Smart lockers were a big topic at Last Mile Fulfillment Asia this year.
What are they you ask? They are the tech-world’s equivalent of high school cubbies but out on the street, in your condominium lobby or shopping mall accessible only to users with the right digital passcode.
Many e-locker providers such as PopBox in Indonesia, Box24 in Thailand and POPStation in Singapore talk about the future of their businesses as the best solution to the region’s ‘last mile’ problem. But is it that simple?
Let’s disassemble the smart locker.
How it works
As online retail grows in the region, it’s understandable that more packages need to be delivered to end consumers. Nomura International (Hong Kong) projects that the package delivery market for the six major Southeast Asian countries will more than double from 2015 levels to over $7.5 billion in 2020.
The last mile becomes costly for companies because of how geographically vast countries such as Indonesia and the Philippines are and the broken address system across Southeast Asia.
While the last mile of the supply chain may be the shortest physical stage in a package’s journey, it represents about 30% of total delivery costs.
“Delivery cost per package a few years ago used to be 60 THB and now, logistics companies in this red ocean are subsidizing costs to charge only 30 and even 20 THB to grab market share,” said Paul Srivorakul, aCommerce Group CEO, at LEAP by ecommerceIQ and Sasin SEC.
Enter the smart locker, a new delivery option that promises less failed deliveries, flexibility for customers, and cheaper last mile costs.
For couriers to deliver the package:
- Login with company’s credentials
- Access data and address customer’s information
- Choose an available compartment
- Scan the package
- Put the package in the compartment, lock it and confirm delivery
For recipients to pick up the package:
- Internet shopper selects the “parcel locker” while checking out online
- Shopper receives an email confirmation and SMS (or in app) with details and code on package pickup
- Customer can track shipment to know when package has been dropped off
- At the smart locker, customer provides the code and other details using the touch screen
- If a package is not picked up, it will be transported to the nearest branch of the logistics partner
In Indonesia, PopBox Asia allows customers not only to pick up packages but as well make payments and return packages. In Thailand, WashBox24 (now Box24), lets shoppers pick up groceries and washed laundry ordered in app through partnerships with supermarket Tesco Lotus.
In North America, 7-Eleven has opened its doors to partners like Amazon interested in renting lockers to stay relevant as commerce moves online.
But lockers are risky for 7-Eleven as each locker takes up about the same amount of space as one large shelf, holding dozens of lockers, which by some estimates could represent thousands of dollars in lost sales each year.
Do they actually solve any problems?
In many ways, smart lockers sound like a perfect last-mile solution. Available 24-hours, simple to use, convenient for the consumer and cheap fee for ecommerce businesses as packages are consolidated at one drop-off point.
But do they work?
Based on recent app reviews for POPStation and Box24, the service and ‘seamless’ pick up experience have faced some problems.
While understandable to have hiccups with the introduction of new technology, the hardware heavy system has proven to work well in markets like Europe. But in a unique market like Southeast Asia, there are a few factors unaddressed by most reports.
Apart from the fact that the lockers require prime real estate and are costly to build and maintain – $5,000 to $35,000 per piece – these machines don’t accept cash.
Given that majority of Southeast Asians, with the exception of Singaporeans, still prefer cash-on-delivery, this last mile option is not viable for many ecommerce companies whose customers want to see the item before committing to purchase.
In China, 15,000 lockers were put in place in 2014 but handled only roughly 1% of all deliveries.
As Lazada Vietnam Gerald Glauerdt commented LMFAsia 2017 to ecommerceIQ’s question if he believed lockers were a good solution for last mile, “these lockers are more expensive than couriers that can take the package directly to the door.”
Operating in low-labor markets such as Southeast Asia gives companies the luxury of re-thinking their last mile strategies. As logistics networks expand their networks in the region, such as hubs on Indonesia’s scattered islands, costs will decrease to reach customers in remote locations.
New startups such as Park N Parcel are also leveraging existing infrastructure such as mom and pop shops and convenience stores to offer another last mile solution.
With packages expected to increase in the region thanks to the rise of ecommerce percent of total retail sales, there is plenty to go around for logistics players, given they can handle today’s customer expectations.
“If you do last mile only, there’s zero loyalty. You don’t remember who delivered your order, but you remember who screwed it up,” – Vaibhav Dabhade, CEO and founder of Anchanto.