Robotics & Warehouse Automation 24th July 2020

Warehousing In India – Time To Take Note

Rueben Scriven
Rueben Scriven

Rueben is one of the warehouse automation industry’s leading analysts and is a regular speaker at leading industry events. He has moderated several panel discussions on the topic of commercial vehicle electrification and has also appeared on CNBC, providing insight on the global electric bus market.

In recent years, India has emerged as the fastest-growing major economy in the world. Estimates place it on course to be one of the major economic powers over the next 10-15 years. And, with a population of over 1.3 billion, and around 480 million active internet users, it is fertile ground for growth in eCommerce.

The Coronavirus pandemic has further fuelled the move towards online shopping. As people are forced indoors, they naturally turn to computers, tablets, and mobile devices to shop. For many, the pandemic may have provided the first real reason to purchase goods or services online. Shopping in the traditional sense is, after all, as much a social undertaking as it is an economic or commercial one. However, in seeing how easy it is to locate and purchase an item online, and have it delivered to your door hassle-free, it seems a reasonable assumption that eCommerce will become the de facto ‘regular’ way of shopping for many even post-pandemic.

Yet it’s also reasonable to say warehouse automation – a key component in the eCommerce puzzle – hasn’t had the take-up in India that it has elsewhere. Partly this is due to the prevalence of cheap labour, and partly due to taxes on goods travelling across state borders in the country historically forcing providers to build smaller warehouses less suitable for automation. Now, with the region waking up to the convenience of shopping online, growing living costs in larger cities like Mumbai and Pune, and changes in state levies, it stands to reason that opportunities for warehouse automation vendors will increase massively in the coming years.

Warehousing in India – the story so far

Prior to Covid-19, there was a huge leap in the amount of investment within the warehousing sector in India.

Knight Frank’s 2020 report on the Indian warehousing market shows strong demand for warehousing space in the country – reporting threefold transactional growth for warehousing space across India’s largest 8 cities between FY17 and FY19. At the end of FY2020, India’s top eight cities held 307 million square feet of warehousing space (of which 40% is accounted for by Mumbai). Meanwhile, warehouse investment, which was reported at $125 million in 2016, had grown to $1.8 billion by 2019. To look at a more specific example, it was recently reported that demand for warehousing space in Hyderabad alone has grown at 41% CAGR in the last three years.

Household overseas names like Walmart and Amazon – keen to succeed where it had failed in China – invested significant sums to increase their foothold in the country’s burgeoning eCommerce sectors. Amazon India, for example, was valued in 2019 at $16 billion, and has captured around 30% of the Indian eCommerce market. Its plans for growth there centre around its logistics base of 42 fulfilment centres, 150 delivery stations and 25 sortation centres, each with scope for automation.

This is in line with other organisations, where a strategy centred on large ‘hub’ warehouses, buttressed by smaller regional hubs, delivers improved efficiencies, and speeds up delivery times. Two major factors are at play here. One; larger warehouses are more suitable for larger-scale automation projects, which provides great opportunities for warehouse automation vendors. Two; the introduction of the Goods and Service Tax (GST) has provided a single tax regime, making it easier to transport goods across state borders. This enables the larger warehouses to support a far greater area of the country and reduces the need for smaller, regionalised warehouses where automation projects are less viable.

Indian eCommerce – who are the big players?

eCommerce in India is largely dominated by two organisations: Amazon, and Flipkart. In 2019, Flipkart’s revenues grew 42% to over $6 billion, and it has also welcomed around $16 billion in investment from Walmart. Amazon, meanwhile, has committed $5 billion to improve Amazon India’s infrastructure and growth.

Overall, India’s eCommerce sector will grow to $202 billion within the next decade which, when you factor in the relatively slow take-up of warehouse automation systems, makes it an incredibly attractive proposition for vendors of this technology. The initial signs of an acceleration in eCommerce warehouse automation spending are evident. In February, it was reported that Flipkart adopted robot-based sortation technology in “a first for India”. Flipkart is using just under 350 AMRs in India and the company reports it has doubled labour productivity – in terms of numbers of shipments processed per hour – as well as also doubling warehouse capacity. Meanwhile, Amazon in India has focused on advanced software to improve its own warehouse operations, and has reportedly deployed AI and machine learning solutions across its 175 Indian fulfilment centres to help managers know which packages to pick when, and which vehicles will be needed.

Looking outside India at what Amazon and Flipkart owner Walmart are doing can also be instructive. Amazon is widely using its Kiva robots in the EU and the USA, and it seems likely that deploying these robots in India is a possibility. Meanwhile, Walmart is partnering with Alert Innovation on flexible mobile robots for micro-fulfilment in the USA. Ultimately, if the USA proves a successful testing ground for micro-fulfilment, it is likely to be deployed in the EU and then subsequently in India too.

Final thoughts

The elephant in the room, amid all this talk of growth and opportunity, lies in Covid-19. With so much uncertainty over how the future will pan out, and what a post-Covid world may resemble – if there is such a thing as a post-Covid world – organisations are understandably hesitant to commit to large-scale investment projects in automation.

But, out of crisis there sometimes emerges positivity. Where eCommerce once meant ordering shoes, or electronic goods, now that extends out to groceries, for example. eCommerce in general has suffered during India’s lockdown, with retailers only allowed to sell essential supplies, however there is evidence of the sector seeing a V-shaped recovery as restrictions ease with categories like fashion seeing a strong resurgence. This should give prospective investors confidence in the longer-term viability of eCommerce and its associated technologies.

The Indian Government is doing its bit too, with new eCommerce policies designed to place larger external players like Amazon, Facebook and Google under strict observation while also offering encouragement and support to home-grown start-ups.

We may not know how the world will look in the near-to-mid future. Covid-19 has put paid to that. What we do know, however, is that consumer spending habits have changed and will continue to do so. The invitation is there for warehouse automation vendors to take note.