DHL to test e-commerce business model in India
The company will invest €100 million in the country over the next two years
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Mumbai: Deutsche Post DHL on Tuesday said it has chosen India to pilot its e-commerce business model for the Asia-Pacific region and will invest more than €100 million in the country over the next two years to create infrastructure for the same.
“Globally, e-retail is rapidly evolving. Over the next five years, the global e-commerce sector is expected to grow by more than 10% per annum with Asia Pacific leading the way,” said Frank Appel, chief executive officer, Deutsche Post DHL, which runs one of the world’s top logistics brands. Appel was in Mumbai to launch the pilot drive in India.
“This region is expected to soon surpass North America and Europe as the biggest online market in the world. As the leading logistics company with an unsurpassed global footprint, there is a huge opportunity for us to become the world’s leading provider of e-commerce logistics and we have ready solutions infrastructure in India to pilot our solutions,” Appel said.DHL’s announcement comes when valuations of e-commerce firms are rising in investors’ eyes.
Over 20 online retailers including Flipkart, Snapdeal, Urban Ladder, Fashionandyou and LimeRoad have got venture capital funds in the past four months. More are in talks to raise funds in the next six months.
Flipkart’s rising revenues, its acquisition of online fashion retailer Myntra, the rise in shopping on smartphones and the change of government at the centre have aided in attracting investors.
Internet businesses attracted about $602 million in 2013, according to investment tracker VCCEdge. This year, e-commerce firms have raised more than $2 billion, Mint research shows.
The hype around the initial public offering (IPO) of Chinese e-commerce company Alibaba, expected in September, has revived hope that if China can come up with large e-commerce businesses, so can India. Alibaba may set its IPO value at $154 billion, according to a recent Bloomberg analysts’ survey.
Meanwhile, online retail is valued at $3.1 billion and is estimated to grow to $22 billion in five years, according to a November 2013 report by brokerage CLSA.
And the sudden rush of money into e-commerce—partly from new investors like Temasek Holdings Pte Ltd, Government of Singapore Investment Corp., BlackRock Inc., and particularly Steadview Capital Management Llc—has significantly pushed up the valuations of e-businesses.
Malcolm Monteiro, chief executive officer, DHL eCommerce Asia Pacific, said with 250 million Internet users, Indian e-commerce remains underdeveloped, with online shopping valued at €2.3 billion in 2013. “This is expected to grow to €4.1 billion by 2018, a CAGR (compound annual growth rate) of 12.3% in five years. All countries across Asia are in different evolutionary stages when it comes to e-commerce. We need to adapt our service portfolio within the region accordingly,” he said.
DHL is part of Deutsche Post DHL and it generated revenue of more than €55 billion in 2013. It is present in 220 countries with 315,000 employees. DHL holds 75% stake in India-listed small parcel transportation firm Blue Dart Express.
Anil Khanna, managing director, Blue Dart Express said margins in e-commerce business are 2-3% better than in other verticals.
DHL will start 15 e-fullfilment centres to facilitate e-commerce business in metros including New Delhi, Bangalore and Mumbai. There are also plans to start such centres in Tier-II and Tier-III cities including Coimbatore and Jaipur.
“Blue Dart follows an asset light model, and has expertise in ‘first and last mile’. DHL, on the other hand, specialises in providing integrated logistics solutions (warehousing, etc.). The commitment by DHL to invest in warehousing for e-commerce business is a step in the right direction and bodes well for Blue Dart’s business growth, as the industry is moving away from vanilla transportation to specialised and integrated service offerings,” said Harsh Dole, senior analyst with brokerage unit of India Infoline Ltd.