Warehousing, Logistics and Material Handling Sector in India

India has a per capita warehousing stock of just 0.02 sq m compared to the USA, China and the United Kingdom which have 4.4 sq m, 0.8 sq m and 1.09 sq m respectively. Even in terms of transaction volumes, USA’s industrial and warehousing market saw 20.4 mn sq m (220 mn sq ft) transacted during 2020, 7 times that of India in FY 2021. 

The e-commerce sector has been the biggest driver of warehousing across developed markets globally. The share of online sales in the UK had in fact spiked from 19.2% in 2019 to a steep 33.4% in May 2020 showing the dominance and scalability of the online marketplace even in a mature market.

In 2021, India witnessed a 21% y-o-y growth in total stock in Grade A & B warehousing space in the top eight cities. The overall warehousing space stands at 287 mn sq. ft. at the end-2021 compared to 238 mn sq. ft. in the previous year. Interestingly, Grade A stock in India stood at 134 mn sq. ft. translating to a 5-year CAGR of 29.9%. Among the eight major cities, more than half of the warehousing stock is contributed by the three largest cities of the country including Delhi NCR, Mumbai, and Bengaluru. 

3PL/Logistics has remained the largest segment based on warehousing space demand over the last 5 years. Space demand due to E-Commerce has gained traction as e-commerce penetration has increased over the years. Many e-commerce categories such as retail, grocery, pharmacy, and food delivery are expected to grow even further, as people make a behavioural shift from making offline purchases to online ones. 

COVID-19 has accelerated e-commerce adoption, leading to an increase in demand for online delivery of essential and non-essential items. Demand from other consumption-based sectors such as Retail and FMCG has also increased while the share of manufacturing demand from the Auto & Ancillaries and Engineering sectors has decreased during the pandemic. The warehousing and logistics sector has been the largest beneficiary during the COVID-19 pandemic and the share of the sector has increased from 2% in 2020 to 20% in 2021. 

Although Tier 1 cities are the key focus investment hubs for investors, the increasing expansion needs to be steered by e-commerce and 3PL players have led to the development of Grade A warehouses in Tier 2 and 3 cities, attracting investments in these cities. This is due to the increased internet penetration, the government’s push for Digital India, rising levels of disposable income, a young population which is cognizant of brands and a higher standard of living. Tier 2 and 3 cities including Rajpura, Anantapur, Sri City, Coimbatore, Nagpur, Lucknow, Siliguri, Jaipur, Bhubaneswar, Guwahati, Hosur, etc. are attracting investments from institutional investors and developers such as IndoSpace, ESR, LOGOS, Welspun, Blackstone, etc. as they expand their footprints across the country.

Demand drivers for the Warehousing Industry 

The government’s initiatives to promote the growth of warehouses in the country, through measures such as the enactment of the Warehousing Act, 2007, establishment of logistic parks and Free trade warehouse zones (FTWZs) along with the Goods & Service Tax (GST) regime augurs well for the industry’s growth. Sensing the tremendous growth potential of the warehouse sector, the private players (including both domestic & international) have ventured into the space with a view to bridging the gap between cost and efficiency of operations. 

Growth in the E-commerce retail sector: E-commerce is probably creating the biggest revolution in the retail industry, and this trend is to continue in the years to come. Online retail business is the next-generation format which has a high potential for growth in the near future. After conquering physical stores, retailers are now foraying into the domain of e-retailing to leverage the digital retail channels (e-commerce), which would enable them to spend less money on real estate (shops) while reaching out to more customers in Tier II and Tier III cities. With the pandemic also on the loose, there have been restrictions as well when it comes to visiting of brick and mortar shops which also leads to greater reliance on the eCommerce sector. 

The emergence of 3PL players: Before the implementation of GST, in-house logistics were the mainstay of supply chain operations. However, now specialised storage and distribution offered by 3PL players have been gaining prominence so much so that 3PL players are taking up the largest share in warehouse demand in the last few years. Due to increasing FDIs, and relaxed policy reforms, the agriculture and manufacturing sectors will continue to increase 3PL warehouse demand. The newer industries like e-commerce with 30 minutes and 10 minutes deliveries in the last mile segment, telecommunications, healthcare and IT will be other stronger driving forces for 3Pl warehousing. 

