India Post targets 50-fold growth in e-commerce revenue

Internet retailers may have been the bane of the brick-and-mortar retail trade and a pain for the old order of things, but for one relic from the past, they are a proving to be a veritable godsend.

For India Post, a 240-year-old straggler long fighting for relevance in a digital economy, the explosive growth in this new-age business has offered it a fresh lease of life and given it the luxury of dreaming big.

These dreams have been bolstered by firms such as Flipkart and Amazon signing up for its services and with the theatre of activity for the fastgrowing ecommerce sector now moving to the country's remote corners.

The Department of Posts is targeting a seemingly implausible 50-fold increase in ecommerce revenues. "With decline in document shipments, ecommerce is our department's new focus," a top official at the Department of Posts, told ET. "We are targetingRs 5,000 crore in revenue from this segment alone in the next 24 months." It won't be an easy task given that in the previous fiscal year to end-March 2014, it earnedRs 10,750 crore in overall turnover.

This year, it is on course to earnRs 100 crore as delivery revenues from ecommerce firms, giving the department's claims a dark ring of incredulity as it is looking at a 50-fold jump in just two years. But officials point out that India Post had managed to expand ecommerce delivery revenues from Rs 20 crore toRs 100 crore in just a year, and given the explosive growth the sector is seeing, an exponential increase in revenues is not impossible. The department started cash on delivery pilots with Amazon in 2013. But the service picked up steam only in 2014, when it signed up players such as Flipkart, Snapdeal and Shopclues.

Karnataka and Haryana currently account for most ecommerce shipments followed by Delhi, Maharashtra and Andhra Pradesh.India's online retail industry is expected to soar to $23 billion (Rs 1.4 lakh crore) by 2018 from about $2 billion in 2013. The overall ecommerce sector, including online travel bookings, is projected at $43 billion by 2018, according to Nomura. To be sure, India Post will not have it easy, competing as it will be with several large logistics firms such as FedEx, DTDC, Blue Dart and DHL as well as a rash of startups such as Ecom Express and Delhivery that have jumped on to the bandwagon.

LEVERAGING ITS VAST NETWORK

India Post, founded as an arm of the East India Company, was a vital strategic institution for decades but its relevance declined dramatically as the rise of the Internet and use of emails for communication made its postcards and inland letters increasingly redundant.

But despite its mainstay business staring at oblivion, the department continued to have several advantages over its competitors, most notably its vast network of 1.5 lakh offices and an army of about 5.5 lakh employees across the country.

India Post has begun leveraging that strength now. It has begun training its postmen in ecommerce-specific requirements, such as accepting cash or card payments on delivery - crucial for online retailers in India - and handling same-day shipments. It also plans to open about 60 socalled fulfilment centres, where goods are stored and sorted before deliveries, across the country this year for its ecommerce business.

For instance in Bengaluru, India Post will invest Rs 1 crore to decentralise packaging and ecommerce parcel services by establishing warehouses across the city, according to MS Ramanujan, Chief Post Master General, Karnataka Circle. To compete with DHL, India Post plans to buy land near the airport to establish a warehousecum-parcel centre, he said.

In Bengaluru and Gurgaon, India Post is already handling about 13,000 and 20,000 shipments, respectively, every day. "We are currently stretched to our limits. Opening ecommerce specific warehouses will lessen the load on post offices," said the official of the Department of Post, quoted earlier.

LESSONS FROM THE WEST

India Post can take heart from the experience of other countries where explosive growth of ecommerce has changed fortunes of their state-run postal departments.

In the West, government postal services have gained the most from the ecommerce sector.

"The US Post is expected to earn half of its revenues from ecommerce package deliveries by 2020. Deutsche Post in Germany and Australia Post have also done well," said Arvind Singhal, head of retail advisory firm Technopak.

Its customers, many of whom are now looking to spread their wings in the hinterland to tap the market potential in India's small towns and villages, have good things to say.

"Given the vastness of our country, India Post plays a key role in offering a seamless experience for our customers who are located in the most remote parts of India," said Neeraj Aggarwal, senior director, supply chain, at Flipkart, which has been working with India Post since last year in addition to its own logistics firm Ekart.

India's ecommerce logistics market is expected to gross overRs 7,200 crore ($1.2 billion) this year.

According to consulting firm PricewaterhouseCoopers, ecommerce firms will need about 15 million sq ft of warehouse space by 2017, up from about 1.7 million sq ft available now. "Getting manpower for last-mile delivery and high expectations of same-day delivery due to technology integration are major challenges for us," said an official at a large ecommerce logistics player, declining to be identified. Shrinking air cargo space and rising costs have also put pressure on private companies to increase shipment rates. "I don't see shipment costs going down in 2015," said Mohit Tandon, cofounder at Gurgaon-based logistics startup Delhivery. India Post claims an advantage here, too.

Source:-The Economic Times