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150519_The Rise of Express Courier in E-commerce Business

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Spire was honored to be invited as a guest speaker at the Indonesia Supply Chain & Logistics Summit 2015 held in Jakarta.

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150519_The Rise of Express Courier in E-commerce Business

  1. 1. 1 The Rise of Express Courier in E- commerce Business Prepared for : Indonesia Supply Chain & Logistics Summit Jakarta, 19 May 2015
  2. 2. 2 Topic 1 Indonesia’s Logistics Market & Growth Prospects 2 Why E-commerce? Why Express Courier? 3 E-commerce Supply Chain Best Practices 4 Challenge & Opportunities
  3. 3. 3 Indonesia’s Logistics Market & Growth Prospects
  4. 4. 4 Indonesia Logistic Market & Growth Overall Indonesia Logistic Market Situation Industry size¹ of outsourced/contract logistics service in Indonesia is IDR 298.4 Trillion (~USD 29.0 Billion) with more than 2,500 players². 1 The industry refers to Indonesia’s transportation, storage, and courier market 2 Only 920 companies are registered in INFA (Indonesian Forwarder and Logistic Service Provider Association) Source: Spire’s Primary interview and analysis
  5. 5. 5 Indonesia Logistic Market & Growth Overall Indonesia Logistic Market Situation Industry growth¹ is promoted by GDP growth and domestic consumption as well as ASEAN Economic Community by the end of 2015. 1 Industry refers to Indonesia’s transportation, storage, and courier market Source: Spire’s Primary interview and analysis
  6. 6. 6 Indonesia Logistic Market & Growth Overall Indonesia Logistic Market Situation The industry¹ is inhibited by lack of infrastructure and industrial development plan as well as lack of skilled labors. 1 The industry refers to Indonesia’s transportation, storage, and courier market Source: Spire’s Primary interview and analysis
  7. 7. 7 4.6% 6.2% 6.5% 6.3% 5.8% 5.3% 5.5% 5.8% 6.5% 15.8% 19.2% 15.3% 17.2% 16.8% 17.5% 18.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2009 2010 2011 2012 2013 2014 2015E 2016F Economic Growth & Logistics Market, 2014 Real GDP Growth Transportation, Storage & Courier Growth of transportation, storage, and courier services in 2015 will be aided by the growth of trading sector, especially the domestic ones. Rise of middle class will result in profound changes as well as create opportunities in transportation & logistics industry. Source: Biro Pusat Statistik (BPS), Spire Data & Analysis
  8. 8. 8Source: Biro Pusat Statistik (BPS), Spire Data & Analysis Railroad Transportation 1% Sea Transportation 6% River Transportation 3% Air Transportation 26% Other Supporting Transportation (Incl. Storage) 12% Indonesia’s Transportation, Courier & Storage Segment Distribution, 2014 Road Transportation 52%
  9. 9. 9 Why E-commerce ? Why Express Courier ?
  10. 10. 10 Indonesia’s E-commerce Market Development Source: MENKOMINFO, Tech in Asia 2014, idEA, eMarketer 2014, Statista 2014, Spire Data & Analysis +255MILLION 4th Largest Population in the world POPULATION 3rd Rank Facebook Users 5th Rank Twitter Users +90 MILLION INTERNET USERS Online Retail Sales Figures 2013 2014 2015 2016 $ 1.8 BILLION $ 2.6 BILLION $ 3.5 BILLION $ 4.4 BILLION 2013 2014 2015 2016 Number of Online Shoppers 4.6 MILLION 5.9 MILLION 7.4 MILLION 8.7 MILLION
  11. 11. 11 Indonesia’s Best Selling e-Commerce Products in 2013 Source: velaasia.com, Euromonitor, Payvision, Spire Data & Analysis FASHION 37% TRAVEL 20% MUSIC & GAMES 20% ELECTRONICS 12% BOOKS 7% OTHERS 18%
  12. 12. 12 Types of e-Commerce in Indonesia (1) Source: Tech in Asia 2014, Spire Data & Analysis CLASSIFIEDS/LISTING C2C MARKETPLACE SHOPPING MALL Example: Characteristics:  The sites do not facilitate online transaction.  Individual seller can use the service for free. How they gain profit:  Premium ads Example: Characteristics:  Every transaction must gone through the website.  Can be used by individual seller. How they gain profit:  Premium ads  Premium seller  Commission Example: Characteristics:  Similar characterization with marketplace, with stricter verification process for the seller. How they gain profit:  Commission
  13. 13. 13 Types of e-Commerce in Indonesia (2) Source: Tech in Asia 2014, Spire Data & Analysis B2C ONLINE STORE SOCIAL MEDIA STORE Example: Characteristics:  Selling their own products. How they gain profit:  Profit from sales. Example: Characteristics:  Selling their own products through social media platform. How they gain profit:  Profit from sales.
  14. 14. 14 Indonesia’s E-commerce & Logistic Providers Source: KOMINFO, Tech in Asia 2014, idEA, eMarketer 2014, Statista 2014, Spire Data & Analysis Famous Indonesia e-Commerce Platform e-Commerce Logistic Provider