Rising disposable incomes across India and increasing demand from the e-commerce sector have prompted developers to increase the storage space across the country. 

India as an investment destination: India is evolving to be an emerging market in the warehousing sector and has attracted significant investments in the past few years from global funds and private equity players who are partnering with local developers and logistic players. With the consumer base of the sector encompassing a wide range of industries including retail, automobile, telecom, pharmaceutical, heavy industries, etc. the logistics and warehousing industry has been increasingly attracting investments in the last decade. 

Increasing investment in logistics parks: The concept of a Logistics Park has gained attention from both public as well as private players. A large number of special economic zones have also necessitated the development of logistics centres for the domestic market as well as for trade purposes. Shifts in the supply chain due to the increasing prevalence of direct-to-consumer consumption have generated an entirely new demand base for industrial space. This has pushed investors to look for innovative solutions and digital transformation. 

The pandemic has accelerated trends such as increased internet penetration rates, expansion of online grocery, Omnichannel retail, and the integration of technology into logistics and warehousing. 

Atmanirbhar package: As part of the stimulus package aimed at improving the economy, the Government of India introduced the Atmanirbhar Bharat Abhiyan package, which included measures towards improving the state of the warehouses in the agri-space. Soon after the government launched a Rs. 1 trillion agriculture infrastructure fund to aid in post-harvest management and marketing of agricultural produce, in turn helping improve farm-gate prices. The scheme is to provide better warehousing and cold storage facilities for farmers.

Sectoral Shift Driving Warehousing Demand towards Larger Storage Space 

Over the years, the warehousing industry in India has evolved from storage space to highly sophisticated warehousing and logistics systems. The warehousing sector in India was highly fragmented with smaller boxes having a limited scope for automation or mechanization. Now, warehouses have become one of the most crucial elements of the Indian Logistics Industry. The evolution of organized e-commerce, 3PL, retail and other sectors as well as increased traction from global investors/ developers have pushed the growth of organized warehouses. This market is now at a pivotal point in the evolution from manual warehouses to organized automated/ mechanized warehouses. 

This transformation towards sophisticated state-of-the-art warehousing has resulted in an increase in the average size of Grade A warehouses by 2x in India. Interestingly, the warehouse size has not just increased in terms of area, the average height has also increased from 9 m in 2016 to 12 m in 2021, which may have increased the average volume of the Grade A warehouse by 3x. 

Growing E-Commerce Fulfilment Centres 

The growth in e-commerce has turned warehouse and distribution centres into mega fulfilment centres. India witnessed instances of global e-commerce transactions with box sizes of more than 2 lakhs sq. ft. going up to 1 million sq. ft. in tier 1 cities. Interestingly, the volume of these warehouses is ranging from 8 million cu. ft. to 40 million cu. ft. in these cities. 

India witnessed more than 15 transactions of warehouses with box sizes of more than half a million square feet going up to 1 million square feet in recent years. The demand for larger warehouses is majorly driven by sectors such as 3PL/ Logistics, e-commerce, retail and other manufacturing sectors such as Engineering and Electronics. 

Increasing Warehouse Automation 

Warehouses have started automating their processes. These automated warehouses extensively use conveyors, sortation equipment, automated storage & retrieval system (AS/RS), and another material handling. Some of the automating equipment which increases the efficiency of a warehouse in the long run are:

• Automated storage & retrieval system (AS/RS): A type of warehouse automation technology specifically designed to buffer, store and retrieve products and inventory on demand. It includes shuttles, cranes, vertical lift modules (VLMs), micro-loads, mini-loads, unit loads, or other mechanical systems integrated with a warehouse execution software (WES) or warehouse management system (WMS). 
• Automated Conveyor Systems: Mechanical devices or assemblies to safely and efficiently transport material through the distribution process with minimal effort. 
• Automated Sortation System: Automated system of separating products from infeed conveyor lines to shipping lines, palletizing operations, packing stations and other sortation applications. 

