Is demand enough to bring scale for the logistics sector?

Characterized as one of the most unorganized sectors in India, the logistics industry presents high growth market opportunities for those who aim to organize the market and improve efficiencies. A report by Avendus Capital says that more than 80% of the overall logistics spend in the country goes to the unorganized sector.

Of the unorganized market, trucking makes up the largest share as 85% of the Indian trucking market is made up of small fleet owners with 5-20 trucks. To add to it, because truckers are regional, 30-50% of forward truckloads return empty. These numbers depict the challenges around wastage of resources, high cost, heavily intermediated returns, and redundancies in the sector.

While the industry is ailing with these challenges, it is also recording a surge in demand as COVID-19 has accelerated the shift to digital shopping by three to five years. In addition, customer expectations are increasing, as they expect to get goods faster, more flexibly, and of course at low or no delivery cost. With all these, logistics disruption and gaps in the supply chain have surfaced more prominently.

Increasing demand is hence not enough for the logistics sector to thrive. There is a need to transform the sector from just a support provider to an essential service provider.

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