 "E-commerce turns to railways to reach 500 million users")
At a time when e-commerce giants such as Flipkart and Amazon are contemplating offline stores to expand their reach, on-board sales in trains could provide them access to 500 million passengers, many of whom are still not on internet.
The Indian Railways is in talks with e-commerce companies like Flipkart, Amazon, Snapdeal and Paytm for on-board sales of their merchandise in reserved compartments. The railways may turn out to be a lucrative market for the e-commerce players as the number of reserved passengers on trains is more than 500 million a year, higher than the entire internet user base of 450 million in India. Of this, only about 60 million people are using e-commerce.
The railways has asked two consultants — Technopak and KPMG — to look into the economic aspects of the plan. Initially, the gross merchandise volume (GMV) of goods is expected to be about Rs 1,000 crore annually, leading to Rs 100-300 crore revenue for railways. GMV is a term used in online retailing to indicate total sales value for merchandise sold through a particular marketplace over a specific timeframe.
“This will be profit sharing model and we already had one round of talks with the three major e-commerce companies and the plan is set to take a final shape after Diwali,” said an official. The companies will also be given space to open their stores, warehouses and pick-up points across 400 railway stations in the country.
While the railways is exploring fresh revenue streams, on the lines of airline companies, by becoming an end-to-end logistics provider, e-commerce companies in India have drawn road maps to foray into Tier-II and Tier-III cities. “This plan will sync well with the railways’ plan to increase non-fare revenue and also the companies’ strategy to expand in smaller cities,” the official added.
The move is part of an overall strategy of railway minister Suresh Prabhu to increase non-tariff revenues by 10-20 per cent. Through steps like monetising soft assets such as websites, data, advertising space, station redevelopment and land banks, the national carrier plans to increase its annual non-fare revenue to Rs 4,000 crore by 2020.
The initiative comes at a time when the railways is set to invite bids for cab aggregators to tap the rail passenger market and use space outside railway stations. Major aggregators like Uber and Ola have already shown interest in the proposal. The initiative is set to add Rs 120 crore to railways’ non-fare revenues. “For this, there is unlikely to be a bidding process as the railways wants to earn maximum revenue from this. It will be open to all players if they are ready to share profit,” the official added. According to railways, companies can also avail cash-on-delivery model for customers through on-board sales.
