E-commerce Industry Trend Prior to Covid-19:

The e-commerce sector was the underdog in India during the pre-covid-19 era. People preferred to shop from brick and mortar establishments rather than e-commerce platforms. The e-commerce industry was expected to grow at a slow rate of 4.1% from 2018-2021.

Graph1: E-commerce sales in India prior to covid-19

Reference: E-Marketer

E-commerce Industry during the Covid-19 Pandemic:

The first wave of the covid-19 pandemic in India accelerated the growth of e-commerce industries as there was a considerable shift in consumer buying behavior. Indians preferred to spend only on essentials due to government-imposed lockdowns. Indians from tier-2 cities also started switching to e-commerce platforms resulting in the surge of e-commerce sales by 8%.

Picture1: Voice of e-commerce customer

The government of India paused the operations of brick and mortar companies which inevitably impacted their sales. Looking for a new way to earn revenue, these companies started establishing their online presence to keep up with the evolving trend. The new entrants into the e-commerce sector brought in a wider customer base, increasing e-commerce sales. The industry is expected to boom reaching INR 7227 billion by 2024 driven by the covid-19 pandemic.

Graph2: Online retail spending in India: 2015-2021

Reference: The Hindu Business Line

Impact of Covid-19 on the E-commerce Industry:

The onslaught of the covid-19 pandemic also resulted in panic-buying on e-commerce platforms, thereby creating a surge in demand causing them to choke due to the backlogs in orders.

E-commerce companies that were technologically driven failed to accept and deliver orders though they had sufficient inventory and stand-by delivery executives.

Picture2: Voice of customer

So, what went wrong with reputed e-commerce companies who were always a step ahead? Was the lack of automation in warehouses causing a hindrance to the growth of e-commerce companies?

Wake-up Call:

Contrary to the popular belief that e-commerce warehouses in India are automated, the warehousing market is labor-intensive. Here are some of the key points which indicate the dependency of e-commerce companies on manual labor:

1. Pickers were paid approximately INR 10,000-12,000 per month and hence automation was not a priority.

2. Prior to the covid-19 pandemic, the availability of labor for e-commerce warehouses was bountiful and cheap.

3. E-commerce warehouses are emerging as one of the leading employers pushed by government incentives. As of 2018, the Indian warehousing market has provided employment to more than 22 million people.

However, The first and second waves of covid-19 created a severe shortage of laborers and the cost of hiring went up by up to 40-50%. About 50-60% of manpower cost is spent on picking orders in warehouses.

Picture3: Voice of warehouse employee

Life of a Picker in an E-commerce Warehouse:

In a day, a picker works for approximately 9 hours and spends 50-60% of their time walking in the warehouse to complete orders. A picker on average walks for 5-7kms in a day and in a month, a picker would have covered the distance between Bangalore and Mysore (approximately 120kms).

Graph3: Time spent on different activities in the picking process

Limitations in the Current Picking Process:

In the last couple of years, we have been studying the automation trend in the e-commerce warehouses and automation has mostly been limited to the running (post-picking) & sorting functions. The picking function in warehouses has remained manual.

Picture4: Pain points of pickers in warehouses which reduce productivity

Prior to the covid-19 pandemic, the number of pickers employed in different industries in India is as follows:

Graph4: Picker density in Indian warehouses of 50,000 sq ft

However, these trends are expected to change due to the covid-19 pandemic. The attrition rate of pickers is greater than 40% due to the fluctuating workload and nature of the work.

Picture5: Voice of a picker

With the speculation of a third wave of covid-19 hitting India, the demand for labor is also expected to rise as e-commerce warehouses are expanding rapidly.

Emerging Trends in Warehouses due to Covid-19:

Picture6: Emerging Trends in warehouses due to covid-19

Reference: Knight Frank Research

The Way Forward:

The warehouse occupancy rate, which is measured in million sq ft indicates that e-commerce and 3PL supporting e-commerce are the drivers of warehouse demand. The 3PL logistics market in India is expected to grow at a rate of 7.8% during the period of 2021-2025 due to the covid-19 pandemic. The below graph shows the warehouse occupancy rate of different industries in India.

Graph5: Warehouse occupancy rate of different Indian industries

Reference: Knight Frank Research

The e-commerce and 3PL supporting e-commerce sector in India are expected to drive the warehousing market to reach INR 2028.86 billion by 2025.

Food for Thought:

Picture7: Food for Thought1

Picture8: Food for Thought2

With a series of blogs and an upcoming virtual conference in July, Greendzine technologies aim at addressing these challenges in association with a panel of industrial and academic experts.

Vibha.V.Murthy

vibha.m@greendzine.in

Market Research Associate

Greendzine Technologies

https://www.linkedin.com/in/vibha-murthy-bb46371a6/