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E-commerce to drive logistics sector growth

Update On :20 May 2015

E-commerce to drive logistics sector growth

The fast growing e-commerce sector will drive the $167-billion domestic logistics industry going forward and the introduction of the Goods & Services Tax which will unify the markets, will be the biggest push for the sector, says a report.

The matrix of logistics sector is changing due to the increasing focus on e-commerce logistics and express logistics. The domestic e-commerce industry is growing at 35- 40 percent CAGR which has resulted in large players introducing a dedicated e-commerce logistics business, said the logistics report by Singhi Advisors.

Singhi Advisors is a city-based boutique investment bank that focuses on deals on the space. In recent months, logistics players like Patel Logistics, Gati etc have set up dedicated e-commerce logistics arms and tied up with leading players, the report said.

Patel Integrated Logistics, for instance, has set up a special arm called Patel Retail to tap the e-commerce space and tied up with Amazon.

The domestic e-commerce sector was close to $20 billion in 2014, up from $3.8 billion in 2009. Out of the total, e-tailing itself is over $5 billion. It's estimated that by 2030, the e-commerce space will be a $300 billion giant, according to various industry reports.

Logistics space has been growing at a CAGR of over 16 percent over the last five years, despite the industry being highly fragmented with organised players being only 6 percent.

Globally, the report said the logistics industry is a whopping $4-trillion giant in 2013, representing 10 percent of global GDP. Another enabler is the government focus on infrastructure such as the Golden Quadrilateral, East-West and North-South corridors, apart from tax break for foreign investors in cold-storage, agri-warehouse and free-trade warehousing zones, coupled with 100 percent FDI in almost all logistics sub-segments, the report noted.

Areef Patel, vice-chairman of Patel Logistics which is planning to set up special units for airfreight, said, e- commerce is perhaps the best that the 'depressed' logistics sector could ask for. Even though 93 percent of retailing is done in traditional format, estimates suggest that by 2020, e-tailing will capture about 20 percent share and for this to happen logistics is the most crucial part.

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