large scale and advertise the advantage of shopping online using this facility.
In order to implement this strategy and minimize the costs associated with it, important investments have to be made in robotics and technology. For example, Amazon has purchased Kiva Systems, to provide robots which handle the warehouse activities. This brings down the cost of shipping to a huge extent and increases the speed of shipping drastically. By implementing automation, products can be sent to the employees to be packed without depending on their judgment, which would minimize the error factor.
How is Flipkart managing same day delivery service?
With increasing competition among the Indian e-commerce players, companies are shifting focus from price point differentiators to factors which can boost customer service and convenience. Flipkart is the most recent e-commerce player to offer same day delivery service to its customers. Flipkart has introduced this service in 10 cities across the country to begin with. Through this initiative, Flipkart has been able to cater to approximately 50% of the customers who use e-commerce platforms regularly. The success of this initiative, to a large extent, depends on the coordination between the operations team, the technology team, logistics team, warehousing team and its delivery partners. The management has set up a separate system in the supply chain for offering this service to customers. This system essentially operates on similar lines as the regular delivery option with the exception of having comparatively lesser lead time. Packaging, shipping and the delivery of the product to the end customer has been given priority as against the standard delivery option. Based on the response generated, Flipkart is planning to extend the same day delivery service to rest of the cities in India.
Since large appliances have a different system of supply chain, this service is currently not being provided for that category.
Some other examples from the e-commerce industry
• Amazon is also providing similar delivery options as Flipkart, however, there is a difference in their delivery conditions and the price points they offer. While the costs for Amazon are on a per order basis, those for Flipkart are on the basis of cost per item. As a result, the delivery proposition for Flipkart is much more expensive. Amazon has also partnered with local mom and pop shops in Bangalore in order to facilitate faster delivery and build a strong delivery network.
• Recently, Myntra.com launched an option of delivery within two hours of placing the order for the customers based in Bangalore and Delhi. This could be achieved primarily by reduction in waiting period from the time of placing the order till the time the shipment left the warehouse. To make this possible, Myntra deployed around 40 handheld terminals in order to reduce the time lag. These handheld terminals also helped in placing these orders in priority at the time of packaging and quality checks. This helped in reduction of average time to 23 minutes within the warehouse.
Table 1.1 Delivery details for different e-retailers
Contrary to the initial buzz generated by the same delivery service, the excitement seems to be fizzling out sooner than anticipated. These services are no longer being promoted as aggressively since the e-commerce players have come to realize that their supply chain network is not strong enough and these services have raised their costs four to five times. The demand for same-day deliveries has been stagnant which has added to the woes of the online retailers. Logistics continue to be one of the biggest constraints in the way of success of same day delivery model especially in India.
The strategy of same-day delivery systems seems an amazing prospect which would increase service levels to new heights and increase customer satisfaction. But the question that remains to be answered is whether the customers really require this service. It might be a great idea to beat competition but there are things which attract customers more than faster service, like free shipping service. Most customers don’t even require same-day-delivery. It sometimes becomes painful to collect the delivery while having dinner or doing household chores. This strategy can go either way, become the great new idea which would help beat competitors or add to the costs incurred by e-retailers and cut down their profits which are already marginal.
This article has been authored by Ashmita Nagpal and Ramakrishna Matli from IIM Udaipur