[2020 Outlook] Key logistics trends to watch out for this year
The year 2019 saw some great investments into logistic startups along with some focus on B2B and last-mile augmentation. Let us now take a look at what 2020 holds for the space.
In 2019, the logistics space witnessed large investments. Startups like Rivigo, Blackbuck, and Locus raised significant funding from key investors such as Tiger Global and Falcon Edge. Further, Gurugram-based Delhivery became the first logistics startup to get inducted into the billion-dollar valuation unicorn club.
According to IBEF, the logistics sector is poised to reach $215 billion by 2020, with a CAGR of 10.5 percent since 2017. However, despite its market size and opportunity to disrupt, logistics is still a tough business to crack.
At present, the logistics space is dominated by the transportation sector which has over 85 percent share in terms of value and is expected to remain high for the next few years. The rest is held by the storage sector.
Currently, the Indian logistics industry is highly fragmented owing to the presence of numerous unorganised players. Only 10 percent of the total market share is owned by organised players.
The sector caters to a myriad of industries that includes retail, automobile, telecom, pharmaceuticals, and heavy industries, and it has been increasingly attracting investments in the last decade.
According to various media reports, the sector is also fraught with challenges related to poor infrastructure owing to poor road connectivity amid a slew of regulatory hurdles.
Thus, it will be interesting to know the trends in the logistics sector in the coming years.
Focus on Tier-II and III cities
In recent years, Tier-II and III cities have witnessed a growth in consumption patterns, resulting in a focus-shift towards logistics.
Currently, new warehousing destinations are emerging in Tier-II and III cities across India which are playing a significant role in shortening the delivery time.
Today, startups are focussing on delivery and customer experience, aligning with ecommerce players’ timelines and customer focus.
According to media reports, the online service transactors in these cities are currently growing at 2.1X, and hyperlocal users, as well as online ecommerce users, are growing at 3X. Further, the lack of infrastructure in these regions has made it easier for startups to gain the traction they need.
Over the years, startups in the logistics space have grown at a CAGR of 40 percent and have reached close to 72 percent of the organised players’ market share.
Emphasise on AI and other technologies
As the supply chains become complex supply nets, the variables and number of stakeholders change dynamically. Data transfer between systems is done with advanced technology now.
Technologies such as artificial intelligence (AI), machine learning (ML), and blockchain have transformed the chaotic and fragmented logistics market. Further, AI has become an integral part of every future software system.
A few years ago, cargo shipped by trucks, trains, and ships were tracked by satellites using telematics. Now, with the help of AI, these processes are made simpler by maintaining data platforms and creating datasets to regulate patterns and anomalies.
Artificial Intelligence has been imperative in saving time, reducing costs, increasing productivity, and accuracy with cognitive automation. Further, it helps in warehousing operations such as collecting, analysing information, and inventory processing, resulting in increased efficiency and higher profits.
Thus, the technology is considered to be profitable for transportation.
Due to the rapid growth of digitisation, several startups and organisations are adding AI to their supply chains to maximise resources by reducing the time and money spent to track package deliveries.
The e-mobility route
The e-mobility market has emerged as a fast-developing one due to a global shift towards green energy and carbon dioxide reduction, resulting in a growing demand for electric vehicles (EVs).
As the logistics sector is said to be dominated by the fleet segment, there are chances of rising e-mobility affecting the space.
Many companies have already started introducing or implementing EVs for their fleet services.
In 2019, ecommerce unicorn Flipkart announced nationwide plans to introduce EVs for its last-mile deliveries in a phased manner. According to the company, it aims to replace nearly 40 percent of its existing last-mile fleet with EVs by March 2020, starting with nearly 160 EV vans to be deployed across cities by the end of the year.
On the other hand, startups such as Bengaluru-based TresMoto offers a high-powered, purpose-built, connected electric scooters for fleet applications.
The logistics sector will now have to play the waiting game as to how it will move towards a sustainable and efficient future.
(Edited by Suman Singh)