Transforming the Urban Logistics Sector 

Urban Logistics Sector is highly attractive in tier 1 cities primarily in grocery & agricultural products, pharmacy, fashion & retail (clothes and garments) and FMCD. The market is shifting more towards on-demand solutions which has further increased the demand for faster delivery. Hence, the last-mile distribution of goods and urban logistics spaces attain critical importance by developing warehouses close to cities. 

Dark stores: Dark stores are the ‘go-to’ solution which can adapt to the complex supply chain involved in the workings of various formats that offer service options to the end customer. Consumers can make digital purchases through the dark store online shopping platforms with the goods, either home-delivered (same-day delivery) or collected by the consumer from the dark store. 

The concept is rapidly gaining interest in India because of the post-pandemic effect, where some of the retail outlets have also converted partially or fully to dark stores to leverage their assets. Global E-Commerce companies and e-grocery companies such as Blinkit (more than 25 in city warehouse transactions), and Big Basket are occupying in-city warehouses in major Tier 1 cities including NCR Delhi, Pune, Bengaluru, Kolkata etc. are also the major distribution hubs in their respective regions. 

Transformation of Warehousing at the Advent of Omni Channel Retailing Omni-channel retailing is expected to help in optimizing inventory holding costs, operating costs and real estate costs, while increasing brand prominence and consumer base across the country.

Customers expect new alternatives: buying online and pickup in-store or shipping from the store. assumed processing capacity Effectually, this transforms a traditional retail store into a fulfilment centre. This demands optimization of the store inventory and flexible fulfilment options that meet profitability targets too. 

Some of the major omnichannel retail players including Decathlon, Pepperfry, IKEA, Reliance, etc. are occupying warehouses of size varying from 2 lakhs sq.ft. to 1 million sq.ft. in different Tier 1 city (NCR Delhi, Bengaluru, Pune, Chennai, Kolkata, etc.) in the last two years. 

Conclusion and Future Outlook 

The warehousing and logistics sector has been growing steadily ever since it the industry was granted infrastructure status by the Government of India in 2017. The government has also announced significant policy measures and made budgetary allocations towards the improvement of rail, road and water connectivity, which will translate into improving the overall logistics and transportation across the country, thereby adding to the growth story of the warehousing segment. 

Warehousing in India is currently in the process of transformation due to improved quality of warehousing spaces (primarily Grade A space), demand for larger boxes and positioning of warehouse location. 

Currently, the warehousing market is driven by the country’s manufacturing, retail, FMCG and logistics sectors coupled with supportive government policies such as the establishment of logistic parks and free trade warehouse zones. As India evolves to become a self-reliant economy, sophisticated warehousing systems would be a key trigger for the manufacturing sector and the entire gamut of trade. 

Major global funds have invested with warehousing developers and operators in order to expand their reach and regional footprint, being the key differentiators in the sector. These investments are not restricted to Tier 1 cities, they are also spreading across Tier 2 and 3 cities which are now emerging as major consumption and e-commerce hubs. 

3PL and E-Commerce have become one of the fastest-growing segments in the warehousing space, contributing more than 50% of total net absorption in 2021, the highest among all the other sectors. COVID-19 has accelerated e-commerce adoption rates, leading to an increase in the demand for online delivery of essential and non-essential items. Demand from 3PL has increased as different sectors such as e-commerce, engineering, electronics & white goods are routing through 3PL. 

The growth in the warehousing industry will be augmented by the requirements in the FMCG, 3PL, pharmaceuticals and e-commerce segments. E-Commerce players are to further expand their position as key occupier groups. The segment has been the driving force behind commercial warehousing demand and going forward many warehouse complexes are expected to come up across India and considering consumers have diverted the procurement of daily essentials towards online transactions. 

