Delhivery Questions Amazon’s Logistics Strategy

Delhivery is scrutinising the strategic importance of Amazon’s recent initiative to open its logistics network to third-party companies. The company’s CEO, Sahil Barua, described this move as an outdated concept repackaged during their quarterly earnings discussion. Addressing Amazon’s entry into third-party logistics (3PL), Barua pointed out that this approach has been previously attempted, and he was uncertain about the strategic advantages it would provide to merchants.

Concerns Over Scale Mismatch

Barua mentioned that a significant concern lies in the scale discrepancy between Amazon’s internal operations and the external merchants leveraging Amazon Logistics. He expressed apprehension that any merchant joining Amazon’s system would be “absolutely minuscule” in comparison to Amazon’s internal shipping volumes, leading to potential issues regarding customer service and prioritisation.

Prioritisation in Last-Mile Delivery

Another point of concern raised by Barua was related to last-mile delivery prioritisation. He noted that when delivery personnel face time constraints, Amazon’s own shipments would likely receive preference over those from third-party clients. He commented on the nature of first-party logistics, reinforcing that this system is inherently designed to favour Amazon’s internal orders.

Cost Implications for Clients

Barua further posited that dedicated first-party logistics frameworks tend to incur higher costs compared to independent third-party logistics services, even after considering Delhivery’s profit margins. He questioned why customers would choose to remain with a more costly captive network that lacks alignment with their interests.

Amazon’s Expansion in India

Recently, Amazon broadened its logistics capabilities in India, allowing businesses to utilise its warehousing, transport, and delivery network for orders made outside of Amazon’s platform.

Market Structure in Express Logistics

In discussing the express logistics market consolidation, Sahil Barua expressed that the current landscape, including Delhivery, Blue Dart, and Shadowfax, is suitably structured. He stated that he does not foresee space for additional large competitors. Moreover, Barua conveyed that he does not believe Xpressbees possesses any notable structural advantage over the established companies.

Capital Expenditure Trends

Addressing the aggressive capital expenditure in the industry, Barua suggested that companies are unlikely to revisit the “operating burn environment” seen in prior years, mentioning that certain firms, such as Ecom Express and Xpressbees, had “voluntarily set their balance sheets on fire” during the last growth phase.

It is significant to note that Ecom Express has been part of Delhivery since April of the previous year. Last week, Delhivery announced a 30% year-on-year growth in its operating revenue, reaching Rs 2,850 crore in Q4 FY26, while its profit remained stable at Rs 72 crore. Currently, shares of Delhivery are trading at Rs 456, reflecting a decline of approximately 4% from the day’s opening price. At this valuation, the company’s market capitalisation is around Rs 34,175 crore, equivalent to approximately $3.7 billion.