The pandemic has exacerbated the pain of the document segment, which has been losing business to digital | Photo: Shutterstock
The Covid-19 pandemic has pushed the already flailing small and medium enterprise (SME) segment of the air freight and courier industry, which accounted for 25 per cent of the market in fiscal year 2019, into an air pocket.
CRISIL Research expects their revenue to decline 30-35 per cent in FY 2021, not only because of the pandemic-induced lockdown, but also their dependence on the document segment, which has been shrinking for a while now. This is bound to erode their market share.
The pandemic has exacerbated the pain of the document segment, which has been losing business to digital. Segments traditionally dependent on couriers, such as banking and financial services, have been won over by the benefits of digitalisation. Similarly, knowledge-based and research-oriented companies now prefer emailing “soft” reports rather than printed copies. Regular company-investor communication is also digitalised.
Non-document SMEs face another threat. They are likely to lose market share to bigger, organised players who have the financial muscle to manage pandemic-induced supply disruptions, the ability to attract migrant labour faster, and the resources to book the current limited capacity on air routes.
In the e-commerce space too, deliveries by SMEs have been low, sincee-commerce companies now prefer to use in-house services or companies with common investors to fulfil their deliveries. This trend is likely to continue, as in-house delivery mechanisms seem more viable in the current environment.
Lastly, the rise of unicorns in the delivery space, coupled with ride-hailing and food delivery startups expanding into the intra-city package delivery business due to the pandemic, will further squeeze the share of SMEs in the market.