As e-commerce is deeply ingrained in the busiest commercial, retail and residential areas, in-city warehouse space is gaining importance for rapid deliveries to end users. The Indian logistic and industrial sector is maturing, and developers have started to include quality space and infrastructure in their portfolios. In recent years, the sector has seen tremendous expansion and significant transformation trends across the country which is expected to continue in the future years.

Third Party Logistics Sector in India

The Indian logistics market is fast evolving, keeping in line with the technological and infrastructural developments as well as various policy reforms taken by the government, including the introduction of e-way bills, fast-tag, e-invoicing, GPS-based toll collection, etc. The logistics sector makes up ~14.4% of the country’s Gross Domestic Product (GDP), but it costs 14% of the GDP. The global average logistics cost to a country is approximate ~8%. The 3PL industry in India is planning to employ more than 40 million people that will become the biggest job creator in India in two to three years. 

In the financial year 2020, the size of India’s third-party logistics market was around $215 bn. It was estimated that this market would grow to USD 320 bn by 2025 with a compound annual growth rate of around 16 to 18%. 

• The 3PL sector in India is poised for robust growth, sustained by new technological adaptation and enabling infrastructure. 
• The 3PL segment is to witness a strong pick-up as more companies outsource a large part of their Logistics to 3PL operators. Express cargo would benefit from a pickup in Manufacturing and exponential growth in e-commerce. 

During the last five years ending 2019-20, Third Party Logistics (3PL) sector has been growing at an average annual growth rate of around 8%. 

In 2018, India was ranked 44 out of 167 countries in the World Bank’s Logistics Performance Index (LPI) 2018. India was also ranked second* in the 2019 Agility Emerging Markets Logistics Index. 

Market Segmentation 

Indian 3PL market can largely be classified as follows: 

1. India’s 3PL Market is segmented based on Services, Mode of Transport, and End-User Services, the market is classified into Domestic Transportation Management, Dedicated Contract Carriage (DCC), International Transportation Management, Value-added Warehousing and Distribution, and others. 
2. Mode of Transport, the market is classified into Railways, Roadways, Water Ways, and Airways.
3.  End-User, the market is classified into Consumer and Retail, Automotive, Healthcare and Pharmaceuticals, and others. 

• At present, the 3PL market is dominated by the road transportation sector and the trend is expected to continue in future. 
• Share of road transportation is around 60% of the total cargo movement in terms of tonnage in spite of it being the second costliest mode of transport. 

Industry/sector’s contribution to the 3PL market

The fragmented nature of the industry impacts the efficiency 

The Indian Logistics industry is highly unorganized and significantly fragmented. With the presence of several small unorganized players in the system, organized players account for a mere 12% of the total market. 

Unorganized players consist of small players having less than five trucks, local warehouse owners/operators, agents, etc. Nearly three-fourth of fleet owners are small operators, owning less than five trucks, which indicates the fragmented nature of the industry. 

Regional Lodgment share

• Out of total domestic lodgment, the South & West zone has the highest volume, closely followed by the Northern part of the country. East has the lowest share. 
• The regional share pattern of air lodgment is quite aligned with to surface express load pattern. 
• This data clearly indicates the industrial / manufacturing pattern in regions. 

Key growth drivers of the 3PL industry in India

• While GST implementation and granting infrastructure status to logistics happened sometime back, the fruit of the reforms has started to reap. 
• Setting up a Logistics division under the Ministry of Commerce can lead to an integrated development of the sector. Annual investments in the logistics sector to reach USD 500 billion by 2025. 
• The recent stimulus package of INR 1.5 lakh crore (USD 18 bn) announced by the Government of India to strengthen the logistics sector is a positive step. 
• A greater focus on digitalization and technology adoption across the logistics value chain can create enormous breakthroughs. 
• Emerging technologies such as artificial intelligence, ASRS, machine learning, blockchain and IoT can be a game-changer in building a strong logistics foundation. 
• Setting up modern automated warehouses which are equipped with next-gen IoT devices and other upgraded technology. 
• The continued growth of B2C and D2C businesses are leading the growth of logistics. Growth in organized warehousing and third-party logistics due to increased demand from the e commerce industry. 
• Improved focus on skill development and training infrastructure development to attempt to develop a pool of skilled manpower by both the industry and government, to work as a growth catalyst. 

