Updated: Aug 11
Logistics for E-Commerce in India – The Definitive Guide!
This Guide is meant for E-Commerce start-ups (or even large retail product companies) wanting to know how to enable Logistics for their E-Commerce site; involving physical pickup and delivery of the products you sell online at your store. We at PERSPECTIVE provide a host of Go To Market Services to E-Com Startups as well as E-Com initiatives of Large Enterprises. As we were an E-Com owner ourselves (for www.artbugs.in – Online Artistic Home Decor & Fashion); we are sharing our inputs from our direct experience. Hope you benefit from these inputs! You can check our related posts here:-
For those who want to learn Digital Marketing (Recommended for everyone I know to learn this all the time!); I strongly recommend you to subscribe/ regularly visit digitaldefynd.com ! Expert Digital Marketers wanting to contribute with posts to this fantastic site can contact me. It has a fantastic Alexa India Rank! (For anyone in E-Com/ Online Business who don’t know what is Alexa; look it up! You need to know!)
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E-Commerce in India is at a very early stage. Those who think it as a bubble; think twice – it may be a bubble for over ambitious large E-Com players who have now reached Series B with no further takers for Series C; but then maybe these players have spent excessively and not achieved revenue objectives in line with the expenditure. However there are 18,000 startups In India and growing; hence those who grow steadily with wise expenditure will survive.
E-Commerce is a Costly Affair
Gone are the days when you could build a website; spend a bit on marketing do some SEO to get organic traffic and launch; all this in Rs. $1000! Now if you are building an online site; think of a budget of Rs. 10 lac – 20 lacs or even Rs. 25 lacs. This will cover your low cost office, the first couple of hires, some amount of digital marketing and other stuff. If you don’t have or can't raise this kind of capital initially; then you are better off listing your products on other large E-Com Marketplaces like Amazon, Flipkart, Askmebazaar – thereby focusing on only making the products, managing the inventory etc. However even if you are only on other marketplaces (and not have your own site); then it is likely that you would need a Logistic Provider to fulfil other marketplace orders. Also if you are listing on Other Marketplaces we would highly recommend www.onlinebecho.com – They provide fantastic services for getting you online! (Right from your product photography!)
PERSPECTIVE has guided Start-Ups and Large Enterprises on their E-Com initiatives; our work begins with the basic company vision, setup, product strategy etc. taking you all the way till Go Live and further to that your Go To Market. If you have a budget of Rs. 10 lac you can reach out to us; our projects involve providing consulting (Covering Business Strategy, IT, Marketing, Developing an MVP (Minimal Viable Product) Product Strategy, Got Market etc.) for a minimum of 3 months; extending it to a year
Logistics for E-Commerce in India
Most E-Commerce websites have a marketplace model i.e. they contact various suppliers, sign a Supplier Agreement with them to list the supplier products on their website. They then take the images and product details from Supplier and then list the products on their site. Hence they DO NOT take the supplier inventory. Whenever they get an Online Order from Consumer; the website in turn places an order to the supplier. Now the issue is; how does the product reach from Supplier to Consumer?
E-Com sites can tie up with a Logistics Provider. Some of them include Delhivery, GoJavas etc. Our very own India Post (Indian Postal Service from teh Government of India) also provides this; but with a pretty steep minimum Billing Value of approx Rs. 12,000 Per Month. Hence choose one which will give you the best service. Ask various E-Com owners to recommend the right Partner. It is critical to deliver to consumers in time (Typically within 7-8 days) in order to fulfill the transactions
Cash on Delivery
With real experience we can share that 60-80% of online orders in India are COD i.e. Cash on Delivery. This means that the LP (Logistic Provider) will also have to pick up your cash from the consumer when he is delivering the package. Hence COD is a mandatory requirement from the Logistic Provider. On a Similar Note; E-Com owners getting International Buyers must provide Paypal Option; as Paypal is a “Pre-Paid” payment to you and you need this “Pre-Paid” obviously before taking up the cost to ship internationally
Services from the LP (Logistics Provider)
For an example lets say your E-Com site www.example.com has listed a product called “Designer Wall Clock Zinc Antique” (Those interested can visit our Arty Clock Designs here ! ). Let’s assume the Supplier is called “ABC Clocks” from Delhi. Let’s also assume the Consumer is from Bangalore. Let’s also assume that you as a company are physically located in Mumbai. Hence the Clock needs to be picked up from Delhi and delivered to Bangalore. Hence we call this a “Two Stage Pickup” i.e. Pickup at Location A and deliver to Location B. The Clock DOES NOT enter Mumbai (You the E-Com Owner Location) – it goes directly from Delhi to Bangalore
Here are the services which will need to be provided by your LP:-
Pickup from Supplier: Whenever instructed by you the Supplier will make the product ready and package it. You will then e-mail her the Product Invoice (which will go inside the box) and the Packing Slip (which will be cello-taped on top of the box). Hence mandatory requirement... supplier needs to have a printer!
