Amid the economic slowdown where most sectors are not expecting strong growth this festive season, the express industry (a term for those offering integrated shipment delivery services) has a slightly different story to tell.
Demand is not as high as last year but those in the sector expect reasonable growth this season. “While we remain cautious and are still assessing the impact of slowdown, it will not be a downturn but lower growth than last year,” said Abhishek Chakraborty, executive director at DTDC. “If average demand growth rate was 40-45 per cent last year, it would be 15-20 per cent this year. I will be positively surprised if it goes beyond 20 per cent demand growth.”
Chakraborty said the mood in middle and lower income groups was pensive, since job security in several sectors is low. “But, it does not take away the fact that people will spend during this season, as it is also more to do about the culture and religious aspect.”
Sector entities believe attractive deals would boost consumption in the season. “The economic slowdown is affecting consumer behaviour and, consequently, spending. However, businesses are hoping for the festival season to bring in a turnaround, as customers would look out for deals and offers,” said Ketan Kulkarni, chief marketing officer and head of business development at Blue Dart Express.
“This year, the economic slowdown did affect consumer sentiment but e-commerce has been less affected by the slowdown, as consumers constantly look for variety and deals which ecommerce companies largely offer. Also, new shoppers get added to the online consumer segment as internet access gets affordable,” said K Satyanarayana, co-founder and director at Ecom Express. “We work pro-actively on value selling propositions, a mix of price and packaging, primarily driven to address the needs of festive season shipping,” said Sandeep Juneja, vice-president (sales & marketing), DHL Express.
According to an Indian Express Industry — 2018 report by Deloitte, the sector is expected to grow at a compounded annual rate of 17 per cent and reach a size of Rs 48,000 crore in the next five years.
This would primarily be driven by e-commerce, significant demand from the small and medium business-to-business segment and growth of the country’s cross-border trade, went the report. Players were also of the view that a consumer, whether a business-to-business entity or business-to-consumer, would prefer express service to plain transportation for the several differentiated services the former offers. Due to this, the express industry sees higher growth as compared to other sectors in the current relatively tepid demand scenario.
“The consumer is no longer happy with simple transportation of goods and in fact looks for end-to-end solutions which would include speed, execution capability and technology, among other features,” said Chakroborty. With GDP growth slowing to five per cent, the sector is expected to see 8-8.5 per cent growth, a two percentage points decline over last year, said players. This will still be higher than the general economic growth. Being labour-intensive, the sector creates employment for a large number of people, directly and indirectly. Demand for temporary hiring goes up during the festive season to ensure timely last-mile delivery.
"Being an asset-light company, Mahindra Logistics uses its network of business partners for transportation and delivery. Our business partners make more resources available to handle these peaks," said Pirojshaw Sarkari, CEO of Mahindra Logistics.
Ecom Express engages with part-time delivery partners through a variable/flexible model of delivery in areas where there is a challenge in getting full–time workers. “In this season, we have created over 10,000 temporary jobs across the value chain to ensure smooth operation during the festival rush. The majority of the hiring is for last-mile delivery, with some part being on the pickup-processing and fulfillment side of operations,” said Satyanarayana of Ecom Express.
The company is seeing a two-three-fold surge in festive sales via online shopping and is therefore expecting a 20-30 per cent jump in demand for last-mile delivery customers this season.
What’s in demand: express service
- Sector entities believe attractive deals will boost consumption in the season
- Players were also of the view that a consumer would prefer express service to plain transportation for the several differentiated services the former offers
- Primarily driven by e-commerce, significant demand from the small and medium business-to-business segment and growth of the country’s cross-border trade
The sector creates employment for a large number of people, directly and indirectly