DTDC eyes ground parcel segment; small operators turning service providers

Abhishek Law Kolkata | Updated on January 08, 2018

Logistics major looking to tap premium express parcel space

Home-grown logistics major DTDC is looking to invest towards the ground parcel segment – or movement of freight via road – as a probable growth driver in the coming days.

In fact, the ground parcel business has seen good growth over the last few years for both the industry and DTDC.

The segment witnessed a 10-11 per cent growth rate for the industry, while DTDC saw a 20-25 per cent growth rate.

According to Abhishek Chakraborty, Executive Director, DTDC Express, the company will look at tapping the premium-end like express parcel space (time-bound deliveries) where margins are said to be better.

Currently, the premium service segment (in ground transportation categories) accounts for nearly 25 per cent of DTDC’s business. Over a two-year period, the contribution of premium services is expected to rise to 60 per cent.

“We are making necessary investments in the network. In the coming days, this will be a major growth area for us, especially the premium segment,” he told BusinessLine.

While the ED did not specify the investments that the company was making into this business segment, he did add that out of all non-IT spends, road transportation is taking about close to 25-30 per cent of the company's investments. Nearly 30 per cent of the investments goes into the IT.

Gati, FedEx, Blue Dart continue to be among the major players in the segment.

Consolidation will happen in the industry with small operators turning into service providers for larger players.

The roll out of GST will make compliances tougher for these smaller operators. Accordingly, many of them will look to switch-over to the transport business or enter into tie-ups with organised players.

“This switchover has started happening for some time now. These smaller or unorganised players are looking to be service providers for organised players,” he said.

DTDC itself does not own any transport or fleet of trucks, but enters into tie-ups with transport companies or agencies.

Merger of subsidiary

DTDC is also in the process of merging the DTDC E-commerce Logistics business – which was, as the name suggests, catering to the e-com players – with the parent company DTDC Express Ltd. The merger is likely to happen within this fiscal.

According to Chakraborty, merger will create better synergies and also lead to a near 4-5 per cent positive impact on the company’s cost and bottomline.

Published on October 01, 2017

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