Asgar Shakoor Patel, 76, who began his career as a truck driver, carrying his first consignment for GlaxoSmithKline Plc in 1959, is all set to step down as chairman from his own company Patel Integrated Logistics Ltd. Patel Integrated Logistics is one of the oldest and largest transportation and logistics firms in India and the exit of its founder, in some ways, marks the end of an era.
When his son Areef Patel takes over, his mandate will be to transform the company and take on the more nimble firms who have grabbed the growing e-commerce logistics business, leaving traditional leaders behind.
“We should have been a pure e-commerce company long back before Flipkart and Snapdeal, considering our last-mile delivery capabilities. We have lost ground on the same. But my son Areef Patel who is also managing director Patel Group is trying to adapt to current landscape," Asgar Patel said in a phone interview from Dubai.
The group has started moving in that direction by adding warehousing and small parcel delivery to its bouquet of services. It has also tied up with Amazon for port-to-port logistics operations to compete with e-commerce-specialized logistics companies such as Delhivery.com, Ecom Express and GoJavas. The plan is to transform into a business-to-consumer (B2C) firm from a business-to-business (B2B) company.
The shift under way at Patel Integrated Logistics is a transformation that many traditional logistics firms are trying to manoeuvre, even though industry watchers are sceptical about their ability to succeed. Companies, including Gati Ltd, Blue Dart Express Ltd, Safexpress Pvt. Ltd, DTDC Express Ltd and Drive India Enterprise Solutions Ltd are all adding e-commerce verticals to their existing lines of businesses.
Transportation company Gati has started a new initiative called Gati E-connect, covering more than 99% of districts in India. According to its website, Gati E-connect offers cash on delivery and prepaid facilities to more than 5,120 pin codes directly and reaches 15,400 pin codes indirectly. It now covers B2B, B2C and customer-to-customer requirements as part of its services.
In a 26 August investor presentation, Blue Dart Express said it is focused on improving its e-commerce last-mile delivery. It said the firm has started offering storage facilities to e-commerce firms in the National Capital Region (NCR) and intends to expand this to other cities. Blue Dart intends to service overseas e-commerce deliveries as well, starting with the US market.
Another company Safexpress has launched a business-to-customer division for e-commerce covering 3,000 pin codes in 50 cities, while rival DTDC Express had started a product called ‘DotZot’ for e-commerce.
Traditional logistics companies are excited about e-commerce sector as they see a large and fast growing market, said Manish Saigal, managing director of Alvarez & Marsal India, explaining the rush to enter into the e-commerce delivery segment.
Saigal, however, adds that the transition will not be an easy one to make as most of these companies don’t have the processes to serve the B2C segment.
“Last-mile delivery for e-commerce is a complex business that requires consistently high level of delivery performance, cash on delivery handling, reverse pick-ups and a scaled-up network capable of delivering to thousands of pin codes. Serious logistics players focused on e-commerce need large amounts of funding to build scale, invest in technology, recruit and train delivery staff and fund cash losses until they achieve cost efficiencies with economies of scale," said Saigal who specialises in logistics and transport.
Among the traditional logistics companies, courier and parcel delivery companies are better placed to leverage their network for e-commerce considering their experience in delivering documents and parcels to households, he added.
Online retail in India is growing at a faster clip than brick-and-mortar retail. The share of modern trade will slip from 17% in 2013 to 13% in 2019, while that of e-commerce companies will jump from 2% to 11% in the same period, according to Think India, Think Retail, a February report published by property consultant and advisor Knight Frank India Pvt. Ltd and lobby group Retailers Association of India.
The e-commerce market will account for 2.5% of India’s gross domestic product by 2030, growing 15 times and reaching $300 billion, a Goldman Sachs report said in May. The current size of the e-commerce market is $20 billion.
Areef Patel of Patel Group says he won’t give up easily. He said the e-commerce vertical will contribute at least 20% of its total revenues in next three years. At present, 25% of revenue is coming from trucking business and remaining from air cargo businesses.
“We will be investing around ₹ 50-60 crore. We will roll out the e-commerce business shortly for e-commerce websites after inducting technology. We are going to start seven to 10 branches every month," he said.
“Better late than never," says his father Asgar.