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Tech-enabled express logistics poised for growth

ICICI Securities 14 Mar 2022

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%).

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