FROM MAGAZINE: E-commerce thrust for air express
With the burgeoning e-commerce sector and other new age industries in India, the air express industry is turning out to be a pivotal segment for enhancing exports, especially in the SME segment.
Surya Kannoth With the government’s emphasis on ‘Make In India’, ‘ease of doing business’ and enhancement of exports, it is all the more important that express delivery services (EDS) is recognised and facilitated with adequate infrastructure at the airports with rational lease tenures and rentals to provide efficient services in India.
“Unlike large companies who have in house departments taking care of their logistical and regulatory needs, the SME sector leans on the expertise offered by the express companies for the movement of their shipments as well as for regulatory support like Customs clearances etc. With the emphasis of government of India on Make in India, express industry would do well,” predicts Vijay Kumar, chief operating officer, Express Industry Council of India (EICI).
The National Civil Aviation Policy 2016 recognises that domestic and international air cargo and express delivery services is a key objective of the government and that revenue from air cargo helps airlines subsidise the cost of passenger tickets.
“Air cargo, particularly domestic has a high employment potential, especially for semi-skilled workers. Currently, air cargo volumes in India are very low as compared to other leading countries due to high charges and high turnaround time. Within the aircargo ecosystem, Express Delivery Services (EDS) has a distinct operational nature and is becoming pivotal especially in the light of double digit growth in e-commerce,” the National Civil Aviation Policy states.
E-commerce companies are expected to invest close to $6-8 billion in logistics, infrastructure and warehousing in the next few years, according to a recent Assocham-PwC study. The study suggested that there will have to be more investment in the air cargo sector.
And in order to meet this demand growth, the country’s delivery infrastructure will have to expand. ASSOCHAM’s Secretary General, D S Rawat shared, “Innovations are very important in this sector, as the demand is always for more reach and faster shipping at lower costs. The companies will need to invest in automation, while utilising existing resources well.”
E-commerce growth has been complementary to the growth of air express. Thanks to the e-commerce sector, players like DHL, BlueDart, TNT Express, UPS, FedEx, and DTDC are seeing a massive growth in orders and volumes. Approximately 10 per cent of the shipments carried by some of the express companies are B to C shipments. There are also companies who specialise only in carrying B to C shipments. The e-commerce sector has been witnessing consolidation, which in turn would open up opportunities for the express market.
Some of the new initiatives by air express operators include auto-sorters, parcel lockers, ‘On-the-Move’ (OTMs) handheld devices, mobile point of sales (MPOS) solution, mobile wallet, retail point of sales (POS), Cash on Delivery (COD), reverse logistics with various value-adds such as ‘open’ and ‘cash return’, preferred time of delivery, innovative delivery options, mobile service centre and parcel shops, which have paved the way for business.
“To intensify our focus on the B2C segment and maintain and strengthen our leadership till 2020, we have introduced strategic initiatives or charters such as induction of the 6th B757 aircraft with 100 per cent capacity utilisation, streamlining the last mile costs to B2C benchmark levels; introduction of a product with cost and transit times between current air and surface products; further differentiate in the B2C market by having better than market service levels; offer consumer convenience options in order to address B2C market requirements and maintain reach advantage by expanding service network reach,” reveals Anil Khanna, managing director, Blue Dart.
Blue Dart holds 46 per cent market share in the organised air express segment in India. Its market share in the organised ground express market has also consistently grown over the years to reach 13 per cent.
With time-definite distribution across 34,831 locations in India and 220 countries and territories worldwide Blue Dart has over 3,010,530 sq. ft. of facilities which include 7 aviation hubs and bonded warehouses, 13 domestic hubs and 85 ground hubs and dedicated air services with a fleet of six Boeing 757 operating each night to the seven main metros across India.
“We expect that there would be consolidation in the e-commerce sector and with internet penetration expected to nearly double in the next four years, the opportunities for express companies for growth in this sector are substantial,” said EICI’s Vijay Kumar.
Confident on the growth of the air express market, R.S. Subramanian, senior vice president & country manager, DHL Express India, said, “The express market is seeing rapid growth over the past years driven by a fast growing economy, high domestic consumption, increasing manufacturing, globalisation of the many sectors and more recently e-commerce. This trend is expected to continue in the coming years as well and bodes well for the express industry.”
2016 was a robust year for DHL Express. The express specialist’s latest quarterly earnings saw the express division continuing its positive revenue earnings, driven by solid growth in the international time definite (TDI) shipments business globally. “Our business levers are trending positively and I am confident that we would end the year on a high note,” said high-spirited Subramanian.
Roadblocks to efficient delivery Provision of track and trace facilities with RFID, approach roads for heavy vehicles, development of more green-field airports, easy surface connectivity to these airports are some of the basic amenities cargo carriers desperately need in India.
India also lacks the availability of world-class cargo transit hubs, which has resulted in business shifting to other neighbouring countries. Development of dedicated freight corridors for both rail and road transport, which can provide better multi-modal transport (connecting airports) is yet to be conceptualised in the country. High dwell time, proper EDI network and customs procedures remain matters of concern.
The air infrastructure in the country is inadequate in terms of cities covered and cargo handling capacities leading to significantly higher dwell time as compared to international standards, blames Anil Khanna from Blue Dart.
Insufficient aircraft bays, truck docking stations, limited space for express terminals, clearance processes lead to delays and impact operational cost. Post the privatization of major airports, the operating cost at those airports have also multiplied manifold without any significant improvement or differentiation in services offered.
“To enjoy the full benefits of integrated air express services, the government needs to address restrictive civil aviation agreements, cumbersome customs clearance procedures, and restrictions on investment in ground transportation operations. The Aviation Turbine Fuel (ATF) price with its high price volatility and multiple rates across states due to different tax rates also directly impacts operating margins,” shares Khanna.
DHL’s R.S Subramanian also complained about the infrastructural challenges in the country as a hindrance to the air express industry. “The significant challenges the logistics industry faces are all in the areas of Infrastructure (airport, sea port as well as road and rail network), complex regulatory framework and resulting inefficiencies that significantly push up the operating cost and quality. We see notable improvement in the outlook with the government stepping up the focus on infrastructure though there is lot more needed. For example, while the airports have seen improvement on the passenger side many still need significant action on the cargo and express infrastructure and capacity for the future,” he said.
Road to growth According to ASSOCHAM’s statement on the study: “Presently, there is a very low level of air cargo penetration characterised by only a few airports equipped to handle large volumes of express delivery parcels. As the e-commerce gathers momentum and moves to the tier-II and tier-III cities, there will be increasing demand of expanding air cargo connectivity to smaller towns. The industry would invest in about $8 billion by 2025.”
As the Indian economy gets more and more sophisticated the demand for express delivery services would keep growing. The markets that express industry cater to like electronics and computers, auto components, pharma products, light engineering goods, garments and textiles, handicrafts among others are all slated to do well. Express Delivery Services are virtually the logistics arms of the vibrant SME sector in India, enabling them to reach out to the world.
