After Flipkart, its Infibeam’s turn to launch its very own in-house courier/delivery service - Infibeam Logistics. Infibeam, one of the prominent online retailers, has just launched its last-mile delivery channel for products customers are placing orders for online. The service seems to be just a soft-release/pilot test right now, with operations restricted to Delhi-NCR region, but it seems that the company is seriously looking into this particular aspect of logistics. They are trying to widen the last-mile delivery network by hiring more delivery agents, and there are plans to expand to other cities in India starting with major hubs like Mumbai, Bangalore, Hyderabad, Kolkata and Ahmedabad.

The service will be catering to both aspects of last-mile physical support – delivery as well as payment collection from users who had opted for the Cash-on-Delivery option. Flipkart had introduced the in-house service some time back, and it has been really good for them – both for logistics, as well as creating a buzz given the uniformed delivery agents. The ads that you see in Delhi metro, on Airport and in movie theatres is also circling around this theme.

There does seem to be an important concern here. The reason why Flipkart could improve up on the last-mile segment can be mainly accounted to the rich inventory and warehousing Flipkart can easily boast of. The delivery agents just complement the already rich and well executed physical presence of Flipkart’s warehouses all around India. This is an area where Infibeam seems to mightily fall short. From what I could see and judge, Infibeam exists with practically no inventory for most of their product categories. Sure, they have an excellent supplier network, as evident from the wide variety of products they showcase, and that too at a price tag that in many cases is cheaper than anywhere else. But their range of inventory doesn’t seem to provide as good a support to their ambitious plans.

So why is Infibeam onto this? Well, there can be many reasons towards this move. In the past 6 months, VCs have not shown a lot of enthusiasm towards investing in traditional e-commerce, and Infibeam has been looking to raise some capital for some time now. When Flipkart started its in-house delivery system, it helped create a clear differentiator – both for investors as well as consumers. With the number of issues e-retailers have been facing in the last-mile delivery segment, I am sure Venture Capitalists these days are quite optimistic about the prospect of last-mile delivery logistics growth. And Infibeam? Well, they seem to be just looking for a part of this VC action.

So, it’s all about the money being planned to raise? Not quite. It may be all about money – sure, but not raising money, rather saving it. As per data received from various couriers delivering e-orders all over India, more than 40% of the customers who opted for a Cash-on-delivery mode refused to accept the product and pay for it when it reached their door-steps. That’s a pretty mighty share for any retailer – big or small. For each of these non-accepted deliveries, a courier company charges the retailer twice – once for taking it to the customer who had placed the order; and second for taking it back to the company’s warehouse. Moreover, if your courier guy or delivery company is collecting payments on your behalf, there are extra charges for that – which are a mixture of a fixed charge and a percentage of the transaction amount.

Now, that may not seem like a huge amount if you look at the hassles it saves you, but if you are Flipkart – in which case you are making thousands of delivery every day, that number starts looking pretty heavy on your balance sheet. So you go ahead and set up your very own team of delivery agents. But Infibeam? I highly doubt that they have delivery volume anywhere close to Flipkart’s. So the reason has to be the 40% return rate, and the higher expenses associated with the returned/non-accepted orders.

True, if that is, then that would mean other e-commerce retailers would also soon follow. We will keep an eye out for that, meanwhile I will just sit back and try to see the impact Infibeam is able to bring about after its bold move.