Amazon reporting a 40% increase in YoY net sales, The global eCommerce and internet companies strategists believe that this is the new normal of the have already started investing in possible solutions post-COVID era. Commerce has changed. for these last-mile problems. The introduction of micro and nano warehouses in cities with dense order volumes is thought of as one of the leading solutions for this problem. A major drawback though, is that directly acquiring and managing thousands of warehouses in places with steep rentals is a fool’s errand.
Due to this rapid digitalization, the operational challenges of the industry have evolved into a whole new monster. With 17%, the Indian eCommerce industry has one of the highest return rates. High warehousing and logistical charges cripple the industry with high YoY losses. Since the industry is working on a model where the money is lost on every transaction, the growth, while spectacular, has also been alarming. Mix in and saute the rapid need for improving supply chain efficiencies to further reduce the last mile delivery times for consumers and you have the perfect storm.
The industry seems to have found the answer in organized retail stores. These are already located at the prime locations in the busiest of the cities, housing SKUs that are needed for an eCommerce fulfillment center. The cost of management and rents are being taken care of by the offline operations of these stores. With a reduced distance between the fulfillment centers and customers, the costs of logistics and warehousing also decline. Amazon India has already started working on its strategy of converting such stores into fulfillment centers. They acquired 49% of Aditya Birla’s More Megastore in late 2018 and have already started fulfilling orders from these stores. Amazon’s supply chain management strategy could not be more evident.
Amazon’s supply chain management strategy could not be more evident with them prospecting a 40% s Consistently ranked in the lower thirties and forties take in Reliance Retail ventures (which recently in the Global Logistics Performance Index, acquired Futures Group’s retail division countries in SEA and Indian subcontinent face comprising of brands like Nilgiris and Big Bazaar). significant logistical challenges due to its large landmasses, geography with jungles and rivers, and The birth of Neo-Retail archipelagic state. On average, it takes 3X longer for deliveries to happen in these regions when This model though functional is very expensive. compared to their western counterparts. These The trend seems to be shifting towards a more regions are the new frontier for eCommerce giants Uber-like model, a “Neo-Retail” network if you to establish their empires as they house more than will, where individual shop owners can be added as 25% of the global population and over a billion nano-fulfillment centers. internet users. Paradigm Shifting
KAIZEN’S OPERATIONS & RESEARCH ENTITY
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