FAST AND FREE
Soaring consumer expectations are shaking up the e-commerce logistics business in Asia. By Erich Parpart
The supply chain of the future is all about automation, personalisation and localisation. The world is leaving the era where retailers decide when and where consumers can buy their goods and entering one where consumers tell retailers when and where they want goods delivered. That could be your house, office, car or a smart locker. And if you’re a merchant, you’d better deliver that shipment fast or your customers will turn to your competitors.
As Supply Chain 3.0 takes hold, those who transform their products, services and operational models stand to benefit hugely. Those who don’t will be left behind because consumers are now in control.
The competition to come up with offers that please consumers the most has become intense. In the US, as soon as Amazon said it would provide free same-day shipping, Walmart said it would do the same.
“Now, the new paradigm or the next expectation is that people can order what they want, and get it delivered on the same day, for free,” says Sean Culey, a futurist at IBM Watson Supply Chain. That’s the new “baseline expectation” in the United States and it is also happening in Asia, he added.
Last week, Amazon launched a local site in Singapore at Amazon.sg, offering a larger range of international goods plus products from Singaporean businesses. It is now going head-to-head with the regional online giants Lazada and Shopee. Singapore is the first country in Southeast Asia — and one of only 16 worldwide — to have a dedicated Amazon marketplace.
The launch came two years after the company introduced Prime Now in the city-state. Previously, shoppers in Singapore who had Prime membership could access Amazon’s fast delivery service through a mobile app. But the selection consisted mainly of local groceries and household items.
While Prime members had access to tens of thousands of products, the new local site gives all shoppers in Singapore access to millions more with free delivery on eligible orders over US$40 within two to three days.
Prime members in the city-state will also get free one-day delivery with no minimum spending for eligible local items, and free international shipping for eligible orders over $60 on items from the Amazon International Store. Now the market is looking to see how Lazada and Shopee will respond.
CONSUMERS RULE
Any business that wants new customers in the digital era must put consumers first, according to Aparna Saxena, a former head of the transport business unit at Lazada eLogistics.
“Consumers demand to be in the centre and everything that we undertake, be it in the supply chain, in retail, in e-commerce, in logistics, will be generally centred on how consumers adopt technology and what do we do to respond to that,” said Ms Saxena, who is now head of learner journey and growth at Manabie International.
Today, most consumers don’t care where a product such as a smartphone comes from. They don’t care how many companies in how many countries made the parts, or how much it cost to produce. All they care about is that they want it when they want it, and in whatever format they want it, she told participants at Symposium 2019 held in Bangkok in August.
“Honestly, whatever experience I get from an iPhone, if a Samsung provides me that, if a Huawei provides me that, I am going to be okay with it,” Ms Saxena said. “The stickiness is no longer with the product anymore, the stickiness is with the service experience.”
In e-commerce, the delivery experience is the “moment of truth” where the consumer comes in contact with the item for the first time. Hence, the entire customer experience starts with logistics and that is where you create trust or “stickiness”. If you lose your customer at this stage, it will take five times more effort to bring that customer back than to find a new one.
“The operator has do all that is possible to retain that customer and to give that customer the best experience possible so that they become a repeat customer. Therefore, the pressure on e-commerce logistics has increased,” she said.
Consumers nowadays have a very short attention span, so the sooner they can get the product, the better. How long they are willing to wait depends on the value factor. It is critical to get things done within an acceptable timeline based on the kind of product being delivered.
“Consumers want same-day delivery because they want instant gratification,” Ms Saxena said. “Of the 7.6 billion population currently in the world, 2 billion are millennials and what do millennials want? They want it fast … while there are also luxury buyers who are not willing to wait as well.”
For example, once someone who can afford a Prada bag worth thousands of dollars presses the Buy button, she won’t be willing to wait three days for it. Tech-savvy consumers also want the latest gadgets as soon as they come out. They will pay more for same-day delivery as a result.
Besides, they also want free delivery. When Alix Partners, a New York-based consulting firm, surveyed 1,015 US consumers in November 2017, 96% said that the availability of free shipping affected their purchase decision to some degree.
To meet this demand, retail and e-commerce players cannot do the job alone. They need to be part of an ecosystem that includes third-party logistics for last-mile delivery, and numerous other partners along the fulfilment chain.
