Analysis and comparison of various hyperlocal supply chain models used in delivery by e-commerce companies

Abstract

Hyperlocal supply chain delivery models have taken center stage in the evolving startup culture in India, especially for food delivery which constitutes approximately 70% of the business. The food delivery model has evolved over the years from FoodTech 1.0, which focussed only on the discovery and listing to the newly emerging FoodTech 4.0, which is a culmination for various hyperlocal delivery needs [1] . In India, most hyperlocal businesses are concentrated in metro cities like Delhi, Bangalore, Hyderabad, Pune, etc. The major players include Swiggy, Zomato, Faasos, Amazon food, etc., apart from several restaurant chains and restaurant-led services. The cloud kitchen model of the food business is a newly emerging trend among these. The recent reports by Statista projected the food delivery businesses to grow to $14.7 Billion by 2024 with a CAGR of 7.94% after adjusting for COVID. The expansion is taking place both in Platform-to-Customer and Restaurant-to-Customer segments. Demographics wise the customer base is constituted by 63% millennials (~80% in 18-44 age bracket), 62.5% males, and ~77% medium and high-income group. Zomato is the leading player, followed by Swiggy2 . The value-chain for the delivery models is primarily aggregator-based with technology-driven operations, last-mile delivery, effective analytics, marketing, and sales & after-sales services. The support services include planning and strategic processes, human resource management (especially for delivery personnel), technology (platform) development, and procurement activities in hybrid models. The revenue streams for the platform-based hyperlocal deliveries today are constituted mainly by advertising services for the restaurant and menu. In absolute delivery charge terms, the business makes losses, but when coupled with other streams of revenues, such as advertising, subscriptions, consulting, etc., it is profitable. COVID-19 resulted in an exceptional surge in demands, as a result of which several of the players like Zomato and Swiggy are expected to turn net-profitable by 2022. Some of the major challenges in the industry include commoditized services, inefficient deliveries, the high delivery time with inaccurate predictions, etc. Solutions such as creating differentiation, enhanced use of AI and analytics, and the need for innovation, etc., have been described in the report. The industry is moving towards 4.0 with the culmination of several hyperlocal delivery services on the platforms. Several new innovations like subscription commerce, IoT and Automation, Drone-based deliveries, etc., are being tried. Despite the cut-throat competition, there is a huge scope given the increasing size of the cake due to rising technology penetration and ever-increasing urbanization.