Logistics Firms Gear Up For Festive E-commerce Rush
The festive season of 2014 is when e-commerce, backed by billion-dollar venture funding and massive advertising, went mainstream in India. But it was also when some of the e-com biggies faced the wrath of consumers because their infrastructure failed to live up to the demand. This time, internet ventures, including the smaller, local ones, are working around the clock to ensure they are better prepared, with people and technology, to cope with the rush.
Last October, thousands of online shoppers took to Facebook and Twitter to protest Flipkart’s mis handling of its Big Billion Day sale, forcing its founders Sachin Bansal and Binny Bansal to ten der a public apology. The Bengaluru-based online marketplace had overpromised and under-delivered.
Expecting great deals from the flash sale that Flipkart had been advertising heavily about, millions of customers had flocked to Flipkart. But the e-tailer wasn’t prepared to handle the overwhelming response. The site crashed several times during the day. The promised deals disappeared even before the sale started. Orders were misplaced. And people were furious.
“Flipkart wanted to do something different. And it succeeded in a way. But too much of a good thing could turn out to be dangerous if you don’t know how to handle it. They didn’t have the processes in place to meet the huge spike in demand it evoked through its repeated advertisements. And it underestimated the Indian online shopper’s wallet and tenacity” says the CEO of a large food delivery startup who did not want to be named.
This CEO says he has learnt from the Flipkart experience. So, in the festive season that has just begun, the venture intends to keep its advertising measured. “We expect a 30-40% natural increase in demand during the period and have readied a new fleet of delivery boys who can be rushed to any location to help out our restaurant vendors,” the executive says.
Numerous new ventures – who sell everything from foot massages to television sets – are flush with money this year, and for many of them, this will be the first festive season. Startrek spoke to several of them, and all said they had learnt the right lessons from the Flipkart experience of last year and were addressing both the front-end and back-end infrastructure capabilities necessary to handle the demand surge the season brings.
More than a third of yearly sales of consumer durables, jewellery and electronics happen during the festive season in India.Some of the big players have readied war chests that run into hundreds of crores of rupees to deal with this. E-commerce major Snapdeal is investing Rs 650 crore to beef up its supply chain for the festive season. E-commerce and mobile wallet Paytm is spending Rs 500 crore in marketing and logistics.
Smaller ones too are preparing for what they believe will be the “best case” scenario. “Our vendors who see 100 orders a day may have to handle over 1,000 orders every day.” says Neeraj Jain, co-founder and CEO of hyper local startup Zopper, a mobile app-only startup that connects users to offline retailers.
He says the vendors will face working capital issues. So Zopper is helping the retailers tie up with financial institutions and banks for loans. The retailers normally do not have a larger logistics team during festive seasons than what they usually have for deliveries. To address that, Zopper has underwritten demand with third-party logistics partners, so that they will always have dedicated logistics support. Jain is also being careful not to expand its reach too much during this season.
Roadrunnr, a B2B delivery startup that has e-commerce sites like Snapdeal, Paytm, and Flipkart as clients, says it expects three times the orders that it currently receives during the festive season and is hiring many more people to handle the demand.
Since technology is now key to almost everything that these ventures do, most are also focused on that part of their infrastructure.Urban Ladder, the Ratan Tata-backed furniture e-tailer, earlier this year automated some of its manual processes. It upgraded its ERP (enterprise resource planning) and CRM (customer relationship management) systems to handle 20x the volumes it was seeing then.”We were clocking 15% month-on-month growth till August and we expect this to rise to 25% in the next three months,” Rajiv Srivatsa, COO and co-founder, says.
Grocery delivery venture Bigbasket has put in place an algorithm-based system that can predict demand surges and alert the operations team. “While we don’t see huge demand spikes during the festive season the way a normal e-tailer would do, we are ready for any unprecedented surges. The demand for staples go up along with increased orders for dry fruits and gift boxes. Also, a 2x surge for us is the same as a 50x surge for Flipkart due to the sheer number of smaller items in one single order,” says Vipul Parekh, co-founder of the venture.
Bigbasket works on a slot-based system.There are four delivery slots during the day . When the technology system detects that the number of orders for a slot is reaching the tipping point, it makes that slot unavailable for consumers and pushes their orders to the next slot. “It works like a safety valve. We cannot afford to go wrong with the delivery time.That would be the fastest way to lose a loyal customer,” says Parekh.
Pre-owned automobile startup Droom, which just received an investment of Rs 100 crore from Lightbox and Beenos and which is anticipating a 30% increase in demand in the coming months, has invested in establishing a fully automated state-of-the-art dispute resolution programme.”It is highly intuitive and will go a long way towards helping us tackle the difficulties of selling something as big as what we do,” says Sandeep Aggarwal, founder of Droom.
He notes that shipment promise is very important since they don’t have the products with them, but have to obtain them from other vendors when the orders come. “So there is a need for constant dialogue with the shopper to ease his anxieties around the transaction,” says Aggarwal. Tech will play a major role in anticipating the questions and avoiding serious embarrassments.