Petrol price has crossed Rs 100 per litre in multiple states, while diesel is gradually inching closer to the three-figure mark. At the moment, India has the highest fuel rates among neighbouring nations. The hike in fuel prices directly impacts several sectors including transport, food delivery and e-commerce. The record high fuel prices in the recent times have made ecommerce sellers and logistics players to think on their margins while cutting other expenses to accommodate higher logistics spend. Here in this context, both logistic and D2C ecommerce sellers are even considering raising their product prices to ultimately pass on the burden to the consumer to sustain higher fuel charges.
The delivery costs for logistics players have increased considerably, as for every five per cent hike in fuel prices there is at least one per cent hike in delivery costs. The fuel prices started increasing towards the end of 2020, and as of now, it is up by over 25 per cent.
Amazon, a leading ecommerce company, has recently announced annual fee revisions for sellers across product categories and other necessities including a five per cent hike in logistics costs applicable from September 1. The logistics aggregators like Pickrr and Shiprocket are either absorbing the costs in their total margins or renegotiating with the courier partners.
Even after sharing the cost burden with courier partners the logistics costs of the ecommerce companies are still up by three to four per cent. However, the ecommerce companies are not ready to review the prices before Diwali, as they fear that any change in prices may dent their sales.
According to the some ecommerce companies the higher fuel costs have resulted in increasing around Rs. 3-5 per 500 gms of package shipped over air movement, and the costs have also gone up for roadways and other mode of transport. The ecommerce companies have been absorbing some part of the total costs as they fear dent in sales if they pass the burden to the customers.
In the wake of high fuel prices some D2C companies prefer to use their own delivery methods instead of choosing logistics services of the marketplaces. Despite the increase in fuel prices D2C companies find the last mile delivery costs manageable, as the distance to cover for it is generally between 8 and 10 km, but they find that the middle mile costs have gone up hugely, because their factories are located far away and the distance to cover to transport them is more than 1,500kms.
As Diwali is approaching ecommerce companies are much concerned to get the trucks to deliver shipments, as there will be shortage in both middle-mile and last-mile delivery. This too may result in further jump in costs.
Experts feel that the government should reduce oil prices. If petrol and diesel prices remain at their current levels or increase in future, this may directly impact the ecommerce business severely as it largely depends on transportation. If the fuel prices remain high for too long then it may have a ripple effect and may make other things expensive.
