Third-party logistics players’ (3PL’s) share of e-commerce shipments, excluding grocery, will continue to grow in line with the growth in online shipments over the next five years, according to a report by Redseer. In FY24, this stood at $4.4 billion and is expected to rise by 30% to $15-17.5 billion by FY29, the report notes.
Redseer notes four key growth drivers for this: New e-commerce models that rely more on 3PL are growing at a faster pace, horizontal marketplaces will continue to rely on 3PLs for broader reach and specialised shipment requirements, tier 2+ cities are expected to contribute close to 65% of e-commerce shipments by FY29, and with growing consumer maturity and expanding product categories the demand for reserve, bulky, and same-day-delivery is set to rise further. “In 2024 alone, tier 2+ cities were key drivers of the festive e-commerce growth, recording a 13% in spending, higher than metro and tier 1 cities. Consumers in small cities are now embracing higher value purchases, particularly in electronics and appliances, signifying a shift towards premium products,” said Nikhil Dalal, associate partner, Redseer. As distribution complexities increase, brands will increasingly rely on efficient 3PL to be able to manage the multiple touch points, the report added.
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However, the size and shape of tier 2+ consumer demand is different from metro and tier 1 cities, the report added. In CY24, tier 2+ accounted for 72% of the entire retail market, while tier 1 accounted for close to 13% and Metro around 15%. Tier 2+ cities, which see $600-650 per capita retail spend, saw 17-20% of this go to organised retail, 4-5% online, 25-30% branded, 45-48% discretionary spends. Meanwhile, metro and tier 1 cities saw $1,200-1,300 per capita retail spend, with 35% of it going to organised retail, 10-15% online, 55-60% branded, 70-73% discretionary spends during the same period. “Despite the convergence of growing offline and online retail, consumption preferences differ significantly amongst city tiers. Brands need to adapt accordingly while serving tier 2+,” the report added.
Meanwhile, India’s overall online retail gross merchandise value is expected to see a $100 billion incremental opportunity, reaching $162 billion by FY29, up from $64 billion in FY24, making it the third largest e-commerce market after China and the US, the report added. However, this represents a slight tapering to a 20% growth rate,
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