When Supplier informs you that the Product is ready you will need to send an email to the LP (Logistics Provider) with the Supplier Address and Contact Info. LP will then pickup the product (from Delhi in this example) and deliver to the Consumer in Bangalore. Hence ensure that LP provides this service
Another aspect is that LP will need to pickup the Cash for a COD (Cash on Delivery) Order. The cash should get credited to you in 15 days and accordingly you can remit your supplier
Other Services: Some LP’s also provide “Fulfillment Service”. This is where they pick up from Supplier and take it to their warehouse. They then check the quality of product (E.g. Is it the same color/ model which was ordered), check for manufacturing defect, if the product is broken etc. The advantage of this service is that product can be replaced by the Supplier at the Local City level itself (with the correct product). The disadvantage of course will be the delay on additional two days for quality check as well as this additional service will be charged extra to you (over and above the Logistic Cost)
Remember with Fulfilment Service there is no guarantee that you are improving your quality of products e.g. In case Consumer gets a damaged product you don’t actually know if the Supplier gave you a damaged product, did the LP damage it; or did the Consumer accidently damage it and now claims it was received defective (Note: In COD order when Consumer receives product he has to pay the cash and then receive the sealed product. He then opens the product and discovered its damaged... hence the package is typically not opened in front of the LP Staff)
Remember while building your consumer base; your Suppliers are as important as your customers. They the Suppliers don’t know you. Why should they ship a product to you or your consumer ON CREDIT BASIS? Hence if you receive an online order with COD; you can pay the Supplier in advance to build trust. If he does not supply; drop him out. If business is flowing regularly between you and your supplier; he will be the first to give you credit for the business you give him
The “sure” method to ensure “Defect Free Product” is if your LP Fulfilment Services provides for the LP’s Pickup Staff to check the product for damage/ defect/ wrong product at the Supplier end itself. I am not sure if “Specialist E-Com Logistic Providers” provide this. If no one does; this is a billion dollar idea! :)
LP needs to provide additional service like reverse pickup. Example Consumer receives damaged product and contacts you; in 1-2 days LP person picks from Consumer and delivers back to Supplier
LP also needs to provide “Return to Sender” e.g. Consumer is not available for receiving product for many days or cannot be contacted; then the product needs to be returned back to supplier. Of course LP will charge additional for Reverse Pickup and Return to Sender
Some minimum level of insurance e.g. Goods worth small amounts might also be provided by LP. Ask them through which General Insurance company do they provide you this insurance coverage.
For High Value Products for Example: We at Artbugs - Provide Paintings and Sculptures costing Lakhs of Rupees also; besides products costing a few thousand rupees. These High Value Products are Art Investments (Similar to Investment in a Stock Market or Mutual Fund; you can Invest in Art). Hence we insure the products. We also provide innovative assurance methods to our HNI Buyers investing in our Art like the Certificate of Authenticity from the Artist. For those unaware; Art Investments are extremely strong and sound provided you have the right advisors; like us. They WILL fetch you big returns over long term. What do the Billionaires Do? Invest in Art! You can start somewhere!
The technical term for return of goods is RMA. Look it up and implement the terms from online guides of RMA for developing your “Return Policy”. For practical guides you can refer the “Product Terms & Conditions” of a recent Electric Iron or a consumer product you bought
Remember in case of damaged product it is not the LP who suffers or the Supplier who suffers; it is you – the online store owner whose reputation can suffer. Hence treat E-Commerce as “Every Customer Counts” and give them the attention. They will surely love you back! We have International Customers so early from across continents hence we know!
