D2C Brands Look Beyond Flipkart, Amazon For Warehousing Tech, As Startups Come To The Fore

For homegrown beauty D2C brand Organic Riot, the lockdown not only meant a freeze on sales for weeks but even when things resumed, the startup had to revisit a crucial component in its manufacturing chain. Given the pandemic, its own warehouses had to be shuttered due to employee safety concerns and the fact that achieving operational safety under the lockdown rules was cost-intensive.

“We took the call of moving all our warehousing with a company like WareIQ as we knew they took lots of precaution and safety in packing and fulfilment. This was great as we could then have warehouses all over the country via WareIQ and also be sure that there would be enough safety and precaution taken,” Siddharth Somaiya, founder and director of the D2C brand, told us.

It’s the same story for most of India’s D2C brands — fulfilment through warehouses and third-party logistics tech have proven to be a cost-effective option especially as demand has spread and grown. On-time delivery and being close to the last mile are critical pieces of the D2C game now, even in the hinterlands. These are the things that most ecommerce startups would think Indians don’t care about, but with the changing market and the growing traction for online selling, the cream of the Indian consumer base has evolved too.

Given that most D2C brands are competing on tight margins and slim differentiation, the right customer experience from ordering to on-time delivery is a crucial competitive edge. And this is all the more critical in these times with festive sales going full steam ahead.

Next-day delivery, priority shipping, returns and exchanges — ecommerce during the festive season is more about fulfillment and delivery than pricing or even stock-keeping. With the pandemic creating greater demand for ecommerce, especially during the festive season, warehouse management and fulfillment centres have become a key success factor for online retailers who do not have the deep resources to match the scale of Amazons and Flipkarts of the world.

Beyond ecommerce, even in traditional areas of bulk commodity warehousing, businesses are adopting tech-enabled digital solutions to keep their processes running.


D2C Retailers Drive Warehousing Tech Demand

Since the pandemic, ecommerce and online grocery demand have picked up across the country. This has in turn fuelled a D2C revolution. The larger stakeholders like Amazon, Flipkart, Reliance Retail and other retail giants already have their warehousing tech in place, but what happens when new to digital retailers or even smaller suppliers seek to do the same? Where do they start?

Here’s how a typical online seller operates — For sellers that take the marketplace route as well as the D2C route, products or stock-keeping units (SKUs) with lower margins follow the in-house fulfilment route (i.e company-owned assets), whereas those products with a higher margin are processed through third-party fulfillment centres such as Amazon and Flipkart or other startups.

One problem that smaller sellers and D2C brands have always raised with the larger marketplaces is that their algorithms tend to push private labels and larger sellers with ad budgets, whereas the small and niche players lose out.

On the other hand, for a smaller business or a new direct-to-consumer retail brand, which can manage to create its own buzz via social media and customer connect, it is easier to sell directly via the likes of WareIQ, ShopX, StackBox, Unicommerce and Udaan among many others.

Kapil Makhija, CEO of Unicommerce, an ecommerce focused SaaS platform that enables omnichannel selling said that while pre-Covid, sellers chose to divide inventory across separate warehouses to meet ecommerce and in-store requirements, the current D2C market is creating demand for integrated warehouses. “Coupled with the demand from both customers and stores in tier 2 and 3 regions, we have witnessed our own (warehouse) client conversion cycles reduce from up to 45 days to less than a week as people seek plug and play warehouse management solutions,” said Makhija.

Most of these companies offer aggregated warehouse and supply chain solutions like Unicommerce’s omnichannel solutions that can be integrated with all the marketplaces and website platforms across Flipkart, Myntra Omnichannel, Amazon, Shopify, Magento etc., along with logistics providers such as FedEx, Delhivery etc. and ERP systems such as SAP, Navision etc.

Another major operator in this space is Udaan, focussed on the B2B segment. The unicorn startup uses warehouse management tools to enable better risk management, pricing, packaging and shipping services while reducing wastage. Udaan services small and medium business enterprises in lifestyle, electronics, home & kitchen, staples, fruits & vegetables, FMCG, pharma, toys and general merchandise enabling a 4-7 day delivery cycle, said a company spokesperson.

These omnichannel enablers have monetised their technology by taking a cut out of the volume of orders processed, unlike marketplaces such as Flipkart and Amazon that charge for storage and fulfillment fees as well as value-added ecommerce services such as promotions and advertising when selling through the marketplaces. For a lot of small sellers, the choice is less about pricing differential and more about the flexibility of choosing the go-to-market strategy.

While no startup operating in the warehousing tech space revealed in any great manner about the pricing models given the competitive nature of the market, the price differential between such startups and going with ecommerce partners can be up to 20% lower, which is a big cut in the game of margins.

Unicommerce’s Q3 report on the ecommerce market in India showed that single brand websites reported a growth of over 78% as compared to 35% growth from the marketplaces year on year, indicating that an increasing number of brands want to create an independent presence. More importantly, the number of non-fashion segments seeking an omnichannel presence is diversifying rapidly in 2020.


Safety Concerns As Covid Brings In Customers

When the country went into lockdown in March and for weeks after it emerged from multiple lockdowns, the supply chain and warehouse ecosystem bore the brunt of pent up consumer demand. Most of these businesses, including those handling food grain supply, had to mobilise solutions against all odds to keep the nation fed.

Sunoor Kaul, co-founder and director of Origo Commodities, an agritech startup that manages end-to-end commodity supply chain, said that while technology has not traditionally been a highlight of the bulk warehousing ecosystem, the past few months have created a pressing need for information security, transparency and scope for Internet of Things (IoT) solutions.

Origo has noticed that since the pandemic, the client conversations have moved towards remote monitoring and audit solutions beyond just inventory mapping and storage. The buyers needed video access, monitoring and ways to check the quality of the product before trade as it became harder for people to travel physically during the lockdown, Kaul added. Small to mid-sized clients have been seeking digital payment solutions for suppliers along with record-keeping of these transactions through the cloud-based ledger and book-keeping solutions.

“People have been concerned with what happens with their commodities post-purchase which is usually reported by someone at the warehouse who may or may not be skilled. IoT solutions are being used at the warehouse level as well as for weighing through a simple combination of smartphone and moisture/ weight reading devices. These updates are given real-time to the buyer and it creates more transparency,” said the Origo founder.