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Last Mile Delivery and Payment Mechanism Issues in Online Retail in India

Last Mile Delivery and Payment Mechanism Issues in Online Retail in India The Online retail industry in India faces a lot of operational issues. Preferred payment option. Reasons for not shopping online. Rs bn. Market Size. 2011. 2015. Interview with 42 respondents. Total Retail. 25,000.

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Last Mile Delivery and Payment Mechanism Issues in Online Retail in India

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  1. Last Mile Delivery and Payment Mechanism Issues in Online Retail in India The Online retail industry in India faces a lot of operational issues Preferred payment option Reasons for not shopping online Rs bn Market Size 2011 2015 Interview with 42 respondents Total Retail 25,000 37,000 Organized 1,700 3,400 Online 32 100 Operational Issues Industry concerns No shipping charges levied by e-tailers; hurts margins badly in distant regions Will I lose customers if I start charging? Warehousing: Costs of inventory & maintaining warehouse are very high Which SKUs to store and what quantity? Taxation: Both CST and VAT are charged for a sale from one state to another How to sell products in a tax efficient manner? Demand in tier-2 and 3 cities is fragmented and non-sustainable Should a warehouse be set up in such cities? Inventory turnover timeis high due to inaccurate demand predictions How to deal with over- and under-stocking? Rural Reach: Only 23,000 out of 31,000 of Indian zip codes are serviceable How to reach the non-serviceable regions? Logistics: High reliance on bigger 3rd party logistic firms in remote regions What other options are there to increase reach? Payment: Customers feel less secure while making online payments How to infuse trust among customers? Central Warehousing • E-tailers minimize their holding costs by having one central and several smaller warehouses • ‘Inter-branch transfers’ are allowed to be tax-free, hence CST can be avoided during the sale In-house logistics • Reduces reliance on 3rd party logistic firms; can provide additional revenue source by outsourcing it Resource exchange • Firms share resources (channels & infrastructure); results in optimal use of resources & cost savings Recommendations Clicks & Mortar model • E-tailers ship the goods to a store or any other target where the customer can go and collect them Indian Postal Service • There are around 4000 zip codes that are served only by the Indian postal service; increased reach Cash on Delivery • Consumers feel more confident as he/ she will be paying only once they get to see the product Specialized logistics • Firms specializing in providing logistics service to e-tailers; provide customized solutions

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