The Great E-commerce Logistics Moderation

February 20, 2023

We were to beat China right? Then why suddenly a talk of slow-down in E-commerce growth. 

Slowdown is relative of course- you are going at 120 kmph and you slow-down to 80 kmph- that is a 50% fall in growth rate. But 80 kmph is NOT SLOW. 

Unfortunately, you have raised funds from your investors to build a capacity to go at 300 kmph and convinced him 600 kmph is in sight. Now 80 kmph looks really slow. 

E-commerce logistics in India is facing this. The monthly volume growth post Diwali has fallen from high double-digit to low single digits and in some months - hold your breath- negative. 

Why so? Is it an indicator of greater slow down to come or just a plateau before next peak? 

My take:

  • We have run out of middle class and SEC A and B super-growth- they will keep on buying and shifting to online- but at 80 kmph !!
  • Even in these mega cities- we have run out of smart phone wielding 18-25 demographic. Rest of the people are simply too poor or less aggressive buyers. 
  • Tier 2,3,4.. (and more..) are proving difficult to crack and costly. The same biker driven model that works for NCR will not be viable for Rudrapur or Mehsana. Economics do not work out- and these days that seems to matter to investors. 
  • India meets Bharat. Do note that China first became rich (comparatively, of course) and then e-commerce boomed. We are still in sub- USD 3000 per-capita- basically still a poor country. 
  • 4G will drive mobile ownership and Smartphone penetration and then habits will change. That will bring next set of 200 mn plus buyers online. But that is 2 years away at least. So the blip.

As many an investor and entrepreneur will tell you- the long term story remains intact.

But in the \"long term\", everyone is dead as well, isn\'t it !! 2016 might just be the year of ghosts !!