Bengaluru: According to a report titled, ‘Inter-city Logistics Market Study’, released by RedCore (the early-stage research arm of Consulting firm, RedSeer) the road logistic market spending in India is to grow at a CAGR of 8% in the next five years making it a $330 billion market by 2025.
Fueled by favorable factors such as rising income levels, higher exports, a rapidly growing e-commerce sector, a growing retail sales market, and a projected GDP growth of 7-8%, the demand for goods movement is projected to grow at a CAGR of 8% over the next five years.
Logistics costs in relation to GDP are an indicator of how efficiently businesses can operate, and how competitive India is in terms of transport infrastructure and freight management. Logistics spending contributes to 14% of the overall GDP of India wherein road logistics has the largest share with 60% of the overall market spends.
The inter-city road logistics spend in India stood at ~$209 Bn in 2021, ~ 87% of total road logistics spend. Out of this, the on-demand/spot market accounted for a 63% share while the contract market accounted for the remaining 37%.
On-demand/spot freight transport is the movement of goods on an immediate basis with prompt payments. It helps in satisfying unfulfilled and urgent demands. It counts sectors such as Defense/PSU, Agriculture, Food & FMCG, and Building Materials, among others as its key clients.
Metros accounted for $84 Bn (40% of ~$209 Bn) of road logistics spend distributed across the on-demand/spot ($34 Bn) and contract markets ($50 Bn).
Further, out of this $84 Bn of transport vehicle revenue in tier 1 cities, trucks account for 61% of the total. The remaining revenue was shared across 4W, 3W, and multi-axled vehicles.
Given the massive economic opportunity that lies here, a slew of start-ups is disrupting this sector with innovative business models that solve most of the industry pain points from the supply side.
These start-ups are operating across the value chain ranging from Discovery & Booking, Value-add services, and Execution. Further, their target clientele includes Consignors as well as Truck Owners.
A notable business model is an Open Marketplace that leverages technology to enable stakeholders in the sector to connect with each other. It focuses on the on-demand/spot market and allows truck owners to get instant booking from verified and trusted transporters without any commission.
According to the report, the time is ripe for the open Open Marketplace to succeed as factors such as heavy investments in road & transport infrastructure, rapid technology adoption among suppliers, India’s digital push, macro drivers for fleet owners, and India’s massive on-demand/spot market will drive its growth in the near future.
Additionally, multiple government policies have come up in recent years that have supported the disruption in the logistics space such as the Logistic Efficient Enhancement Program (LEEP), Digital India, and Make in India, among others.