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Gati’s ecommerce revenue fell due to govt’s rules curbing discounts

ecommerce

Logistics company Gati said that the government’s rules on ecommerce discounts has resulted in slower growth in its ecommerce division. “The e-tailers have not been allowed to influence the prices of the product. There has been a reduction in the discount deals across ecommerce website, this has resulted in a slower growth rate in e-com shipment compared to previous period,” Bala Agoramurthy, director and president of Gati KWE said in a call with analysts.

Revenues from ecommerce declined 9% to Rs 58 crore on a quarter-on-quarter basis for the June quarter. However, it grew 28% on year-on-year basis.

“Also with a cap of 25 % on single seller selling on any market place, this has resulted in a shifting of sales from inventory base seller to other retailer on the market place,” Agoramurthy added. Gati added that in May last year, ecommerce business clocked in a GMV rate of $9 billion and that this year the number inched marginally.

The company gave a guidance of 50% growth for the ecommerce business for the year. “I do not think we will see 2 years back growth of 150%-200% going forward. But it is still going to be 40%- 50% growth across board,” Dhruv Agarwal, chief strategy officer said.

COD on orders is right now is around 70% and the management said that it was around 90% about a year and a half back. The ticket size for ecommerce orders were about Rs 2,000. For the quarter, Gati did 45,000 deliveries per day.

Ecommerce  companies adding more sellers

Agarwal explained that with the new regulation, ecommerce companies had to shift how they do business and have been onboarding new sellers. “So lot of them operating with 1 or 2 large sellers now they have had to bring onboard a lot of new sellers which they have done aggressively in the last quarter or may be last 4 or 5 months, so as more and more sellers get on boarded the e-tailers would have changed the strategy on how they have been selling so far and how they have to do it under the new law. In this last quarter definitely there was almost no sales and hardly though there was some advertisement etc. the sales were not so aggressive, so order volume has definitely come down a bit,” he added.

Shift to lower weight mix

Gati’s management said that the weight mix of their deliveries has shifted to 70% being lesser than 3 kgs and 30% is above 3 kgs. The management did see many white goods and electronics being shipped this year. “See the smaller packages is what get shipped out every day because that is the kind of things people kind of buy on a daily basis. The larger packets the white goods and so on, they happen typically during sales period. For example, last 2 years during IPL there is always a TV sale, during summer there is always a refrigerator and air conditioner sale. This year we did not have those at all. So for these reasons the heavier package segment has not grown as much,” Agarwal said.

Shift in mode of transportation as well

Gati’s management said that there has been a shift in packages being delivered on surface rather than air. “So as we moved forward and as more and more people are moving more packages on the surface segment. We certainly see us benefiting from this change in transportation mode.”

“Industry wise it will be 30% air and 70% road, maybe more actually. May be 40% air and 60% road but that is changing,” he added.

Comments on GST

“GST is definitely a huge advantage for us primarily because we run on systems and processes which is a big plus when the new regime comes into play. Second is that in terms of operational efficiency today we struggle a lot at the borders between states where we have stoppages and checks, etc. Once these borders go away which the government is talking about and promising, our network efficiency is going to increase. Our transit times are going to decrease. We are going to be able to cater to much larger hubs which will allow us to automate, so thereby we will see a huge operational efficiency creeping in. The only point on the GST which we are still requesting the government is that we must continue with a single centralized tax registration versus what is proposed in the bill currently which is having a registration in each state,” Agarwal said.

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