Organized retail driving Indian Retail 3PL market

CHENNAI: The booming Indian economy is leading to the burgeoning purchasing power of the consumers and the rapid growth of the retail sector, especially the organized retailing segment.

Entry of several international retailing companies, along with domestic major industrial groups focusing on the retail sector is driving this growth.

However, success in this competitive and dynamic sector depends on achieving an efficient logistics and supply chain, which could be provided by professional logistics service providers such as the 3PL companies. The 3PL market revenues in this sector are estimated to grow from $49.5 million in 2005 to $140 million by 2012, at a compound annual growth rate (CAGR) of 16.0 percent.

While the market is continually expanding, 3PL service providers in India need to address a few challenges such as shortage of skilled manpower and highly diverse geographic conditions to gain maximum share in this market.

The number of participants in this market has grown to be more than 400 in 2005. The Indian retail 3PL industry can be divided into three distinct tiers: national 3PL companies with nationwide presence, regional 3PL companies with a strong presence in one or two regions, and local 3PL companies with small or remote presence.

Frost & Sullivan's research has identified that the largest market segment for 3PL services as of 2005 is transportation, followed by freight forwarding.

"In this robust environment, it is important for service providers to customize their service offerings coupled with competitive rates in order to truly capitalize this opportunity," observes Industry Analyst Srinath Manda, Automotive and Transportation Practice, Frost & Sullivan.

CIOL Bureau