E-commerce giant Flipkart has formed a strategic and commercial partnership with the Adani group to “strengthen its supply chain infrastructure” and “enhance its ability to serve its rapidly growing base of customers”.
Under the partnership, Adani Logistics will construct a 534,000 sq ft fulfilment centre at its upcoming logistics hub in Mumbai and will lease it to Flipkart to address the growing demand for e-commerce in Western India. It will also support the market access of several thousand sellers and MSMEs (micro, small and medium enterprises) in the region, Flipkart said in a statement.
Leveraging state-of-the-art technologies, the centre is expected to be operational in the third quarter of 2022 and will have the capacity to house 10 million units of sellers’ inventory at any point. In addition to strengthening Flipkart’s supply chain infrastructure, the facility will enhance local employment and create about 2,500 direct jobs and thousands of indirect jobs, it said.
Flipkart is also developing its third data centre at AdaniConneX’s Chennai-based facility as a part of its private cloud deployments in the country.
The Adani group is planning big-ticket investments in its data centre and logistics business.
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The tie-up with Flipkart will help it to get a marquee client for both. The group is attracting investments from international investors like Warburg Pincus, which recently picked up a stake in its port business. With the Flipkart deal, the Adani group is expecting to attract more international clients to its logistics and data centre business. “I am delighted to see two of India’s fastest-growing businesses come together to help build some of the most critical as well as state-of-the-art infrastructure that our nation needs. This is what Atmanirbharta should be all about,” said Karan Adani, chief executive officer of Adani Ports and Special Economic Zone.
Kalyan Krishnamurthy, chief executive officer of Flipkart, said: “We are focused on ensuring that our customers get access to a wide range of products made available by sellers across the country as we continuously innovate to drive greater affordability. Our logistics network and technology stack are instrumental in making this a reality. These investments will help us strengthen our presence and capabilities in India to support MSMEs and sellers while also accelerating job creation and growth.”
Flipkart refused to comment on its fulfilment centres. The Adani group also did not comment on the deal. “This expansion is in part due to the pandemic-led disruptions faced by industry in the Q2 of 2020, as the marketplaces faced problems in fulfilling several orders due to logistics issues and lack of access to large fulfilment centres to cater specific geographies,” said Sanjeev Kumar, forecast analyst at Forrester.
“The other reason is demand that e-commerce players are witnessing from smaller cities and specific categories. It is evident that most of this demand will stick, leading to growth in orders. For instance, Flipkart had little presence in grocery before pandemic but has been aggressive in ramping up with fresh produce added into the offerings. The company also launched a ‘quick’ service for grocery, showing serious intentions of growing the category. Demand for smartphones and appliances category is no more about tier1 and 2 cities, and to cater to such demand they need bigger fulfilment centres,” said Kumar.
Other than the tie-up with the Adani group, Flipkart is coming up with an integrated logistics hub at the outskirts of Kolkata, which has seen an investment of Rs 600-1,000 crore from the company and is expected to be operational by mid-2021. This centre will cater to all the eastern and northeastern states. Additionally, the company recently acquired a plot of 140 acres from the Haryana State Industrial and Infrastructure Development Corporation (HSDIIC). The fulfilment centre will have a covered area of 3 million sq ft at Patli Hazipur, Manesar, the statement issued by the Haryana government said. Flipkart will be setting up a logistics park on the land parcel over the next three to five years, which has the potential of a total built-up area of 5 million sq ft and will be developed in two to three phases. The first phase of the project will be operational by 2022, said a report by PTI. According to industry sources, Flipkart has over 35 fulfilment centres across India, but it needs to ramp up its presence in Western region as well as categories.
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Amazon, on the other hand, has ramped up its presence through fulfilment centres. In July of 2020, Amazon had announced the expansion of its fulfilment network in India, with 10 new fulfilment centres and expansion of seven existing buildings. With this expansion, Amazon.in will have more than 60 fulfilment centers in 15 states, with a total storage capacity of over 32 million cubic feet.
