In Southeast Asia, the real money is in logistics, not ecommerce

A quiet revolution is underway in an obscure warehouse in Singapore, and you’d be hard pressed to pick its leader out of the pack. When drivers arrive at the nondescript building to report for duty at logistics startup Ninja Van, the CEO blends in among the other mostly 20-something men in polo shirts and flip-flops.

Changwen Lai is a lifelong entrepreneur. As a student at Raffles Institution and Raffles Junior College – Singapore’s most elite schools alongside Hwa Chong Institution – he spent his free time buying used mobile phones at below-market prices from internet forums, and then selling them for a tidy sum. Later, he’d buy bicycle parts, put them together, and sell the two-wheelers for a profit.

“I wanted extra pocket money,” he says, lighting up a cigarette. That was the best use of his free time, since he didn’t need to attend extra lessons – “tuition” as they’re called in Singapore – to get good grades.

He was then offered a government scholarship, but that comes with a six-year bond to government service. A month before he was supposed to leave Singapore for studies, he realized becoming a civil servant wouldn’t be fulfilling to him.

Much to his parents’ disappointment, he turned down the lucrative scholarship, and entered local college Singapore Management University while most of his friends went abroad. There, he started made-to-measure menswear brand Marcella, his first “proper business.”

Investment banking attracted him initially as there were tons of money to be made. But he did not stay long. “Trading became a bit boring as well. I decided to quit my job, and my parents got very pissed again,” he says.

Lai jumped into Marcella full-time, spending half a year in China setting up its factory. With a few retail stores established, its next step was selling online.

But Singapore’s logistics services weren’t ready for ecommerce, he realized. Automatic parcel tracking was non-existent, and printing waybills (delivery instructions) was done manually. Customers were at a loss when a parcel didn’t arrive on time.

So, at a lunch with friends, including angel investor John Tan, Lai lamented on the state of logistics. They told him: take our money and do something about it. That was in April 2014.

Southeast Asia is a laggard in ecommerce, and logistics has a huge part to play. Online shopping accounted for less than one percent of total retail sales in 2013. That’s far behind the six to eight percent in Europe, China, and the United States.

However, things are changing. The lack of ecommerce penetration is seen as an opportunity by entrepreneurs. Rocket Internet almost single-handedly lifted Southeast Asia’s ecommerce economy by investing almost a billion US dollars into Zalora and Lazada, its two flagship websites in the region.

It’s not just professional outfits that are selling online. The growth of marketplaces like Lazada and Qoo10 means individuals and small companies can get in on the ecommerce stakes too.

Investments in ecommerce skyrocketed. This created larger order volumes and higher order densities. In other words, a neighborhood may have seen 10 deliveries monthly a year ago, but now it’s getting 50 packages from online shopping. As a result, ecommerce sites are becoming more efficient, since the cost of delivering the same amount of goods is lower.

Helping the old guys

On board a rocketship

Acing the last mile

Uber-ization of logistics

Why SingPost looms large