How logistics have become vital as e-commerce booms

March 31, 2020

As Asia’s e-commerce market flourishes, logistics has taken a dual role as both a core driver and an enabler for the industry.

At once, increasingly sophisticated logistics solutions are helping retailers get products to buyers more quickly – which in turn is driving online demand for goods from consumers who may have once considered long delivery windows a deterrent to preferencing e-commerce.

E-commerce revenue across Asia is projected to reach US$1.298 trillion this year and on track to reach a market volume of US$1.72 trillion by 2024. China, of course, accounts for the lion’s share of his market, with its 1 billion consumers spending some $832 billion online domestically this year and cross-border e-commerce accounting for a further $164 billion.

Such a rapidly growing adoption of online shopping across the region has brought increased volume and thus economy of scale for global logistics providers. But it has also placed substantial pressure on those providers who are constantly having to adapt to increased scale.

One logistics provider, FedEx, for example, has responded by offering solutions such as delivery-time options and delivery mobile notifications, providing opportunities to reduce costs by aggregating shipments with heavyweight and freight capabilities and giving buyers peace of mind through visibility of the whole order-to-delivery process with end-to-end real-time tracking of high-value shipments.

The reason logistics is so important is that besides the online-checkout experience, delivery service is a key area where the consumer’s perception of the retailer they are purchasing from can be most influenced.

New York and Hong Kong-based retail thinktank Coresight Research listed speedier logistics and order fulfilment as a key trend in Chinese e-commerce for 2000. “We expect logistics providers to offer faster delivery by upgrading their logistics infrastructure and increasing capacity at bonded warehouses. Same-day delivery would then be possible for a broader range of products.”

Cross-border challenges and opportunities

Such attitudes are driving an evolution in the logistics sector towards a more comprehensive service than merely moving goods from A to B.

With half of Asia-Pacific online shoppers making purchases cross-border, vendors now have to build extensive knowledge of procedures such as duty collection, customs clearance and other minefields. Here is an important area when logistics providers can step in and assist. Automated package and freight shipping solutions are available to improve efficiency for the entire shipping process of retail vendors. Retailers will soon be able to leave the paperwork to shipping partners, such as transmitting customs documentation electronically and enjoy a smooth customs clearance process, minimising the time and cost involved in the associated paperwork.

Moreover, with more and more regional and trade deals being negotiated between governments and trading blocs, it has become more attractive for SMEs to expand into new markets.

Logistics companies can help local retailers go global by shipping their products internationally faster. Experienced logistics service providers are dealing with customs departments and other regulatory authorities on a daily basis, providing businesses with established clearance solutions. When it comes to markets like Europe or the Americas, they are well placed to smooth the way for Asian e-commerce companies to develop trans-continental trading partnerships and to ship to markets which are not previously practicable.

Speed meets trust

For retailers, a core part of selling online is establishing trust with customers. Just a single bad experience makes the difference between a loyal purchaser and someone who decides to shop with a rival.

Here is where an experienced and efficient logistics partner plays a huge part in customer satisfaction and thus loyalty: If a retailer commits to a certain delivery date of a product, it must honour the commitment. Delays frustrate consumers and would potentially lead to cancelled orders as they seek an item somewhere else. A reputable distribution partner can reduce the risk of delivery problems by offering shipment personalisation options such as delivery notifications, have shipments delivered to a secure location and more – to suit the customer’s needs.

Consumers – especially millennials and their successors from Gen Y and Z – expect instant gratification. If they like something, they want it there and then. This is nowadays being referred to as the “on-demand economy” and here logistics is absolutely critical to satisfying customer expectations. There is evidence that consumers will pay more for speedy deliveries.

A recent study found that 43 per cent of Gen Z, 28 per cent of millennials and 18 per cent of Gen X consumers believe the faster you can purchase something, the better the vendor or product is. As one commentator observed, “that might not be totally fair, but that’s the reality of this new omnichannel world of payments and commerce”.

How to choose a logistics partner

Here are six considerations for retailers choosing a logistics partner for an online retail business:

Understanding and meeting your business needs:Do you have special shipping requirements, for example, strict temperature control?
Areas of expertise: How extensive is their network? What delivery options do they offer?
Reliability of service: Do they have a proven track record of timely and accurate delivery?
Flexibility and scalability: Can they meet seasonal variations in customer demand?
Technological support: Can they facilitate technological advancement and integration with your system?
Transparent pricing: Is their pricing straightforward? Are there any terms to pay attention to?

Finally, one of the most important considerations in choosing a logistic partner for an online retail brand is trust. A retailer’s relationship with a customer is only as strong as the weakest link in the customer purchase pathway. A bad experience with delivery usually impacts the retailer’s brand and reputation, not the shipper’s.

For more commentary on current retail and business issues, visit the FedEx Business Insights Hub.