The rise of e-commerce in Asia and its associated challenges

Why do they feel a need to build their own infrastructure solutions as soon as possible?

The main reason is the small parcel deliveries. Unlike in traditional retail, where large orders are consolidated, e-commerce logistics revolve around disparate numbers of small packages- all to be sent to different locations. Hence, warehouses used must be optimised to consolidate multiple small orders into a single delivery. In other words, there is a need for top-end location management systems and dedicated software systems for a high volume of storing and picking requirements.

Unlike in traditional retail where customers go to a central store to pick up their purchases, e-commerce customers expect their purchases to be delivered to a specific location. This can be problematic and cost-intensive. For example, consider the need for a delivery person to park the vehicle, complete a security pass application, access the elevator, find the unit, and make the delivery. When spread over several hundred deliveries, this results in significant costs of time and effort. Furthermore, there is a chance that some deliveries are rejected or sent to the wrong address, which would require a repeat of the entire process and incur additional delivery costs.  China’s e-commerce giant Taobao solved this problem by using Singaporean shopping and shipping agent ezbuy to set up collection points that customers located in Singapore could go to to pick up their packages. Unfortunately, a recent spat in late 2017 between the two companies led to a temporary end to the partnership.

A key advantage of collection points is there is no need for a second delivery run when the recipient is not present. However, they can be problematic as well. Those that are unmanned run the usual array of problems: theft, vandalism, and customers who struggle to unlock and collect their packages.

A single shopper may order a dozen products from a dozen different online companies. Even when purchasing from the same retailer, there may be similar difficulties if separate orders are made a day or two apart. Hence, marketplace sites often have different shipment options to cater to this. For example, Taobao allows users to have their purchases- all from multiple sellers- consolidated into a single delivery. Consolidation allows multiple deliveries to be done at the same time to reduce the transportation cost and optimise the truck load. This strategy reduces the logistics costs (and costs to the buyer) while still maintaining the delivery fulfilment.

An inevitable problem with cross-border e-commerce is customs clearance, which can be inconsistent and time-consuming. Import duties, regulations and customs processes vary widely among countries. As e-commerce stores often sell to an international market but leave the responsibility of customs to the buyer, this results in an added layer of complexity when several packages need to move quickly. Long delays stemming from items waiting to pass through customs inspection can create a long backlog of goods to be delivered. Logistics costs increase while customer satisfaction decreases. A potential solution to this in Asia is the ASEAN Single Window. A joint effort by ASEAN countries, the intention is to create an integrated website to expedite cargo clearance by enabling the electronic exchange of border documents among ASEAN member states. However, until the project succeeds, customs clearance remains a challenge for e-commerce businesses.

Rising transportation demands may produce uncontrolled growth in the number of vehicles on the road, which can result in traffic congestion. Some countries may also be lacking in rail and road options, which makes the final delivery even more difficult. Additionally, poor optimisation of delivery vehicles such as not loading trucks to their most efficient weight and volume capacity results in further inefficiency.