The internet economy in Southeast Asia is booming. Well, that is an accepted fact now. But, how booming is it really?
“The region added more than 10 million internet users last year, bringing the total number of people connected to the internet to 360 million in 2019. The internet user base is now 100 million larger than it was in 2015,” according to the e-Conomy SEA 2019 report by Google, Temasek and Bain and Company.
Not just that, the report also adds that there are around 150 million active E-commerce users in the region and as of 2018, there are three million E-commerce deliveries daily.
World over, same-day delivery has become the next big revolution and SEA is, in many ways, becoming a trendsetter.
With this in mind, we, at Locus, really wanted to search for some answers as to what makes same-day delivery such an imperative in the region and how it is changing businesses. We invited Faizal Kuraesin, Head of Supply Chain Partnership at E-commerce unicorn Bukalapak, for a webinar along with Krishna Khandelwal, our Chief Business Officer.
What followed was an absolute knowledge ride as we dived deep into the phenomenon of same-day delivery and how SEA has changed the game and set new benchmarks for the world to follow.
Really, what makes SEA so special and conducive for same-day delivery?
History. We always go back to history, don’t we?
“In Indonesia, it was ojek, it has been available for a long time. In Indonesia, it is not just cab drivers or buses, it is motorcycle transportation called ojek. People use these for personal transportation. The only thing that was lacking was trust,” said Faizal.
Faizal feels that the digitization and transparency has managed to combine the ever-increasing demand with the already available supply, in this case, ojek drivers.
“You would not trust, say your laptop, with the ojek rider, but now insurance is being provided. More people and sellers are using these platforms to accommodate same-day deliveries,” said Faizal. Technology platforms like Gojek and Grab have capitalized on this.
The other critical factor, which is unique to SEA, is the order density. Indonesia, for example, is a collection of islands, and most of the demand comes from a tier-1 city like Jakarta.
“High density of people means dense orders, it’ll be less costly (to do same-day delivery) as compared to western countries,” said Faizal. “A lot of transactions are in Jakarta. A lot of logistics players are tapping into the last-mile delivery. They are trying to collaborate with e-commerce players and chasing density.”
The region’s growing urban middle-class tech-savvy generation’s paying capacity is on a rise. They are, as you can guess, very social media friendly, which also influences their buying decisions.
“The amount of urbanization happening in SEA is increasing, the GDP per capita is increasing, more spend is available in people’s hands, the innovation of new tech, all of this is making it (same-day delivery) seamless,” said Krishna.
What are the challenges in implementing same-day delivery?
According to the ‘Tech logistics in SEA’ report by INSEAD, which quoted a consumer insight survey by PricewaterhouseCoopers (PwC), 51% of customers prefer same-day delivery and 74% of customers (of the same customer set) are ready to pay more for same-day delivery.
So, the first challenge is really the cost, right? Must be sky-rocketing?
It all depends on who you collaborate with and which segments you target.
“Many people think that the cost of same-day delivery is higher. It is dependent on who you collaborate with. If I have a partner who can consolidate these deliveries, the charges will be lesser than if I were to have my own fleet,” said Faizal.
With cost out of the way, the next big challenge really is about achieving the perfect integration of process and tech. Both the speakers stressed on the need for a solid blueprint so that all stakeholders know what is expected of them.
“Even before deploying, we need a blueprint in place. Why is the blueprint important? It sets the right expectations for different stakeholders. Before implementing the tech, having a blueprint can lead to efficient execution,” said Faizal.
But, how to implement an agile tech infrastructure? The answer lies in listening to feedback from the ground and implementing it in the tech.
“The nice part of logistics is that it is not just the tech game, it is the ground game too. The ground game is tangible. This feedback can be processed and it helps in making business decisions. It leads to cost efficiencies,” said Faizal.
Faizal recounted an example of how being on the ground helped a popular 3PL operator in Thailand to be efficient on their deliveries.
“Kerry Express is located as close as possible to the seller. The guy from Kerry collects all the orders from the shop and ensures that the cut-off to leave the mall is met. They control influence by being at the location.”
With all this frenzied activity, there’s certainly got to be some opposition. People are just used to the old ways, there’s always that inertia to change.
“In Indonesia, the ojeks have become an enabler to same-day delivery. They’ve disrupted the logistics companies. Companies like Gojek and Grab are tech-savvy. It results in deliverymen dealing with TMS applications. Change management is a challenge. Not everyone is willing to accept. We need to make sure that stakeholders have full transparency, driven by the blueprint,” said Faizal.
But, you know what? It is all worth it.
“The high order density in SEA, good process blueprint and tech could lead to a lower cost for same-day delivery. Consumers are willing to pay for it. This could be an option not only to get customer loyalty, but also a great opportunity to generate more revenue,” said Krishna.
We are certainly spoiling the customer, but why not? They seem to be liking it and do not want to let go of the convenience. But remember, not sticking to your delivery promise is not forgiven by this social media savvy consumer either. “Over 90% of consumer complaints and negative feedback are tied to transit time and late delivery,” reveals a study titled ‘Delivery: The Biggest Pain Point in E-Commerce in SEA’.
To finish off our speakers had these parting words of wisdom to share-
- SLA adherence – It is not just to end consumers, it is to all stakeholders in the ecosystem- Faizal
- Keep three core things in mind – Create a concrete process, adopt agile technology, and stakeholder management. The technology platform should help you do order clubbing, enable dynamic routing, smart geocoding and finally help with SLA adherence, while accounting for real-time traffic and route restrictions- Krishna.
- Network design – To enable this we need to make sure to know what the actual lead time is. What is the lead time for suppliers, transit hubs, etc. Limit the SKU you are willing to provide same-day delivery on as you need a stable supply of these. Based on the lead time, you can create your inventory point and determine how high it should be – Faizal