Preferably choose a Specialist E-Commerce Logistics Partner. However some of the traditional Logistics Companies are providing such services hence you can check them out also
Choose the LP with a competitive price; however timely delivery is all that matters hence check that
Timely Delivery: Even with an extreme example where in you sell “Made to Order” products e.g. some of our “Hand Painted Trays” are made when the online order comes; you need to deliver within 7 or maximum 10 days. Hence e.g. 3 Days for Supplier to prepare the product and maximum 7 days for delivery to extreme corners of India
Typical “Ready to Pickup” Supplier products should be picked up and delivered within 5-6 days. Give an additional 2 days for Supplier to package/ ready the product for shipment. Hence a total of max 7-8 days for Consumer to receive the product from the time he orders it
A key question is should you provide “Free Shipping Across India” or “Add Shipping Cost” Function to your website? These Functions are extremely complex to build in your website logic. If you get into Global Delivery it becomes even worse. Hence for India Delivery it would be best if you include shipping cost in the product price
Also note that Shipping cost for Pickup from Mumbai Supplier and drop to Bangalore is cheaper than for example Pickup from Surat and Delivery to Hubli. Versus this Pickup in Mumbai and drop to Mumbai Consumer will be cheapest. Hence you need to figure out an “Average Cost” if you are adding shipping cost to the product price
COD charges: Note COD Collection charges are typically 3%. Dont bother about this and add this to your cost. Reason being if it is a Pre-Paid (Credit Card/ Internet Banking Order) Order then the Payment Gateway charges are around the same 3%. Hence either way you are paying for 3% Pre-Paid or 3% COD
Incentivise your Website Visitors to pay by pre-paid. E.g. 3% Discount for Pre-Paid. This is a great marketing strategy besides making sure money hits your bank faster. If you are again worried about the Technology Logic needed to be additionally built for the Pre-Paid discount... one of the simple ways to do this is create a “Pre-Paid” Coupon Code
If you don’t have an International Payment Gateway for International Orders then add a “Paypal Payment” option to your website. It is very easy besides which International Consumers will greatly prefer paying via Paypal which offers them protection e.g. Refunds. Those unfamiliar with Paypal: The International Buyer needs to simply add your company’s Paypal E-Mail ID to their Paypal Account. They pay this E-mail ID. From this E-Mail ID the payment hits your Indian (or Local) bank account
Another similar initiative is “Amazon Easy Pay”. Check it out also. Enable both this as well as Paypal. Lot of Indians might prefer “Amazon Easy Pay” and not be aware of Paypal itself
We have had so many international buyers who liked our “Artistic Indian Product” and contacted us via Phone (on the website) or E-mail (on the website). We simply conveyed the cost with International Shipping and viola; order fulfilled; we got the money in Paypal and then shipped International! Remember as an E-Com owner; nothing gives you a greater kick than having your product “Being Accepted Worldwide!” Remember also that International Buyers in certain countries are more mature E-Commerce Buyers and hence more trusting of E-Commerce; so they would be more open to buying from a small Indian (Or local site... for International Readers) Site than your own country citizens
Note Paypal payments hit your bank account within 5-6 days. Our experience has taught us that Paypal costs around 6-8% per order. This is also reasonable
Remember not to even think of SWIFT Remittance for International Orders. The cost is prohibitive
For those of you who want to build an Advanced Logistics Management Solution we would recommend webxpress.in (Do provide my reference; you will get the right service!)
Another note on Paypal: Note that I am sure International Buyers can pay via Paypal to Indian E-Commerce Sites; but I am not sure yet if Indian buyers can pay via paypal for an Indian E-Com Site or Indian business. However also note that you can use your Indian Paypal Account to buy from an International Site (Or International Vendor/ Supplier/ Service Provider with a PayPal Account)
Logistics Cost Calculator
A key point to note is “Volumetric Weight” v/s Actual Weight. For the same we have built this “Logistics Cost Calculator” (Excel 97 File). Free for you to Download from this link!
What is the Volumetric Weight? It is the (Length x Breadth x Height of Product in Centimetres) / (Divide By) 5000 (The Number). Hence for example a Painting may weight only 1 Kg. But its volumetric weight may turn out to be 2 Kgs. Hence LP will bill you at the Volumetric Weight rounded off to the nearest higher 500 gms. E.g. If Volumetric Weight is 2.1 Kgs LP will charge you for 2.5 Kgs and not 2 Kgs. Note that the approach to the charges is same for Actual Weight. Our above excel has a Volumetric Weight calculator. It also has an “Inches to Cms” and a “Cms to Excel” Converter
Based on the Weight the Excel covers the various aspects of the Logistic Provider’s charges and gives you the final total Shipment Charges including Service Tax. This is extremely detailed
Modify this excel as per the Rate Slab of your Logistics Provider. Once again make sure you add the right formulas for your LP! Disclaimer: We are not responsible for your Logistic Cost! But you will find this excel superb for your Logistic Cost Calculation!