A worker sorts out documents and packets for distribution at Cardig International at Halim Perdana Kusuma International Airport in Jakarta. (GA Photo/Mohammad Defrizal)

Foreign Logistics Firms Gain an Edge on Local Rivals in Booming E-Commerce Market


AUGUST 14, 2015

Jakarta. Foreign companies are seizing logistics and warehousing opportunities in the Indonesian e-retail sector, while local firms make a late entry to the retail shipping industry.

A commodities-driven boom in recent years has seen Indonesian logistics companies specialize in transporting goods in bulk. However, that investment is turning out to be a weakness as commodity prices slump, forcing clients to cut sales shipments.

Meanwhile, a surge in online sales calls for a logistics capability that is quickly being filled in by foreign firms such as aCommerce.

Based in Thailand, with regional headquarters in Bangkok and Singapore and fulfillment centers in Indonesia and the Philippines, aCommerce provides services that span the entire e-commerce gamut, from channel management to cash-on-delivery.

With big clients such as Mitra Adiperkasa, MatahariMall, GroupOn and BlueFox, aCommerce has experienced growth of 136 percent in revenue over a span of six months, says Paul Srivorakul, the group chief executive of aCommerce.

“Indonesia just recently surpassed Thailand as our biggest market with 60 percent from the entire region’s head count based in Indonesia,” Srivorakul says, adding that monthly orders have nearly doubled over the period.

“E-commerce in Indonesia is here to stay and will eventually become the biggest e-commerce market in all of Southeast Asia,” he adds.

The company is banking on its vast network across Southeast Asia to woo online retail clients seeking to expand their businesses outside their home countries.

“With the upcoming Asean integration with the Asean Economic Community, cross-border logistics will also be very important,” Srivorakul says.

Booming market

The e-commerce sector in Indonesia is flourishing, thanks to an ever-growing consumer base and increasing Internet connectivity. The arrival of operators such as Tokopedia, Berrybenka and Elevenia has also led to massive opportunities for logistics and warehousing companies filling in the gap between the e-commerce firms and their customers.

Berrybenka, a fashion and beauty retail site based in Indonesia, operates its own warehouses and a logistics fleet called Berrybenka Delivery. But it also enlists other companies to deliver its products.

“We use four external logistics providers: aCommerce, JNE, First Logistics and RPX,” the company told GlobeAsia. The latter three firms are Indonesian.

“Now, around 60 percent of our orders are still being delivered by third-party logistics, but going forward, Berrybenka Delivery might play a bigger role, especially within Greater Jakarta.”

Missed opportunity

But with notable exceptions like JNE and RPX, established local logistics companies have been late to the e-commerce game. The country’s e-commerce market is expected to grow to $4.49 billion by 2016, from $2.6 billion in 2014, according to Singapore Post eCommerce.

“For many retailers, logistics and delivery are not their core competence and it is very costly for them so it's more efficient for them to outsource to us,” says aCommerce’s Srivorakul.

Increasing competition from foreign companies is also making it difficult for local logistics players to enter the retail delivery market, says Arman Yahya, vice chairman of air transport at the Jakarta chapter of the Logistics and Forwarders Association of Indonesia (ALFI).

In addition, “the online shops have their own logistics divisions,” Arman says.

Local logistics companies have been struggling amid declining demand for commodities, further undermining their ability to expand to new ventures. Although most ALFI members have managed to stay afloat in the market without losses, “unfortunately, our revenues are not growing,” Arman says.

He blames an uncertain regulatory climate and weakening rupiah as the main reasons for ALFI members’ lack of growth in the first half of the year. This, he says, has allowed foreign companies to come in and grab business opportunities that would otherwise have been snatched up by local logistics providers.

Arman also identifies the lack of government protection for local firms as the main reason for the lack of performance from home-based logistics firms.

“The government should be aware of the online retail industry and maybe put some [protectionist] regulations,” Arman says.

Still, there is scope for local logistics firms to develop, with online retailers looking to outsource their delivery to multiple providers.

“One of the main reasons we use multiple logistics providers is because of their different strengths,” says Berrybenka. “One logistics provider is excellent for cash-on-delivery orders, another one is great for orders from customers outside Java.”

The online retailers also want to avoid delays caused by “unexpected backlogs with a [single] logistics provider,” by having other options to fall back on.

“Partnering is our key step for logistics,” says Madeleine Ong de Guzman, vice president of marketing at Elevenia, a joint venture between local telecommunications provider XL Axiata and South Korea’s SK Planet.

“Right now, our strategy is working with established companies to handle this key process of e-commerce as they have the expertise already and coverage,” she says.