There’s increasing pressure for ecommerce companies to offer customers “value-added services” such as same-day delivery or offline pick-up points thanks to a growing generation expectant of instant gratification – waiting even 3 days for a package isn’t going to cut it.
Online brands and retailers end up working with a variety logistics companies to deliver orders across urban and rural areas in a quick fashion to appease customers. This is a trend not only in developed economies, but demanded in developing countries such as Thailand and Indonesia as well.
Progression of logistics in Southeast Asia
Southeast Asia is poised to become one of the world’s fastest growing market for ecommerce, estimated to exceed $238 billion by 2020. Known to be ridden with infrastructure challenges such as fickle trade regulations and lack of roads, government initiatives across the region are being put in place to improve logistics.
“If you look at the roads, airports and railways, things are improving and will continue to. Infrastructure spend in Indonesia is expected to reach $165 billion by 2025 and the spend in public investment expected to increase by 7% per year,” says Charles Brewer, CEO at DHL Ecommerce.
Thailand also has a $50 billion infrastructure budget as the country plans to improve roads, highways and railways in the upcoming years.
But long term changes will take both investment and time before the region’s infrastructure can catch up to “same-day appetite” in developing markets and at a relatively inexpensive cost.
The ‘Light’ Model
In the meantime, online players can rely on the rise of an on-demand, lighter logistics model that tackles issues of long delivery periods and limited distribution in rural locations.
According to real estate consulting firm CBRE, modern logistics services are shifting away from big box warehouses, bulky deliveries and in turn, expanding their networks with existing infrastructure or building small counters across the country to meet the demands of clients.
Logistics providers are also introducing collection points at existing locations such as shopping centers or office buildings in second and third tier cities as seen by DHL Ecommerce’s recent nationwide expansion in Thailand. The company’s aim is to decrease the time SMEs take to ship parcels.
According to a DHL survey, 55% of SMEs cite logistics as a time killer.
It’s resource heavy to build new hubs and roads and companies can’t afford the time needed to see infrastructure improvements and capture market share. By turning to a light model, logistics services can provide efficient, speedy services without big investments.
Adapting to (on) demand
Southeast Asia’s increase in delivery expectancies could be attributed to the fact that mobile subscriptions are ahead of the global average with 854 million mobile connections. These mobile first users can easily request for on-demand groceries, t-shirts and hot meals on the go with their phones.
Next day delivery account for 95% of existing logistics services in Thailand, while the remaining 5% is filled by on-demand delivery services. There’s still a vast opportunity for logistics players to service ecommerce companies that require speed and efficiency.
In Indonesia, there are PopBox lockers designed to make last mile more convenient for shoppers and merchants. According to William Tanuwijaya, CEO of B2C marketplace Tokopedia, “courier businesses will grow as they are needed to deliver products sold on marketplaces. The promise of fast delivery is also appealing to locals.”
In order to fully serve Southeast Asia’s growing customer demand for faster deliveries, logistics companies need to offer localized, out of the box solutions such as pick-up points in parcel shops, partnerships with convenience stores, lockers or risk being left behind.