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Tech-enabled express logistics poised for growth
What’s buzzing:
The express logistics segment is poised to grow at 28-32% CAGR in the next three to four years, backed by changes in buying behaviour of customers.
Context:
While the express segment constitutes mere 2% of the overall road logistics segment, it deals with transport of time bound cargo (below 40 kg parcel size). They are typically asset light and technologically intensive companies (provides lower per unit cost, higher barrier to entry, scalable model).
Our Perspective:
Primarily, the growth in the segment is being fuelled by strong volume growth in the e-commerce segment (32-35% CAGR). Of the ~1.5 billion e-commerce shipments in FY20, third party players (3PLs) typically deliver 50% of shipments (i.e. ~0.8 billion shipments with rest delivered by e-commerce players themselves). Of the ~0.8 billion shipments, traditional e-commerce shipments (via the two marketplaces i.e. Amazon, Flipkart) comprise 72% of the pie, while the rest is constituted by D2C (12% - fully outsource parcels to 3PLs), social commerce (16% - commerce via social media platform) and omni-channel (~0.5%). Proliferation of smartphones, online category expansion, newer payment methods, easy replacement are expected to boost newer categories such as social commerce to 32% of the pie (overall 8-9 billion shipments) in FY26. In contrast, traditional the e-commerce market is expected to reduce to 50% of the pie with the rest being commanded by the D2C (15%) and omni-channel category (3%).
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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