Mitch Bittermann, Regional Chief Logistics Officer at aCommerce recently sat down with The Postal Hub podcast to discuss a successful B2C ecommerce strategy, logistics in Southeast Asia, and what he thinks brands should prioritize when attempting cross-border.
The Postal Hub: From a retailer perspective, what are the challenges to get into ecommerce
Mitch: I would look into tech, customer service, warehousing and transportation. Retailers today are mainly working from a B2B perspective. This means bulky shipping and heavy-duty racking in the warehouses, which is only suitable when operating B2B. To do B2C, the requirements are completely different, because the consignments are smaller. From a transaction perspective, businesses would also need to think differently.
With transportation, it would either be light or FTL (full truck load), the size of packages are smaller with B2C, which means you have to work with parcel couriers to get the items shipped to your end customer. The biggest difference is also with customer service. If a company is running their own customer service, it usually requires them to talk to businesses, but with B2C, customer service means the end customer is contacting you through various channels, from calling to live chat, things that B2B businesses may not have.
The Postal Hub: If you are a retailer entering ecommerce, what are the key delivery considerations?
Mitch: I would go one step before that. I would think about what the location strategy is. Where is your supplier, brand, manufacturer and customer sitting? If it comes from a transportation perspective, today, you’re shipping a lot on freight. You’re shipping pallets, costs is definitely a consideration but from a cost perspective it is a lot smaller than if you have to send everything in small consignments. Someone has to pick up the bill.
Customers in Southeast Asia are more cost sensitive about shipping price so retailers will eventually need to consider setting up a hub somewhere to cut costs on shipping.
Postal Hub: Cash on delivery is popular in Southeast Asia. What are the other ways people are paying?
Mitch: Cash-on-delivery (COD) is the biggest enabler in ASEAN. This is the choice for most people, especially in tier 2-3 cities that are unbanked. If you look at Indonesia, in a place like Papua New Guinea, 90% is COD. Do we have another method? Yes, but one of the challenges is that we do not have Alipay. Banks offer platform but they are not default.
In Indonesia, a lot of banks are talking about an e-platform but nothing concrete is happening just yet.
For now, we cannot live without COD in Southeast Asia. Potentially, a retailer could lose out 60-70% of revenue if they don’t offer COD as a payment method.
Postal Hub: What about buy vs. build? What should be outsourced?
Mitch: It really depends on retailer maturity. If a retailer is just starting, I would say do as much as possible by yourself. Pack and send off shipment by yourself, if your business scales, then look to outsource. When it reaches the stage of 100,000 orders a month, do you want to run it by yourself or outsource to a third party service provider?
With transportation, it is best to outsource. This is because Southeast Asia still has fairly weak infrastructure. There are a lot of options to choose from; DHL and Kerry are the big ones. Then we have smaller disruptors such as Ninja Van and Sendit. All the movements in the transportation industry also mean prices will be soon drop and the industry will become more commoditized.
Some of my clients run their own warehouses and some outsource. When I was working in B2B, companies were running their own warehouses and then the outsourcing trend happened. The trend is coming for B2C, but I don’t think it will take 5-10 years to take off, it will go faster.
Soon, the trend will go towards out-sourcing supply chain so that businesses can focus on growing and selling their products.
Postal Hub: What about cross-border delivery?
Mitch: With delivery, some people request next day or same day. It’s more difficult to ship cross-border with these requirements. Companies need to consider regulations that are related to ecommerce shipment and study revenue transfer, especially if you don’t have your own entity in that country. Figure out how to get money back from country A to country B while also thinking about tax implications.
Businesses will also need to think about FDA licenses and certain regulations. For certain products, you would need a license to legally bring it into a country, including distribution and logistics licenses.
A client came to me, they wanted to ship stuff from Singapore to Indonesia, but it was taking 7-9 days and costing customers $7 per shipping order. Depending on the product, that is quite a high price point. Customers are also not happy to wait that long for a delivery.
The client wanted a local set-up and do COD shipment because they want to build up scale. The company never shipped more than 100 orders a month. When they signed on with aCommerce, we closed 1400 orders after 3 months. The only thing that changed is the country we did the shipping from.
For businesses that are starting out in Asia, I would say for them to start their operations from either Hong Kong or Singapore. If it scales, then is the time to go local i.e. Jakarta, or hyper-local, such as tier 2 and tier 3 cities like Bandung or Surabaya for better reach.
Postal Hub: What about parcel lockers? What are end consumers in Southeast Asia interested in?
Mitch: The interest is there, but it’s all about reach and coverage. In Singapore, the country is not that big and essentially a metropolitan location, which makes it easier to offer things like same day delivery. In Bangkok, we power SKYBOX, a pick-up station on sky-train stations that allows consumers to pick-up their parcels on the way to and from work.
In Jakarta, MatahariMall offers lockers but it is limited in terms of coverage. I would recommend looking at pick-up and return from convenient stores such as 7-Eleven, Family Mart and Alpha Mart. There is already a lot of offline coverage in Southeast Asian cities and retailers can collaborate with these stores to begin a wider distribution network.