Delhivery CEO Sahil Barua challenges the viability of Amazon’s newly launched third-party logistics business in India, pointing to fundamental structural disadvantages that favor Amazon’s own shipments over external clients.
- Amazon logistics prioritizes first-party orders over third-party shipments
- Captive networks raise cost and service concerns for external clients
- Flipkart’s in-house logistics arm struggled with similar challenges
What happened
Delhivery’s CEO, Sahil Barua, expressed doubts about the effectiveness and strategic value of Amazon’s recent third-party logistics (3PL) offering in India. Amazon opened its freight, distribution, fulfillment, and parcel shipping network for external businesses, including those outside its e-commerce platform. However, Barua argues that Amazon’s logistics scale is overwhelmingly geared toward its own orders, making external clients a small and potentially neglected portion of the business.
He highlighted that when logistics resources are constrained, Amazon’s network will naturally prioritize first-party shipments to its marketplace, potentially compromising customer service levels for third-party users. This critique was shared during Delhivery’s post-earnings call and comes amid broader industry skepticism about captive logistics models.
Why it matters
This critique strikes at the heart of ongoing debates about the viability of captive logistics networks offering third-party services. Amazon’s logistics infrastructure, optimized for internal needs, may not effectively serve external sellers, diminishing the attractiveness and cost-effectiveness of its 3PL option for clients. According to Barua, first-party logistics tend to be more expensive and less flexible, which could deter businesses from adopting Amazon’s captive services.
Adding to the skepticism, Barua referenced Flipkart’s eKart, a similar captive logistics experiment that failed to scale successfully. Market concerns about data sharing and competitive conflicts led Flipkart to roll back eKart’s standalone logistics operations, highlighting the potential pitfalls of captive networks attempting to serve wider external logistics demands.
What to watch next
Market observers should closely monitor how Amazon addresses the concerns around prioritization and cost in its 3PL offering. If Amazon continues to prioritize own orders during peak demand or capacity constraints, it could face resistance from third-party clients seeking more reliable and cost-effective logistics partners. The company's ability to balance these interests will be crucial to its success in the logistics marketplace.
Additionally, trends in India’s logistics sector will be shaped by how other players like Delhivery capitalize on captive network limitations. The evolution of Flipkart’s logistics strategy and competitor responses could offer further insights into the sustainability of captive models serving third-party merchants in large, complex markets like India.