How can eTailers make delivery financially sustainable

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Financial sustainability is the basis of all business. With the migration towards digital commerce direction, it is important for companies to investigate strategies to create greater value to encourage higher paying customers. Especially with the increasingly demand for free delivery, it is important to find out how to minimise cost for door-to-door delivery, and if possible, monetising delivering services for eTailer business.

 

In this issue, we interviewed Jianggan Li, CEO of Momentum Works, looking into venture building, business and investment consulting and direct investment running up to his panel discussion at Seamless Asia conference, happening in Singapore on 3-4 May 2018. Here’s to sharing our discussion outcome with Jianggan:

 

Q: How bad is this problem in Southeast Asia? Outside of main metros – SG,HK, Bangkok – how well-addressed is the region?

Li: Delivering out of the main metro areas is still very challenging for ecommerce players & brands. That is due to a multitude of factors; and in our experience, the lack of clear address system, is not the worst one.

 

In most places we see the address systems pretty well established – and for those where it is not exactly clear, there is always local agents who can bridge the gap. For example, in many places of Indonesia there is an Alfamart, and channels of Telcos and mobile phone manufacturers that reach further into neighbourhoods.

 

The bigger problems are demand and pure economics actually – the orders (as well as the major players’ marketing spend) tend to concentrate in (big) cities, which are denser and easier to navigate. For more rural areas, many do not have sufficient concentration of orders to warrant investment into perfecting the system. Even in China with its high eCommerce penetration, delivering to rural areas remain challenging and expensive

 

Q: What’s the realistic response from an eTailer selling to consumers in to target hard-to-reach, poorly recorded areas? Are there technologies that eTailers can use to overcome this problem?

Li: In terms of technologies, it’s less down to what technology is available (as there are definitely options available) it’s more down to having a reliable network of local agents. Local third party logistics providers are often the better option as they know the area far better than most of the large companies. So ensuring that you work with an established local partner can be a way to reduce delivery failure rates.

 

But on a broader level, eTailers need to be fully aware of the economics, and choose whether (and how) to serve some of those areas. For some categories, it might just does not make sense to ship to remote islands (rather than relying on the traditional trade network).

 

Q:What can the private sector do to urge governments to fill gaps in address systems? Do you know of any successful initiatives?

Li: I think the most important thing is for the government to take (and fortunately in many cases, remain) an open stance towards competition in the logistics sector. That includes easing license restrictions, reducing cross-province/state barriers, and generally make the tax scheme easier. That also includes opening up the data the government has; and allowing private sector players to complete missing information it as they reach out to individual.

 

Jianggan will be moderating the panel discussion on “How can eTailers make delivery financially sustainable?“, joined by senior representatives from HappyFresh, Minor Group, and Hong Kong eCommerce Supply Chain Association along with 200 other speakers at Seamless Asia happening on 3-4 May in Singapore. More information can be found on our website: www.terrapinn.com/seamless

 

 

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