New Delhi: T.A. Krishnan, chief executive officer of e-commerce logistics services provider Ecom Express Pvt. Ltd, started the firm in January 2013 with friends and ex-colleagues Sanjeev Saxena, K. Satyanarayana and Manju Dhawan. In an interview, he talks about the journey of the e-commerce logistics space in the last four years, the company’s growth and future plans. Edited excerpts:
How has e-commerce delivery as a market evolved in the last four years? Where do you see it going from here?
From 2012 to 2016, there has been a huge difference. B2C (business-to-consumer) operators were almost non-existent till about 2011-2012. Today if you see the preference of a customer—45% of the volume that exists today in the e-commerce space is handled by dedicated partners like us (Ecom Express, Delhivery, Xpressbees, among others).
Even though companies such as Amazon and Flipkart have in-house logistics firms, in future, my belief is that most of these companies would start focusing more and more on core, which is just the marketing activity rather than logistics. However, even if that were not to happen, the way the market (e-commerce) is expected to grow, there is enough and more for all of us to co-exist peacefully and not cut each other.
Given the sort of growth the e-commerce sector is expected to witness, how many delivery firms do you think India can accommodate?
There are four multibillion-dollar companies handling the China market, acquiring 70% of the overall market. India is far away from what China is in terms of e-commerce volume. So if India has to grow the way the Chinese market grew, there is enough space for four-five large companies, besides which there can be a few niche operators or value-add companies offering services such as next-day guarantee or companies who specialize in try-and-buy or reverse logistics.
What are your thoughts on hyperlocal delivery as a sector segment? Unlike your competitor Delhivery, you refrained from investing in this sector. What is the reason behind that?
To me, it doesn’t make any sense. It is a volume game. Unless the ticket size improves, logistics costs will kill the business and it is not sustainable. It is a different ball game. I am not saying there is no science to it, but companies need to have a density of orders and order size beyond Rs500-600. This business needs a lot of capital to be infused, till the companies grow. My view is, companies should not focus on multiple cities. They should take one city at a time and then go to another city, and then replicate it. You can’t have burn rates going up in multiple cities at a time. They should focus on one city, build the infrastructure, delivery points, have their own network of people to handle delivery, only then can this model work. There is a space, but it is a highly capital-intensive business and thus break-evens would take much longer. But once it grows, then there is no stopping it. The gestation period could be six-eight years. Only when the order density improves can the business become profitable; till then the companies need a lot of capital.
What are the key challenges Ecom Express has faced in the sector so far?
There are a lot of issues—infrastructure and regulatory ones. There is no space in Delhi which can be called a warehouse. There are regulatory issues and problems we all have to face when it comes to different states. Everybody is trying to encash the e-commerce thing. There is an entry tax issue which states have been building. Certain states are hostile, some are friendly, so we have to deal with such things every day. Sales tax is archaic and is not friendly to the e-commerce trade at all.
What are your expectations with GST (goods and services tax) coming into place?
Life should become fairly simple. We would not have to go through check posts. Technically, if companies want, they can just have one warehouse and can probably have an all-India distribution, which can be taken care of by us. Our proposal to the government of India is to also probably have a unified registration; otherwise, it is too painful and cumbersome to go get registration done in every state. Post GST the whole thing changes, you don’t have to fight the old sales tax rules.
How busy are you this festive season?
Every year, around this time, we are hardly in town, trying to check the readiness in terms of people we are taking, infrastructure we have to create and synchronization of network, among other things. All those things we need to plan, depending on the kind of volume. So all that planning takes a lot of time. We are ready now, raring to go and wanting the volumes to happen. Once the festive season ends, we will be setting up large format facilities. Seven such facilities will come up pan-India. They will be at least of 500,000 square feet.
Had you not spent time in Blue Dart, would you still have thought of setting up a logistics business?
I have done only logistics all my life, haven’t worked in any other industry. Twenty-six years of my life I have spent in the courier and logistics business. Don’t think I would have succeeded in anything other than this.