SUMMARY
Amazon had launched its logistics arm Amazon Transportation Services in March 2015
The Expenses increased to $219.8 Mn (INR 1,608 Cr) from $138.06 Mn (INR 1,010 Cr) in the previous year
In the filings, the company said it continues to invest heavily on building infrastructure and logistics business to expand
In the growing ecommerce industry, logistics has become the key factor for major ecommerce companies to ramp up their operations and ensure better along with faster delivery. In lieu of this, Amazon had launched its logistics arm, Amazon Transportation Services in March 2015 and has since then grown considerably.
Filings with the Registrar of Companies show that for FY18, Amazon Transportation saw its revenue grow by nearly 60% year-on-year on the lines of continuous to cater to the increasing demand from Amazon’s marketplace business.
Amazon transportation’s revenues touched $217.25 Mn (INR 1,574 Cr), compared to $135.53 Mn (INR 991 Cr) in the previous financial year. The company had seen a 60% growth in revenues in FY17 as well, from $84.63 Cr (INR 619 Cr) in FY16.
The operations of the company cater to “a single customer in India that is a fellow subsidiary of the holding company, and all assets are located in India.” The filings show that Amazon Transportation was in an agreement of sale of services with Amazon Seller Services, the marketplace business of Amazon in India.
Here are some key numbers for Amazon Transportation Services in FY18:
- Its other income, mainly from interest on bank loans, was $1.36 Mn (INR 10 Cr).
- Expenses increased to $219.8 Mn (INR 1,608 Cr) from $138.06 Mn (INR 1,010 Cr)
- The losses were $3.38 Mn (INR 24.7 Cr)
- The biggest component of expense for the Amazon subsidiary was the delivery service fee, which nearly doubled from $81.25 Mn (INR 594 Cr) to $138.85 Mn (INR 1,015 Cr)
The company said in its regulatory filings that it continues to invest heavily on building infrastructure and logistics business to expand keeping in mind the future growth and therefore its expenses also grew considerably.
Amazon Betting On Logistics
Since its entry into the Indian ecommerce, Amazon has been adding warehouses and fulfilment centres to improve its reach to consumers, taking the total number of Amazon India fulfilment centres to 67.
The company has announced its plans to increase its storage capacity in 2018 by 1.5x over the previous year. With 20 Mn cubic feet of space, these Amazon fulfilment centres are present in 13 states across India.
Amazon India is now looking to strengthen its logistics capabilities with geotagging and new age technologies such as artificial intelligence (AI) and machine learning (ML).
In July 2017, Amazon India announced plans to extend its logistics services to its sellers in India, even for orders placed through offline distribution as well as competitors Flipkart and Snapdeal. The logistics arm is currently running a pilot programme, in which it is reportedly working with 300 of its registered sellers.
The company is also focussed on rapidly expanding its network of fulfilment centres across the country. Amazon currently offers sellers three basic services: Merchant Fulfilment Network (MFN), Easy Shipping Model, and Fulfilment By Amazon (FBA).
Not exactly a warehouse, Amazon’s fulfilment centres are part of the FBA programme, which allows sellers to store their inventory in Amazon’s fulfilment centres across the country. At present, around 60% of the vendors use this service.
Last year, in the month of August, the Seattle-headquartered ecommerce giant unveiled its 41st fulfilment centre in Jamalpur, Haryana. Only a week after the inauguration of the Jamalpur facility, Amazon announced the launch of its biggest Indian FC in Hyderabad.
Logistics Network: Identifying The Need For Timely Deliveries
With a huge dependence on timely and fast deliveries, logistics is the lifeline for Indian ecommerce startups and the slightest change in cost structure can bring in a huge impact on the overall company financials.
World Bank’s report suggested that logistics cost in India is among the highest in the world. Logistics in India account for 14% of the total value of goods compared to 6%-8% in developed economies.
In March, Flipkart revealed its plans of setting up 4.5 Mn square feet state-of-the-art logistics centre in Bengaluru, following which it also announced its 80 acres logistics centre in Kolkata to cater to its East and North East deliveries.
The company claimed, in a statement, that the logistics park will house several Flipkart fulfilment centres, improve supply chain efficiency and reduce costs by deploying mechanised warehousing, acting as a freight aggregation and distribution hub and by leveraging technology for intelligent transport systems.
Here’s a quick update on what others are doing for boosting their logistics services:
- Foodtech startup Foodpanda also announced the launch of its high tech centre in Bengaluru to strengthen the technology infrastructure, product capabilities and end-user experience for the company
- Chinese ecommerce major Alibaba invested $35 Mn in XpressBees to support Paytm mall, which then announced its plans to integrate XpressBees on its platform
- In January, reports surfaced that Flipkart invested around $257 Mn in its logistics subsidiary Ekart during October- November 2017
- In September 2017, Flipkart invested $147 Mn (INR 961.4 Cr) in two tranches in Ekart via Klick2Shop
[The development was reported by ET.]
