Logistics barriers impede growth of Asia Pacific’s e-commerce market, says new report
Asia Pacific represents the world’s fastest growing e-commerce market and has the potential to become the largest market for e-commerce sales in the next few years.
Although this development led to a 33% expansion of the region’s e-commerce logistics market in 2012, Ti’s new report, Asia Pacific e-commerce Logistics 2013, warns that the sharp growth of the market has outstripped the region’s logistics capabilities.
Cathy Roberson, Ti’s Senior Analyst and lead author of the report, observed: “This is a region that has long been dependent on exports, with infrastructure developed to support this type of demand. The dramatic rise in domestic e-commerce sales has put a strain on infrastructure which is now proving to be a hindrance to market growth; thus creating considerable challenges for governments, retailers and logistics providers alike to overcome. However, projects are underway to establish improved road and rail networks, better delivery service options and to expand warehousing and distribution centres. It remains to be seen if these developments can keep pace with the growth of e-commerce.”
According to the report, one of the main concerns is the need for modern warehousing. In China and India, for example, warehouses have historically served merely as storage facilities. The increase in e-commerce has resulted in demand for not only more warehouses, but also for facilities that are automated and integrated into retailers’ websites and store-fronts along with capabilities such as pick and pack. In addition, Ti’s report indicates that these facilities need to be located in more convenient locations as many consumers expect same-day or next-day delivery.
Another key issue outlined in the report is the limited access international logistics providers are permitted in domestic markets, if any access at all; for example UPS and FedEx were only granted limited licences to operate in China in 2012. Domestic providers do not necessarily have the capital to invest in major network overhauls and new start-ups are entering the market to fill gaps in the e-commerce supply chain. This has led to a high level of fragmentation and disjointed service capabilities.
Furthermore, retailers have taken it upon themselves to develop their own logistics networks to overcome the shortfall in suitable domestic transport solutions. For example, Alibaba, Flipkart and Rakuten have all incorporated logistics as part of their individual corporate strategies.
Governments across Asia have been encouraging e-commerce as a platform for export growth, but they must now focus on developing domestic infrastructure to enable postal and logistics providers to enhance their service offerings and allow the region to continue its e-commerce growth spurt.