There is a saturation of players in the lower end of the markets. However, there are few niche players in high value added segments like Logistics management.

The demand is expected to grow at a CAGR of 15-20% over the next few years.

Infrastructure, technology, well entrenched distribution networks and strong brand. However, in lower un-organised segment the entry barriers are marginal.

Relatively low

High

High, the industry is very fragmented with more than 2000 players.

Both the leading courier companies in India viz, Blue Dart and Elbee Services reported a lackluster performance for FY02 on the back of sluggish industrial and consumer demand. This was inspite of the fact that ATF (Aviation Turbine Fuel) prices, which account for a major chunk of expenses where revised downwards. Both the expenses recorded a drop in operating margins.

The industry continued to focus on shifting its portfolio towards more value added services. Technology and infrastructure investments continued. Banking and Finance sector continued to be the key growth driver for the courier industry.

Consolidation phase already seem to have started in the domestic courier industry. Organized players in the industry are on the prowl to capture the market share of the unorganized sector. Blue Dart acquired two small regional logistics company during the year to consolidate its position in the South India.

With the increasing penetration of Internet and other communication devices and competition from un-organised players, the document business has witnessed a reduction in margins in the last three years. Whereas the non-document business is relatively less competitive as it requires players with deep pockets. Within the non-document business, 'low weight' parcels are most profitable.

Big express companies have tie-ups with global courier majors for the international business. Blue Dart has a tie-up with FedEx whereas Elbee has tie-ups with UPS and TNT. In the international business, companies normally operate on cost plus basis and hence the margins are not lucrative. While domestic business is more profitable for companies with good infrastructure backing. Both the express majors viz. Blue Dart (38% market share) and Elbee (20% market share) are thus consciously concentrating on the domestic business.

The industry demands huge investments in technology and infrastructure to provide value added services through product innovations. E-tracking and tracing of parcels on a real time basis, bar coding for security purposes has become a norm in the industry. Companies are also implementing the hub and spoke model to minimize time to delivery.

Logistics Management is emerging as one of the fastest growing segments in the express industry. As more and more companies stress on Just-in-time (JIT) requirements to prune inventory costs, supply chain management is increasingly outsourced. Hence, express companies with requisite investments in infrastructure and technology have huge opportunity to cash in on third party logistics management.

The courier industry as a whole is expected to grow at a rate of 15-20% over next three years. While volumes in the non-document business are expected to grow by 25-30% every year, document business is likely to witness single digit growth rate in volumes. Express companies will have to manage their revenue mix extremely well to maximize returns.

The un-organized segment of the industry is expected to feel a pinch in the coming years due to low pricing and marginal entry barriers. The industry would witness a consolidation, as established players would leverage their infrastructure and distribution network to grab a larger share of the pie.

With opening of the Indian economy, some international players have evinced interest in setting up base in India. However, it is expected that these global majors would concentrate more on the international business and tie-up with leading players in the country to penetrate the domestic market.