Question

Should Ekart (Flipkart's Logistics arm) venture out into normal courier delivery (besides delivering the load of Flipkart)

Answer 1

Assumptions:

EKART's venture doesn't affect Flipkart's propositions of deliveries.

Q. What is included in normal courier services?

A. All the deliveries P2P and documents, etc sent from enterprises like banks, government institutions and all is included in courier services.

Q. What is the goal of venturing into normal courier?

A. Revenue generation.

Main Answer:

What could be stopping EKART from getting into normal courier?

Buying power of customers(P2P and enterprises): High - depends on cost.

Threat of alternatives: High - Many local and national options available.

Threat of new entrants: Medium - More or less same infra for providing services is present for all companies.

Intra-industry rivalry: Medium - Not many large players are available however, many service providers are present.

Advantages for EKART -

1. Core competancy is in courier services itself hence delivery network is sorted.
2. Flipkart's brand name could provide a good starting edge for EKART.

Market opportunity:

Around Rs. 71B with 33% CAGR in the past decade.

My Recommendation: EKART should totally venture into normal courier delivery

Comments

Hi uchiha-ashish,
Thanks for answering the question.
Here's what you did well: You considered porter's 5 factors for market entry and did an analysis on the basis of the factor.
However, any additional revenue comes with expansion cost to the company. You might want to consider the expansion cost and then see if the total addressable market masses sense or not.
Also, the market opportunity of 71B is a total market which consists of many segments.
Let's try to dive into this additional cost:
Currently, the distribution hubs and logistics infra is optimized for e-commerce deliveries. You might know that the package size within e-commerce (Flipkart/Amazon) is pretty much standardized.
That means if Ekart starts accepting normal couriers, they'll have to rework on their planning algos, optimize their delivery bags/vehicles, and also optimize/change the space in their delivery hubs.
Couple that with peak time load and additional capacity that would be needed during the peak time.
Best way to do a comparison is consider load of normal courier for a particular city, then calculate the load requirement and additional capacity cost and then finally check what's the additional operating margin Ekart can extract from the additional capacity. If it is good enough, it would be a good move else not.
Also, to give you perspective, any courier company operates on a very thin margin.