Saturday, November 7, 2015

E-Commerce Resuscitates Moribund India Post, World's Largest Postal System

A declining state-owned firm has received a new lease of life on account of India’s e-commerce boom. India Post, the world’s largest postal system with 154,882 post officesstaffed by 460,000 employees handling over six billion pieces of mail annually, has begun to flourish after offering deliveries to a host of leading online retailers including Amazon India, Snapdeal, Paytm and  Shopclues.

At a time when online retail is booming, India Post’s wide reach, its well-entrenched network and a huge team of 150,000 postmen are proving to be reliable delivery partners in a logistics-starved country. The system is particularly useful to meet growing demand in rural and semi-rural markets where online shopping has begun to take off.

“India Post’s zip code coverage of tier 3 and tier 4 locations is unmatched,” says Vishal Sharma, vice president of operations at Shopclues, headquartered in Gurgaon outside New Delhi. Within a year of partnering with the postal system, India Post already handles a tenth of Shopclues deliveries. “About two-thirds of these deliveries are in areas where no other logistics providers exist,” says Sharma.

It is true that 90% of India Post’s post offices, nearly 140,000 of them, are located in rural India which are barely serviced by private logistics providers who prefer to operate in urban centers. A lack of reliable logistics infrastructure in rural India is proving a challenge for many online retailers. Building infrastructure from scratch to serve vast geographies is economically non-viable.

Enter the torpid postal system which appears to be galvanized and has introduced such services as same-day and next-day deliveries in some zip codes. It has set up 48 modern delivery centers to handle ecommerce, including a massive one in Mumbai, India’s financial capital. India Post’s cash-on-delivery(COD, as it is called) offering launched about two years ago is proving to be a big hit with the sector.

Cash-on-delivery is a popular mode of payment in India where buyers – a large segment of India – shell out cash only after their shopping arrives at the doorstep rather than pay in advance with a credit or debit card. COD is particularly handy for hundreds of millions of Indians who do not own credit or debit cards and who would otherwise be left out of the online retail boom.

The sluggish India Post has long been symbolized by a cross bag-toting man riding a rickety bicycle delivering letters at an unhurried pace. But such deliveries have dwindled with the advent of mobile phones and the internet. Now, e-commerce has sparked a revival of fortunes and India Post saw a 37% rise in revenues in package deliveries last year, compared with a 2% fall the year before. This is still a sedate pace considering online retail is expected to see three-fold growth this year.

So, India Post has scope for massive expansion but challenges remain. Online retailers demand real-time visibility into deliveries and cash collection which the government-owned company does not have the technology to provide. “Communication is key in all stages of the delivery cycle to the customer and India Post is investing in technology to bridge the many gaps in its system,” says Ankur Bisen, a senior vice president for retail and consumer products at retail consultancy firm, Technopak.
Then there are the practical challenges. “How does a postman on a bicycle deliver a television set to a remote village?” asks Bisen. The government-run firm needs to enhance its last-mile delivery capabilities as well as its payment systems. “If they do, India Post could transform to become market leaders in e-commerce deliveries in the way state-owned postal companies in Germany and the United Kingdom have,” he said.
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