Government initiatives 

• After the government introduced the Production Linked Incentive (PLI) scheme, many sectors, including food processing, mobile devices, pharmaceuticals, and automobile components, poured large investments into setting up manufacturing plants in India. 
• The country’s ‘Make in India’, ‘Atmanirbhar Bharat’, and ‘Vocal for Local’ campaigns have also led to a positive response with a rise in demand. 
• Moreover, the government’s Bharatmala Project focuses on establishing 35 multimodal logistics parks throughout the country, with four proposed for development in Maharashtra under the Public-Private Partnership. 
• Development of Waterways – Sagarmala program. 
• Such a mix of logistics operations is expected to boost the logistics and warehouse operations in the country. 
• In addition, with India’s significant policy changes, the interest of foreign investors to increase their footprint in the country by way of investments in the warehousing and logistics sectors has witnessed an uptick. 
• Systematic reforms such as the introduction of goods and services tax (GST), tax benefits to FDI investments, interest rate cuts, and corporate tax reforms have made investors keen to explore the new industrial asset class. 
• 3PL, the government’s tax benefits to FDI investments, the growth potential of e-commerce, and India’s cost advantage are all driving forces attracting a sizable foreign investment into the logistics, manufacturing, and warehousing sectors. 

1. 100% FDI, the establishment of logistic parks / MMLP (Multi-Modal Logistics Parks) and FTWZ (Free Trade Warehousing Zone).

2. India initiative and has allowed 100% FDI under the automatic route in Electronics Systems Design and Manufacturing sector.

       3. FDI into single-brand retail has increased from 51% to 100%^. 

Infra development key to the growth of the Logistics sector

The Government of India is aiming to promote Foreign Direct Investment in the logistics industry. Investment can be carried out in two ways: 

• Automatic Route: Approval is not required from the Reserve Bank of India or the Government of India. 
• Government Route: Any activity that is not covered by the ‘automatic route can be carried out after getting approval Foreign Investment Promotion Board (FIBB). 

The extant Foreign Direct Investment (FDI) policy permits FDI up to 100%. Additionally, the automatic route for the logistics sector is subject to applicable laws / sectoral rules/regulations/security conditions. 

The Logistics Sector grants infrastructure status in 2017. The infrastructure status permits the Logistics Sector to avail of the following benefits: 

1. Infrastructure lending at easier terms with enhanced limits.
2. Access to larger amounts of funds as External Commercial Borrowings (ECB).
3. Access to longer tenor funds from insurance companies and pension funds.

In September 2021, DP World, a leading logistics services company, announced a fresh investment of ~Rs. 2,000 crores (US$ 266.81 million in Tamil Nadu, including the setting up of a new container terminal, cold storage and seafood processing zone among other units. 

In November 2021, ESR India, an industrial and logistics real estate platform, announced to investment of an additional Rs. 260 crores (US$ 34.92 million in Oragadam Industrial Park for construction and development. 

In November 2020, Warburg Pincus-backed logistics real estate firm, ESR India signed an agreement with the Maharashtra government to invest Rs. 4,310 crores (US$ 578.88 million) to set up 11 industrial and logistics parks around Mumbai and Pune.

