Delhivery CEO Sahil Barua on Amazon's Logistics Expansion Strategy
Delhivery CEO Dismisses Amazon's Logistics Move, Citing Economics and Operational Concerns
Delhivery's chief executive officer, Sahil Barua, has expressed skepticism over Amazon's recent announcement to open up its captive logistics network to external sellers. According to Barua, Amazon's move is essentially an old product rebranded, with the company failing to address the underlying economics and operational issues that plague captive logistics models.
Amazon's decision to allow external businesses to use its warehousing, transportation, and delivery network, even for orders originating outside its ecommerce marketplace, is part of the American giant's efforts to expand its logistics and supply-chain offerings in India. However, Barua believes that captive logistics models are inherently flawed, prioritizing first-party orders over third-party seller orders, especially during last-mile delivery operations.
This prioritization is due to the structural design of captive logistics networks, which are built primarily for first-party orders. As a result, when it comes to deciding which order to deliver during last-mile operations, the first-party order is inevitably given preference over third-party seller orders. This, according to Barua, is a fundamental flaw in captive logistics models.
Furthermore, Barua argued that the scale mismatch between Amazon's shipments and external merchant volumes would create service challenges for third-party customers using the network. With Amazon's in-house operations dwarfing any client who onboards themselves into Amazon logistics, it is unclear how customer service would be provided.
| Company | Q4 Revenue Growth |
|---|---|
| Delhivery | 30% (QoQ) |
| 18% (YoY) | |
| Amazon | Not disclosed |
Delhivery, which has been competing with Amazon in the Indian logistics market, reported a flat fourth-quarter performance, with a net profit of Rs 73.4 crore, up from Rs 72.6 crore in the year-ago quarter. The company's revenue from operations rose 30 percent from the previous quarter to Rs 2,850 crore, while full-year revenue grew nearly 18 percent to Rs 10,508.3 crore.
In contrast to Delhivery's steady growth, Amazon is doubling down on its India logistics and quick-commerce ambitions, with a recent investment of Rs 2,800 crore to expand its operations network, including fulfillment centers, sortation hubs, delivery stations, and quick commerce infrastructure. The e-commerce giant is also looking to scale Amazon Now, its quick commerce service, with plans to expand to 100 cities and build a network of over 1,000 micro-fulfillment centers.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Investor Takeaway
Investors should be cautious of Amazon's logistics expansion strategy in India, as it may not offer meaningful advantages to third-party merchants.
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