Digital-First Brands Experience Significant Revenue Decline Amid Delivery and Return Issues

Logistics Inefficiencies Cost Digital-First Brands 25-30% of Revenues During Festive Seasons

Digital-first brands are losing a significant portion of their revenues due to failed deliveries and return to origins (RTOs) during peak festive seasons. According to Velocity, an e-commerce enablement platform, digital-first brands lose about 25-30 percent of their revenues during this period.

Velocity's analysis of over 1,000 digital-first brands and 40 lakh orders revealed the extent of the problem. The study found that Tier 2 and beyond regions are of growing importance to new-age brands, accounting for more than 67% of total shipments.

The gap in delivery performance is largely due to structural challenges such as inconsistent address formats, limited courier coverage, larger delivery areas, and a high share of cash-on-delivery (COD) orders. COD orders increase the risk of cancellations and failed deliveries, as per Velocity.

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To address this issue, brands are deploying AI solutions to drive up efficiencies. AI-enabled nudges for COD-to-prepaid conversion are a key driver of this trend. When COD orders originate from high-risk locations, AI voice agents initiate local-language conversations, explain prepaid benefits, and offer real-time incentives, reducing the risks of failed deliveries.

Prepaid orders, which reflect higher purchase intent, demonstrate materially better delivery performance and lower RTO rates. AI verification flows in Tier-2 and beyond cities have recorded an improvement in delivery completion rates by 11 percent.

Note: The table shows the improvement in delivery performance after the implementation of AI solutions.

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