Major Challenges Faced by Logistics Companies in India 

• High Order Intensity Ratio: Every Indian Logistics Company has faced the issue of receiving a bulk load of orders that would break their back while trying to keep up with the supply-chain timeline. Considering the high volume of orders received, it gets difficult to prioritize orders and deliveries while juggling too much on too little time. 
• Transportation Roadblocks: Even when the packaging and drops are conducted on schedule, the transportation industry is often unreliable. India is a huge country that covers a lot of different terrains subject to different conditions. The roads are terrible in internal parts of the country while the Ghats are prone to accidents and landslides. 
• Rail Tariffs: The high costs of rail transportation and the hike in goods transportation tariff don’t make a positive impact on time-bound delivery since the Indian railways, too, suffer from a congested network. 
• Port and Shipping Problems: Shipping goods from point A to B takes the longest time among all of the possible modes of transport. Coastal ports have an infrastructural problem where large vessels fail to dock due to a lack of depth. 
• Lack of Skilled and Specialist Personnel: There is a serious lack of skilled personnel and specialists in the Logistics sector in India. The labourers are under-skilled, overworked and lack the desired skill set to make the process more efficient. 
• Slow Transition into Newer Technologies: When we compare the logistics and supply chains of more efficient countries like Japan, their work models, and strategies revolve around adapting to the latest technologies to achieve maximum productivity. The logistics companies in India fail to reach that potential when they don’t upgrade their technology with changing times. 
• Ever-Increasing Fuel Costs: With the change in the prices of fuel, the biggest problem is transportation costs. Increasing fuel costs cause an increase in the surcharge to the freight tariffs. 
• Government Policies and Bottlenecks: With compliance mandates being tightened even more, the logistics companies in India face the consequence of bottlenecks. 

Current Scenario 

• India is targeting to bring down Logistics costs to 10%.
• The government is looking to reduce Logistics costs to ~10% of GDP, with an almost equal reduction in transport and inventory costs. 
• Cost reduction is essential to improve competitiveness and improve exports. As the industry consolidates and turns more organized, it would help in better customer reach and service quality, leading to sustainable export growth. 
• Logistics costs in India are among the highest at 14% of GDP, due to the inefficient modal mix, which is tilted towards the Road segment. 
• A greater share of the unorganized sector leads to inefficiency and higher costs. Logistics costs are expected to fall, with increased technology usage and a higher share of other transport modes. 
• Several new-age players are making their presence felt in the market, with the massive use of technology. They have managed to gain market share from traditional players. Segments like e-commerce are growing exponentially. 

E-commerce Sector in India 

The E-commerce segment witnessed stupendous growth during the pandemic as people across the country depended on online websites for their essentials. The Indian E-commerce market is expected to be USD 120 billion by 2026 from USD 38 billion in 2021 which in turn is expected to drive the growth of the warehousing and logistics sector in India. 

Young demography, increasing internet and smartphone penetration, and relatively better economic performance are the major drivers of the E-commerce industry in India. With 830 Mn users, India is currently the 2nd largest internet market. Internet penetration in India has increased from 4% in 2007 to 45% in 2021. India has the highest data consumption rate worldwide at 14.1 GB of data per person a month. 

In 2021, digital wallets were the leading payment method for E-commerce transactions with a share of around 45%. 

More than 60% of transactions and orders in India come from tier-two cities and smaller towns. The E-commerce trend is gaining major popularity even in tier 2 and tier 3 cities as they now make up nearly half of all shoppers and contribute three of every five orders for leading e-retail platforms. 

India had the third largest online shopper base of 230 million in 2021, which is expected to be 350 million in 2026. In India, 100% FDI is permitted in B2B E-commerce. 

As per the new guidelines on FDI in E-commerce, 100% FDI under automatic route is permitted in the marketplace model of E-commerce. The heavy investment made by the Government of India in rolling out fibre networks for 5G will help boost E-commerce in India. 

Segment-wise landscape – Online retail market 

The online retail market in India is estimated to be 25% of the total organized retail market and is expected to reach 37% by 2030.

Online retail in India forecast to grow at a CAGR of 20% by 2025. Online retail spending in India is expected to grow nearly six fold by 2030 with expansion in the number of digitally- influenced shoppers and online shoppers. 

The number of digitally-influenced shoppers has grown rapidly reaching 280 million from 260 million and online shoppers have grown to 230 million from 210 million in 2021. With one of the world’s lowest data and smartphone costs, growing internet penetration, and a creation of new online shopping channels, India is experiencing a dramatic rise in e commerce and digitally influenced spending as India becomes the second largest digital economy by number of internet users.

