India’s bustling e-commerce transactions and a planned new national tax system that’s expected to boost freight movement are prompting Deutsche Post DHL Group to expand warehouse capacity in one of the world’s fastest growing major economies.
“We see business-to-consumer as the next big challenge, a big growth area and we really want to tap into that through businesses such as modern retail,” Vikas Anand, Mumbai-based managing director at DHL Supply Chain India Pvt, said in an interview on May 30.
The national goods and services tax, scheduled for implementation on July 1, is seen increasing the ease of doing business by getting rid of a web of levies divided among various city, state and federal governments. Anand sees “multiple opportunities,” as many companies with factories currently scattered across various states in order to take advantage of local tax breaks are expected to consolidate operations after the GST rollout.
India’s e-commerce market, which sees as many as 1.2 million transactions daily, is estimated to jump 31 per cent annually over 2017-2020 to $80 billion, KPMG said in its August 2016 report. According to Knight Frank India Pvt, the total warehousing space requirement in the country’s top seven markets is seen rising to 839 million square feet by 2020 from about 621 million in 2016.
DHL Supply Chain India says its sales have grown at about 30 per cent annually over the past five years, double its estimate of the contract-logistics industry average, and the company expects to maintain its brisk pace. The company has an 8 per cent to 10 per cent share of the $3.5 billion Indian market, Anand said.
Asia Pacific contributed 10 billion euros ($11.3 billion) to parent Deutsche Post AG’s total revenue of 57.3 billion euros in 2016, according to the company’s annual report. Revenue from the global supply-chain business was 13.8 billion euros. The company said demand for supply chain services will see “a particularly strong rise” in rapidly growing economies such as south-east Asia and India.
DHL Supply Chain India plans to invest more than $100 million in additional capacity in the next three to four years, with as much as 65 per cent of that going into warehousing. The company aims to boost its warehousing space to more than 10 million square feet by 2020 from the current 7 million, Anand said. Bigger multi-client centers located near metropolitan cities will comprise as much as 70 percent of the total space and the remainder will be spread across various cities and towns, closer to the end-users.
In addition to increasing its warehouse space, DHL Supply Chain India intends to bolster its transportation network used to deliver products from businesses to industrial and retail customers. The company currently transports goods by road, mainly through contracted trucks from dedicated vendors, and is looking to use railroads where it can to improve time and fuel cost efficiency.
“A good high-single digit of DHL’s freight movement may be through trains in the next five years, mainly to move goods between two big cities,” Anand said.
Source: Bloomberg