Amazon India scales up delivery network to keep up with 'Prime' growth

With nearly a quarter of 170 million products listed on Amazon India eligible for free and fast Prime deliveries, the US retail giant is beefing up its delivery network to handle an “unprecedented” load of packages expected to be shipped during this festive season.

Right from its massive warehouses to small kirana store partners, Amazon says it has scaled up its delivery network 1.5-2 times in anticipation of this year’s Great Indian Festival sale.

Amazon continues to make big investments in infrastructure as it eyes a multi-year horizon for each large fulfilment or sortation centre, and isn’t worried about having under-utilised capacity in the short term, it said.

“As the number of Prime customers as well as the selection under Prime has increased, if we want to deliver products in the same time or even less, we have to expand our fulfilment capacity. As the storage capacity has increased, so has the capacity of all the outbound lines,” said Akhil Saxena, vice-president, Customer Fulfillment, Amazon India.

With Amazon is eyeing two-five times the order volume in the upcoming sale period when compared to last year’s event, the company says its capacity expansion is vital to maintain customer satisfaction. An excessive logistics capacity will help in handling the peak load during the sale.

In a recent visit to Amazon’s newest fulfilment centre on the outskirts of Bengaluru, Saxena pointed out the empty lines would be full during the four to six weeks of the festive sale period.

While utilisation would drop after the sale, by early next year overall order growth is expected to rise to such an extent that the unit would be operating full steam again.

“Our transportation capacity has doubled, our fulfilment capacity has gone up by 1.5 times, and this is over and above the large base we’d built over the last two to three years. Every single state and union territory of India has an Amazon presence and we deliver to every single pin-code either by ourselves or through our partners,” added Saxena.

While Amazon has continued to grow its logistics business, says Saxena, this has not come at the expense of the business the company offloads to its partners. Today, the number of orders managed by India Post and even small local entrepreneurs continues to grow, he claimed.

For instance, Amazon has grown the number of stores under its ‘I have space’ initiative to 20,000 from 17,500 last year, while third-party delivery stations have doubled from 350 to 700 in the same period. The e-commerce giant says these partnerships are invaluable for its business to grow in tier-II and tier-III markets, which already drive 65 per cent of the orders on its platform.

Amit Agarwal, vice-president and country manager at Amazon India, told Business Standard in an interview in June last year that half the company’s investments until then had gone into building its logistics network. Since then, Amazon has pumped in close to $1.5 billion in the country and is inching closer to the $5.5-billion investment commitment that Chief Executive Officer Jeff Bezos has made for India.

While Amazon does not disclose the number of Prime customers it has in India, industry analysts estimate that number to be slightly north of 10 million. For the past two consecutive festive period sales, Amazon has said that the highest sold item on its platform has been its very own Prime memberships.

TAKING STOCK

• Amazon has 50 fulfillment centres across 13 states with 20 mn cubic feet of storage space, a growth of 1.5 times against last year

• Has 1,500 dedicated trucks travelling on 400 routes and covering 500 different cities on any single day

• The firm has grown its air cargo capacity for expedited long-haul deliveries, by 1.5 times in the past one year

• It has 30 sortation centres across 17 states covering 1 mn square feet with state of the art conveyor belts spanning entire facilities

• There are 150 Amazon managed delivery centres with an additional 60 centres dedicated to just large appliances