E-commerce Fulfillment: Striking the Balance Between Speed and Cost

  • Tejal Patel

  • 13.09.23

E-commerce Fulfillment: Striking the Balance Between Speed and Cost

In the ever-evolving landscape of Indian e-commerce, the word that binds consumer satisfaction with logistical brilliance is ‘fulfilment.’ As India’s digital landscape grows, with its internet user base expected to cross 830 million by 2025, the criticality of optimizing e-commerce fulfillment becomes paramount.

In a market where the metropolitan buzz of Mumbai coexists with the rustic charm of places like Sikkim, the challenges of delivering speedily, cost-effectively, and efficiently are manifold. But therein also lie opportunities.

The question arises: How can businesses harmoniously blend cost, speed, and quality, ensuring both customer satisfaction and operational efficiency?

India: A Unique Playground

Indian e-commerce is expected to grow at a CAGR of 27 per cent, reaching around $163 billion by 2026, almost three times the overall retail market, and is riding the wave of digital transformation. However, the sheer geographical, infrastructural, and demographic diversity poses some unique challenges.

India’s e-commerce marketplace is as diverse as its geography. We’re looking at an intricate blend of densely populated urban centres, sprawling towns, and remote villages. While cities like Mumbai or Delhi might have the infrastructure for rapid deliveries, fulfilling an order in Leh or a remote village in Odisha is an entirely different challenge.

Indian e-commerce is expected to grow at a CAGR of 27 per cent, reaching $163 billion by 2026


Speed is the New Normal

We’re in the age of Amazon Prime and Flipkart Plus. Consumers, having tasted the delight of same-day or next-day deliveries, now expect it as a norm rather than an exception. The Indian consumer, armed with digital literacy and the power of choice, is well aware of the value of time. However, this speed often comes at a price.

People prefer quick delivery model


But Speeds Comes at a Cost

Speedy deliveries mean storing inventory closer to the customer, faster shipping methods, and sometimes even bypassing bulk shipments for direct-to-customer deliveries. These measures can significantly hike operational costs.

Consider the infrastructure required for storing goods closer to the customer base. In India, this might mean setting up multiple warehouses or partnering with local distribution centres, leading to increased overheads.

For example, Leh, situated at an altitude of 3,500m in the Himalayas, or the remote villages of Odisha, ensconced in dense forests. Delivering here isn’t just about distance – it’s about battling adverse weather conditions, navigating treacherous terrains, and understanding local customs. As per a report from KPMG, last-mile delivery costs can be 1.5-2 times higher in such areas than in urban centres.

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Key Strategies to Strike the Balance!

In India’s e-commerce world, balancing speed with cost is vital, especially with rising consumer expectations and fierce competition. Here are the essential strategies to strike this balance effectively:-

Choose the Right Fulfillment Model 

Different e-commerce ventures require distinct fulfilment strategies, depending on their scale and the product type. The key is to align one’s operational setup with the needs of the customer base, ensuring that delivery is quick and costs are optimized.

Example: Pepperfry adopted a mixed model, managing its large-item deliveries with ‘Pepperfry Studios, ensuring quality service for furniture deliveries. Meanwhile, for smaller items, they relied on third-party logistics, optimizing cost and reach.

Optimize Inventory Management

Efficient inventory management means predicting what products customers will buy and in what quantities. With accurate predictions, a business can reduce storage costs, ensure fast delivery of popular items, and avoid the expenses of overstocking.

Example: BigBasket uses sophisticated demand forecasting algorithms to gauge which products will be in demand, allowing them to optimize warehouse space and ensure the availability of popular products.

Enhance Packaging and Shipping

Proper packaging ensures the product’s safety and can enhance the customer’s unboxing experience. Efficient shipping ensures products reach customers in the shortest possible time.

Example: Flipkart introduced ‘Flipkart SmartPack’, ensuring products, especially electronics, are safely packed and delivered in perfect condition to customers.

Monitor Fulfillment Performance

Keeping tabs on every stage of the fulfilment process—from warehouse operations to delivery—can help identify bottlenecks or inefficiencies. This data-driven approach can guide improvements in both speed and quality.

Example: Amazon India uses its ‘Seller Flex’ program where it transforms sellers’ warehouses into Amazon-branded fulfilment centres. This helps in monitoring performance closely and ensuring adherence to Amazon’s strict quality standards.

Experiment and Innovate

The e-commerce landscape is always evolving. Those who succeed are often the ones trying new methods, technologies, or processes to improve speed, reduce costs, and ensure quality.

Example: Dunzo, an Indian delivery service, has been experimenting with drone deliveries. This could potentially revolutionize delivery speeds while cutting down on transportation costs.

Decentralize Warehousing

Having multiple warehouses or distribution centres spread across key locations can drastically reduce delivery times. While setup costs might be higher initially, the savings in transportation costs and time can be significant in the long run.

Example: Amazon India has fulfilment centres spread across various cities in India, ensuring that products are stored close to the customers, allowing for faster and cheaper deliveries.

Dynamic Pricing

By charging customers based on the speed of delivery they choose, e-commerce platforms can offset some logistical costs. This way, customers who value speed can opt for quicker (but pricier) deliveries.

Example: Swiggy offers a ‘Swiggy Super’ membership that provides unlimited free deliveries for a subscription fee. This dynamic pricing model balances speed (priority delivery for members) and cost.

Tech Integration

Incorporating technology like AI and Machine Learning can lead to smarter predictions about demand, optimized routing for deliveries, and better warehouse management.

Example: Myntra employs AI for better demand forecasting, which helps in deciding which products to stock, ensuring faster delivery times and reducing storage costs.

Local Partnerships 

Collaborating with local delivery services or businesses can enhance delivery speed, especially in areas hard to reach by mainstream logistics services.

Example: Nykaa partners with local suppliers and delivery agents in certain regions to ensure a swift and cost-effective supply chain.

Bulk Shipping and Consolidation 

By grouping shipments headed in the same direction, businesses can save on shipping costs. This approach reduces the per-item cost of shipping and can also lead to faster deliveries as trucks or delivery vehicles are fully utilized.

Example: Delhivery, a prominent logistics solution provider in India, employs this strategy, especially for its B2B clients, optimizing both cost and speed.

Optimized Routing 

Utilizing advanced routing algorithms can significantly cut down delivery times by finding the most efficient route. This not only saves time but also reduces fuel consumption and costs.

Example: Zomato uses tech-driven route optimization for its delivery partners, ensuring that food reaches customers most quickly and efficiently.

Concluding Thoughts!

India’s e-commerce landscape is a dynamic blend of challenges and opportunities. As businesses navigate the balance between speed and cost, they’re not just delivering products; they’re building trust. The growth of the sector, especially in a diverse market like India, underscores the importance of adaptability.

The real insight? Success in e-commerce fulfillment isn’t just about quick deliveries or cost savings. It’s about understanding, anticipating, and consistently meeting the unique needs of every customer, ensuring that each interaction adds value and strengthens the bond. As the industry continues to evolve, this customer-centric approach will be the cornerstone of its enduring success.