E- commerce Business Models in India

Department of Industrial Policy & Promotion has defined the Market Place & Inventory based models clearly, which makes most of the existing e-commerce companies to re-look at their business models to ensure compliance with the guidelines issued. 

However, the Fulfilment centre model is widely adopted by e-commerce companies to reduce the delivery period. 

Now, logistic companies like GATI, and DHL also have their own fulfilment centres.

Value Chain in Indian B2B E-commerce 

No product storage is done by e-commerce companies. They list the products and forward the order to respective suppliers/distributors via e-mail. 

Products are dispatched by the suppliers/distributors after receiving the order details from the e commerce company through their own or e-commerce companies’ logistics partners. 

There are no handling charges as the products are dispatched by the suppliers/ distributors. Logistics charges will be added if the suppliers opt for e-commerce companies’ logistics partners. At present they are charging flat commission inclusive of logistics support. 

Payment is made to the suppliers/distributors after deducting the charges & fees through NEFT/RTGS. The payments are done after 7 – 21 days after the delivery of products. 

Customers’ queries and return handling are handled by the suppliers/ distributors, but the support is provided by e-commerce companies in the case of the fulfilment model. 

Key Challenges Faced in B2B E-commerce segment

Factors driving E-commerce growth in India

• Increasing investments in warehouses and logistics are expected to be the key driver of the E commerce segment in India. 
• Shift from cash to card: India has been ahead of the curve in terms of real-time digital payment infrastructure including UPI and 24×7 NEFT. 
• Growing consumer spending: India is expected to become the third-largest consumer market by 2030. The reduction of interest rates by RBI to an all-time low has helped the household sector reduce the burden of loan servicing. It is estimated that spending on food and non alcoholic drinks will grow at 7% CAGR in the coming years. 
• An increasing number of online retailers driven by increased usage of mobile internet Growth in revenues from Tier II and Tier III cities 
• Though the age group of 15-34 years continue to be the major consumers of E-commerce, an increasing number of older people have started to shop online. 

Impact of E-commerce on Warehousing, Logistics and Material Handling 

The exponential rise in the E-commerce segment has fueled the growth of the warehousing and logistics sector in India. E-commerce companies have become the key occupiers of warehouse spaces in Tier I, II and III cities. E-commerce and third-party logistics companies are driving businesses to ramp up supply and storage to deliver products at the earliest. It is estimated that the share of the E commerce sector, third-party logistics and other related sectors will increase from 78% to 86% of the total transacted space over the next 5 years. 

As per industry estimates, major E-commerce companies like Flipkart and Amazon have leased over a quarter of India’s total warehouse capacity over the last 2 years. Rents in key warehousing markets have increased by over 5% in 2022 as against a growth rate of 3% from 2015 to 2021. Demand for warehouse space demand is consistent in key consumption centres such as the Mumbai Metropolitan Region, the Delhi-National Capital Region, Bangalore, Pune and Hyderabad, and also tier-two cities such as Ahmedabad, Lucknow, Chandigarh and Nagpur. Demand for warehousing is being pushed with the expansion of quick eCommerce services that include delivery commitments within 10 or 30 minutes even as several online retailers build an omnichannel presence for a higher wallet share. 

E-commerce applications are driving the material handling equipment market due to escalating need for faster deliveries to better cater to the consumers’ demand. Several vendors in the e-commerce industry are installing Warehouse Management Systems to monitor inventory levels and classify stock locations. E-commerce players today are investing heavily in automating supply chain processes. They are leveraging AI and Data Analytics capabilities to detect inconsistencies and issues like low inventory or delayed supply. Integrating new-age technologies or tools is further aiding brands to analyze their customers’ preferred fulfilment choices and past shopping behaviour to optimize inventory management, increase repeat purchase rates and balance fulfilment costs. 

Efficient supply chain management is becoming critical for e-commerce companies as it eliminates several stages of retailers, distribution, and outlets, subsequently reducing the overall cost of products. It also enables companies in the e-commerce space to easily import raw materials from anywhere and export their finished product to any country. 

3PL Industry – Key Industry Organisations