Hinterland will drive the e-commerce growth

Makarand Prabhakar Pradhan, Chairman, CP World Group: The Internet use is growing in the hinterland faster than the Tier-I cities, so I expect the rural India to drive the next wave of growth in e-commerce.

Considering the supply chain disruptions in the past few months, how is the consolidation cargo business today?

COVID-19 has hit the cargo consolidation industry and the total exim trade in general. We talk about the disruption from March onwards, but since we are consolidators and our major market being China, we started to feel the heat from January onwards. We had a fantastic FY2019-20 and we were optimistic about very good growth in 2020 as well, but unfortunately as the pandemic broke out, the impact was felt in January. In December the imports in China were low due to the New Year, followed by the pandemic in January the imports drastically dropped.

We were among the first few businesses to sense that there is going to be a drastic change in the way business is being done. We learned from our Chinese partners about how their business was impacted and prepared ourselves, we could take a lot of precautions since we were working with them closely.

The most important thing was to have the systems online. We prepared our software to be able to work from home and from March 17 our complete team was working from home, except for the few employees who had to visit the CFSs. We suffered the least damage due to these preparations. Similarly, for handling import containers we negotiated with our carriers for around 28 days free period, for which we had to pay $25 more per teu, but we could avoid the pressure of having to destuff and return the containers to the carriers in order to escape detention and demurrage charges.

Considering the geopolitical situation, imports from China may dip what is your perspective?

I also feel that we should not be dependent on Chinese imports, but the ground reality is today around 40% of cargo consolidation and imports are from China and this is not going to stop all of a sudden. About 80% of bulk drugs come from China and there are many products which are coming cheap from China as compared to made in India. Now Amazon has come up with a policy that businesses have to declare in which country their product is made? But Chinese goods are still selling. There will be a dip in imports from China, but those commodities will be imported from other countries in Southeast Asia.

We operate around 35 offices in Southeast Asia, we know how business is done there and if any shift in business happens we will be prepared for it.

Next to China which Southeast Asian countries do you think can export to India?

Korea is coming up in a big way in electronics and we have been buying a lot of Korean products. Japan is also an option but it is quite expensive for our industry. In the electronics sector there is no other market and China is the biggest supplier. Household items and gift items can be imported from Vietnam, Cambodia, but their capacities are very limited compared to China.

How is your business with Nepal, Bhutan and Bangladesh?

We have a fantastic service into all these countries, of course, we do not do much via road but by ship we are among the top ten consolidators from India. Our group does very good consolidation from Dubai and Singapore and this is a very important business into Bangladesh. I do not see this business growing too much the trade has been stable for the past years and we can expect a gradual increase and not a sudden jump. These countries import a lot from us so when the trade itself is big then the growth cannot be drastic.

India is planning to move cargo for North-eastern states via Chattogram Port. What are the prospects for this service?

The inland movement is to Agartala needs good support from Bangladesh government because the last lap into Agartala is going to be 200km by road, so regulatory barriers need to be eased.

How is your business with Africa and CIS countries?

We entered this market just 3 years back but we are not seasoned in this market. We operate through 3 offices in East Africa – Mombasa and Dar es Salaam. This gives us a great edge over others in terms of coordinating the movements. We are also looking at the West African market in the coming future to operate inland trucking. Not many people are into this market, just 4-5 forwarders, because the market is complicated and you can land-up in huge losses.

In the CIS region we don’t have our offices yet, but in Kazakhstan and Azerbaijan we operate through representatives. On a monthly basis we are doing about 75-80 containers over 3-4 transshipment points. Recently we also moved a project cargo successfully. The biggest problem in these markets is the vagaries of transport because of the weather conditions the rates keep fluctuating.

During the pandemic e-commerce has picked up. Do you see the trend continue in the near future?

Let me recap what we did pre-COVID-19. We started this business 2 years back and grew gradually. There are 2 models in this:

  1. We pick up the goods from Amazon warehouses and deliver it to the consumer.
  2. The second model is – in the tier-III and tier-IV cities we open up our small warehouse, Amazon sends the goods to our location and we move it.

If we talk about the ratio, we operate 30% of the business on model 1 and 70% of the business is on model 2.

Last year Amazon gave us a target of opening 118 stations, but we managed to open only 48 stations due to the COVID-19 the process got slow in April and May, but in June and July we have picked up pace are now at 70 stations.

Before COVID-19 we were doing 7lakh shipments a month and today we are at 11 lakh shipments a month, posting 55% growth. With more stations opening up even Flipkart supported us and if all goes well in the coming Diwali we are expecting to touch 3 million shipments. Of course in the post-festive season the volumes drop, but we are able to retain 80% of the volumes. This is the cycle for the past 2 years.

The stations you have mentioned, are you building these assets?

No, we believe in an asset light model, so we rent them. Based on the number of deliveries their size ranges between 400sqft to 1500sqft. The number of internet users is increasing in the hinterland than in the cities now. So the rural India will drive the next wave of growth in e-commerce. We are prepared for that and when it comes we will see a definite growth in volumes in the coming 2-3 years.

What are your growth plans?

At this point, apart from consolidation, freight forwarding, last mile delivery and the niche markets of Africa and CIS, we are not actually looking at much more diversification. We have also started sourcing for chemical industry. We have got 3-4 orders and we have executed 2 orders each from Spain and Poland. We are creating a platform which will in future have one million chemicals and bulk drugs traded on it. Today there is no online platform for chemical and bulk drug trade. Since we are strong in consolidation we can offer door-to-door delivery of chemicals and bulk drugs.