As e-commerce continues to grow exponentially, Southeast Asia will account for 20%
The stickiness is no longer with the product anymore, the stickiness is with the service experience
APARNA SAXENA
Manabie International
In any country where e-commerce is booming, the competition in lastmile delivery, logistics and payment will also increase WANWISA SRIRATANA
Kasikorn Research Center
of worldwide e-commerce by 2022, Jenny Hui, the regional general manager of eBay, told the Bangkok Post in June. As well, Asia Pacific is expected to become the largest cross-border trade region in e-commerce for both imports and exports, she said, citing the Google/Temasek e-Conomy 2018 report.
NEW PRODUCT PROFILES
Over the past few years, cross-border trade via e-commerce has changed from light and cheap products to high-quality and bulky items, said Ms Hui, who oversees Hong Kong, Taiwan and Southeast Asian cross-border trade. Branded products and customisable items are also in demand.
According to eMarketer Cross-Border Ecommerce 2017, cross-border e-commerce has been growing by 24% a year since 2014, against 13.5% for global e-commerce overall.
A major factor is the increased flow of information, logistics and capital across borders. Logistics in particular has improved greatly and is no longer just about shipping an item from A to B. Track-and-trace, fully digitised operations, smart warehousing and returns are all part of the modern logistics provider’s arsenal.
In Thailand and Southeast Asia, the growing number of consumers who have embraced e-commerce are feeding exponential growth in the last-mile delivery business.
Kasikorn Research Center said in September that the last-mile delivery business in Thailand would continue to grow by 11% annually for the next two years to at least $1.19 billion by 2020. However, with increasing competition from China, Hong Kong, Japan and Singapore, especially from e-market places that are building their own last-mile delivery networks under their own
brands, small and medium businesses in Thailand and Asean need to respond sooner rather than later.
“In any country where e-commerce is booming, the competition in last-mile delivery, logistics and payment will also increase,” Wanwisa Sriratana, senior researcher at Kasikorn Research Center, told Asia Focus.
K-Research encourages small and medium businesses with a shorter reach in last-mile delivery to embrace online platforms and e-payment to prepare for increasing competition from e-marketplaces. Same-day delivery is something to consider if competitors are offering it, keeping in mind operating cost and price of delivery. To be even more competitive, same-day delivery outside major cities should also be considered.
“In Thailand, there are players that are already offering same-day delivery where convenience and quality of service are the most important things,” Ms Wanwisa said. “Eventually, every player here will have to offer same-day delivery but right now, it is still costly to do so and it does not cover every area.”
Once every player manages the cost of same-day delivery enough to be able to offer the same service, some will then move into the hour-by-hour zone. However, those that cannot compete on speed can still do well if product quality and other aspects of the customer experience are strong.
“The price of delivery is still important for last-mile delivery, where some operators might choose to say that they do free delivery when the cost of delivery has already been added (into the product price). Some might choose to add it in later for the consumers to see,” said Ms Saxena. “These are all psychological effects that different players choose, which show that the price of delivery is still relevant based on our research in Thailand.”
TECH-DRIVEN SAVINGS
The digital revolution is also helping lastmile delivery providers as tech-enabled route optimisation shortens delivery routes to save time and reduce fuel costs. Real-time tracking should be on offer as well, since it is popular with consumers, and operators can also monitor routes and make changes in case of blocked roads or heavy traffic.
The better delivery becomes, the more some businesses will be able to offer. For some, that could mean more delivery of products such as fresh seafood, fruits and vegetables, and fast-moving consumer goods. Other higher-value goods could also be considered, such as electronics and brand-name products.
K-Research says SMEs in the last-mile delivery sector should also consider going green as a new selling point to consumers and business partners. That could include using electric vehicles and cutting back on packaging, especially plastics.
More market opportunities are also emerging in cross-border e-commerce in Asean, the value of which has been growing at 35-37% a year since 2014. However, businesses need to be aware of the numerous regulations that vary from country to country, K-Research cautioned.
Looking for partners in such an endeavour is also recommended to lower transformation costs and speed up the process, especially those who have reach outside of major cities or across borders. These partnerships could include other last-mile delivery players, modern trade retailers or banks.
From two major players in last-mile delivery who controlled over 80% of the market in the past, there are now 570 such operators, mostly B2B (business-to-business) SMEs and subsidiaries, fighting for market share in Thailand and Asean. Those who fail to digitise to stay abreast of current trends will be left out.
“In Cambodia, there are startups that are already selling their ideas on last-mile delivery services throughout the region and that is something we have yet to see in Thailand where there are many B2B SMEs in the sector and not that many in B2C (business to consumer) yet,” Ms Wanwisa said.