India’s Tier II, III beat Tier I cities in e-commerce growth: ICICI Securities

The growth of e-commerce volumes in Tier II and III cities in India is outpacing that in Tier-I cities, says an ICICI securities report. As per the report, in Q4 CY20, the volume share of smaller cities in India's e-commerce market increased to 46 per cent from 32 per cent YoY. Online spending per customer in Tier II and III cities also improved to 43 per cent share from last quarter, raising hopes of a sustainable last mile delivery economics emerging for the industry yet hyperlocal last mile small parcel deliveries remain economically as challenging as ever.

The report continues to see emergence of end-to-end logistics contracts with Bajaj Electricals and Flipkart with Mahindra Logistics. The trend, while accreting value to the service provider, also gains currency as emergence of multiple channels is increasing supply chain challenge and risks. The report noted that post GST implementation, a gradual move towards organized large format 'grade A+/grade A++' warehousing is leading to significant business opportunities for sector participants.

ICICI Securities, however, sees challenges with asset heavy road transportation players and it said that many transportation models are at the risk of not reinventing, especially as SME business environment recovers and new star-tup ecosystem starts to aggressively target the same.