Post-pandemic, India has started witnessing several changes in the industrial, commercial, housing, as well as logistics sectors.
A Redseer report predicts that, by 2030, 88% of India’s online shoppers will come from Tier-II and Tier-III cities, compared to less than 30% pre-pandemic. The growth of e-commerce in these cities has been accelerated by the pandemic as consumers increasingly turn to online platforms to purchase essential items. Moreover, customers other than Tier-I cities are also demanding similar facilities in their hometowns, which has led multiple big companies to expand to these smaller cities.
In this article, you will find out what is driving logistics companies in India to expand in Tier-II and III cities and what their future holds in India.
The Government’s Role in the Spread of Logistics Companies in India to Tier-II and Tier-III Cities
The government has played a vital role in promoting the expansion of logistics companies in India into Tier-II and Tier-III cities through various initiatives and policies. With the implementation of the smart cities mission, logistics businesses can anticipate making a more substantial profit in the logistics sector by focusing beyond the few Indian metropolitan cities.
To build a pool of competent personnel from which logistics businesses may draw, the government has invested in infrastructure development, offered incentives, and sponsored many skill development programmes. Furthermore, the government has prioritised the development of digital infrastructure, which has assisted in connecting Tier-II and Tier-III cities more closely with the rest of the country.
In addition, goods transport services that offer more than just a simple “trucking” solution will naturally have a greater retention rate, and companies and SMEs are now looking to tie up with logistics companies that can add value to them beyond the primary product offering. By investing in themselves and the technology that allows them to provide a better end-service experience to their customers, logistics companies in India are changing the perception of logistics from just another expense on the balance sheet to being viewed as a value-added service.
Why Are Logistics Companies in India Growing in Tier-II and Tier-III Cities?
Some of the key factors that lead to the growth of logistics companies in Tier-II and Tier-III cities are:
Expanding Market
Tier-II and Tier-III cities have emerged as new growth centres due to their growing consumer market. The rise of e-commerce has led to increased demand for logistics services in India. Small towns, or Tier-II and Tier-III markets, are outpacing larger metros in a variety of industries, including packaged foods, beauty, personal care, and quick-service restaurant chains.
As companies open branches in smaller cities to draw in people who now prefer remote jobs in their hometowns instead of moving to metro areas, retailers and logistics companies see an opportunity and open stores in Tier-II cities.
Government Support
The Indian government has introduced various initiatives and incentives to promote investment in smaller cities. Moreover, it aims to develop these cities as accessible and resourceful as the metropolitans with the “Smart Cities Mission”. Thus, these incentives, like tax exemptions, subsidies, and other benefits, encourage logistics companies to invest in Tier-II and Tier-III cities.
Infrastructure Development
The Indian government has also invested in infrastructure development in smaller cities, including the construction of new airports, highways, and other facilities. This has made it easier for logistics companies to carry out efficient and smooth goods transport services in and out of these cities.
Lower Cost
Logistics companies can set up operations in smaller cities at far lower costs than in larger cities. Moreover, most manufacturing factories are on the outskirts of larger cities, which is paving the way for companies to build their warehouses nearby. So, as the demand for doorstep goods delivery rises in these cities, the delivery cost also reduces significantly for the logistics companies. Moreover, lower real estate costs, reduced competition, and lower salaries of employees make it attractive for these business companies to invest in Tier-II and Tier-III cities.
Availability of Skilled Talent
The growing pool of skilled talent in Tier-II and Tier-III cities has made it easier for logistics companies to find and hire skilled employees. For instance, Tier-II cities in India have witnessed a significant improvement in the availability of skilled and employable resources. According to the India Skills Report 2023, Lucknow and Mangalore, both Tier-II cities, have emerged among the top three most employable cities in the country.
The emergence of e-commerce, infrastructural development, and government efforts have all contributed to the expansion of logistics companies in Indian Tier-II and Tier-III cities. Logistics businesses are expanding their products beyond transportation due to the availability of competent employees, and they are investing in novel technology to satisfy the changing demands of clients. As the logistics industry expands, it is critical to work with a dependable logistics business that can provide end-to-end delivery solutions.
Porter is one such leading logistics company that provides businesses of all sizes with a full suite of delivery-related solutions. Contact Porter now for trouble-free and dependable logistics solutions.