  15. 15. 15 Market Development Express Courier Service in Indonesia’s E-commerce business Key Success Factors Key Business Logistics Services Used* On-time and consistent performance are crucial in e-commerce industry as these are the keys to customers satisfaction. Land Freight Air Freight Sea Freight 1 2 3 1 2 3 Strong IT capabilities and integrated systems are needed to enable status tracking of shipped goods. Broad network/geographical coverage is important to ship products to customers outside of Jakarta. Breakdown of E-commerce Logistics Market Share (2014) *Note: Based on limited sample size of respondents in the market 35% 20% 15% 5% 10% 5% 10% TIKI RPX JNE DHL First Logistic Others FedEx Source: Spire Primary Interview with Players, Spire Data & Analysis
  16. 16. 16 Criteria of Express Courier Service in Indonesia Close Custodial Control Track & Trace Technology Door-to- Door Service High Level of Reliability & Coverage Speed of Delivery This delivery includes the seamless transfer across multiple mode of transport. This services also known as Pick-Up & Delivery Services Using sophisticated information system will enhance package security to reduce risk of loss or damage Shippers & consignee may track the precise movement of the package using track & trace technology ECS company promises that the package will arrive at the required destination and on time. This is particularly important to create customer awareness Most importantly, overnight and second-day express services reduce overall inventory and create effective supply chains. The average express delivery in Indonesia is about 1-2 working days. Source: Spire Primary Interview with ECS Players, Spire Data & Analysis
  17. 17. 17 E-commerce Supply Chain Model in Indonesia E-commerce Marketplace Supply Chain Model Full e-commerce Supply Chain Model Order Origin from Web Portal/ e-Sales MARKETPLACE Vendors/Distributor Retailer Order Received to Customer ECS Provider take place to Deliver Order The Marketplace supply chain model usually has no warehouse since the e-companies are more dependent on vendors or retailer regarding the product availability. The vendors or retailer will directly send the product ordered by the customer. Full e-commerce supply chain using warehouse and also delivery hub owned by the e-commerce company. In this case, E-commerce company will stock their own product and directly send them to the customer. Order Origin from Web Portal/ e-Sales ITEM PRESENT IN WAREHOUSE Vendors/Distributor Order Received to Customer ECS Provider take place to Deliver Order YES WAREHOUSE Retailer Delivery Hub NO Source: Spire Primary Interview with ECS Players, Spire Data & Analysis
  18. 18. 18 Marketplace gives better shopping experience and lower costs for both merchants and customers Customer buys 3 products from 3 different merchants in a multi-brand site on one portal, or MARKETPLACE Picks up “unpacked” items from 3 merchants consolidates the individual items and assembles the order at the fulfillment center, all processed and fulfilled at the same day Customer receives the order in one branded package next day via express delivery Source: Spire Primary Interview with ECS Players, Spire Data & Analysis On some sites, customer may choose a logistics partner from several options available. Marketplace may also have their own logistics service. Several prerequisites are essential to use the service. (e.g. distance, product weight, and so forth.)
  19. 19. 19 Challenges & Opportunities Express Courier Services in E-commerce Source: Spire Primary Interview, Spire Data & Analysis Challenges E-commerce Supply Chain Opportunities E-commerce Supply Chain Lack of infrastructure, resulting in high logistics cost and longer delivery & shipping time. Geographic location, with ± 20,000 islands. Slow development in logistics industry due to lack of support from the council of “Sistem Logistik Nasional”. Limited trained/skilled logistics workers Rapid growth of internet users. Double growth of smartphone users since 2013, providing accessibility and connectivity. Growth of e-commerce players. Growth of customers’ trust in using online payment system. Growth of urban lifestyle, leading to the convenience of online shopping.
  20. 20. 20 Case Study: JNE – Largest Nationwide Network in Indonesia (1) Branch: ± 55 with ± 50 warehouses Agent: ± 3,000, Total service points 2014: ± 1,500 location Average number of Delivery in 2014: ± 400,000 / month Average number of scheduled flights in 2014: From Jakarta ± 298 flights / day To Jakarta ± 100 flights / day Average number of scheduled truck departure 2014: From Jakarta ± 100 trips / day To Jakarta ± 80 trips / day 60% of the overall sales turnover comes from e-Commerce retail sales. ±15% e-Commerce sales turnover growth y-o-y Employee 2014: ± 5,000 Car Courier: ± 250 Vans Motorcycle Courier: ± 800 Motorcycle Already Adopted Online system Source: Interview with JNE person, (Sales Division), Spire Data & Analysis
  21. 21. 21Source: Interview with JNE person, (Sales Division), Spire Data & Analysis Trace & Tracking Comprehensive JNE Web Portal One of JNE Transit Warehouse One of JNE Sales Office JNE Truck JNE Motorcycle Case Study: JNE – Largest Nationwide Network in Indonesia (2)
  22. 22. 22 Tel: (62) 5794 5800 Fax: (62) 5794 5808 Wisma 46, Kota BNI 25th Floor, Unit #07-09 Jakarta 10220 id.info@spireresearch.com www.spireresearch.com

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