The Emerging Asian E-commerce Market And Last Mile Logistics
Melissa AU Team | |
The internet has made it possible for sellers to expand their reach to the national and international markets. Setting up an e-commerce portal is easy. The difficult part is managing logistics.
In 2018, the Asia Pacific last-mile delivery market was valued at US$ 500.3 Mn. By 2027, this is expected to reach US$ 2,292.6 Mn. According to a Nielsen IQ report, almost all growth in the retail sector for the next 3 years will come from online sales.
There are multiple reasons for the sharp growth of e-commerce. While a Cambodian report attributes the rise in demand to higher disposable income and increased absorption capacity for digital content, the rise on the supply side can be accredited to a rise in affordable internet, social commerce and a dynamic start-up culture.
As the frequency of online shopping grows, so does the need for seamless last-mile logistics.
The Current State of Logistics
In order to speed up delivery schedules, the entire stock for an e-commerce platform is rarely stored at the same place. De-centralized warehousing reduces the distance products need to travel from the time the order is placed to when it is delivered to the customer. There is still the delivery from the warehouse to the customer to be accounted for. One of the most common reasons for delays in last-mile logistics is inaccuracies in address details.
There are a number of players and industries in the last mile delivery market. As a result, the market is fragmented with high competitive dynamics. The competitiveness will only continue to grow. After all, the frequency of online shopping is increasing too. A Nielsen IQ report shows that the percentage of households in Thailand buying FMCG products online has increased by 58% while the number in the Philippines has increased by 325%!
As private players find ways to improve logistics so are government players undertaking initiatives to improve the last-mile delivery market. For example, simplifying customs clearance can go a long way in improving delivery timelines. Similarly, a Cambodian report says that the government is aiming at integrating e-commerce with the digital economy and improving institutional coordination.
Understanding The Need For Improvements And Its Impact
Logistics must evolve to keep pace with the new digital economy. Today, the speed and accuracy of delivery could be pivotal to a customer’s decision to stay loyal to the brand or shop elsewhere. Let’s take a look at some of the factors influencing this sector.
Customers Can Shop For Anything, From Anywhere, At Any Time
Today’s customers can shop from anywhere without limiting their shopping experience to daylight hours. According to a study in Cambodia, online retail sales jumped from 16% to 19% in 2020. On the other hand, overall retail sales dropped by 1% in the same period.
This means that sellers must have efficient delivery networks within metro cities as well as tier 2 cities, tier 3 cities and rural areas. A customer may shop late at night and still expect next-day delivery. Else, they may take their business to a competitor.
Businesses wanting to maintain their customer’s loyalty must thus take a closer look into their last-mile logistics. Something as simple as ensuring that they have the customer’s complete address can help. This minimizes the chances for misrouted deliveries and smoothens last-mile logistics. It also helps brands service a wider customer database.
Changing Standards Of Customer Satisfaction
One of the traditional disadvantages of e-commerce as compared to shopping from brick and mortar stores is the inability to try on an outfit, shoes, jewellery, etc. With better logistics, this may become a possibility. For example, earlier, while e-commerce platforms did accept returns, a customer wanting a different size had to return the product, wait for a refund and then re-order.
A fashion e-commerce platform in India recently started allowing customers to place an exchange order without waiting for a refund. This simple change allows customers to shop more comfortably and shortens the satisfaction circle. Today, it’s all about the convenience of letting the customer shop for what he wants, when he wants and from wherever he wants.
The Emergence Of New Technology
Technology can make a big difference to logistics. Relying on old-school technology may put last-mile logistics providers on the back foot. The first thing to come to mind I probably the introduction of drones. Drone delivery bypasses traffic jams etc. and can help quicken delivery. But, there’s still a while to go before this becomes a reality. In the meantime, there are address verification services that are already making an impact.
Instead of having to manually check customer addresses and verify them, technology can be used to verify and enrich customer data in real-time. Address verification tools can compare addresses inputted in your system with reliable third-party databases to verify that they are accurate. In addition, the tool can enrich data to make it more efficient.
For example, it can update old street names to the newly updated street names. It can also complete the address instances where fields are missing such as the customer’s pin code. In this way, address enrichment enables logistics providers to plan the most efficient routes.
Delivery Timeline As A Brand Differentiator
Once upon a time, when customers compared brands, it was mainly on the basis of product quality and pricing. Today, there’s a third aspect that’s often more important – delivery timelines.
A study found that 37% of customers agree that delivery timelines influence their purchase decisions. They are willing to pay for a better delivery experience with real-time tracking. And, simultaneously, delayed last-mile deliveries can give brands a poor reputation in the market.
COVID-19 has been one of the biggest propellers for the growing popularity of e-commerce. Of course, there is a concern as to whether the trend will continue once the pandemic is over. According to the Nielsen IQ report, 75% of consumers surveyed said that they would continue to shop online post COVID. Thus, investing in improving last-mile logistics will have not just immediate benefits but long term as well.