Southeast Asia’s ecommerce surge is a blessing for logistics

If you want to send a package in Indonesia, the first option that comes to mind is JNE. The courier services’ outlets are abundant and you are likely to find one in your neighborhood.

Its service is slow, sometimes unreliable, and happens largely offline, so senders have no way of tracking the progress of their package in real-time. But it works. JNE is Indonesia’s market leader. It has 3,500 brick-and-mortar store fronts in cities across the archipelago. In its fleet are 7,000 motorcycles and 2,000 vans as well as hired trucks and boats to serve the remote areas of the 17,000-island nation. From a logistics point of view, Indonesia has an unfortunate geography.

A JNE agent in Jakarta which also doubles as a tailor.

JNE has been the indirect beneficiary of this scattered geography. It’s also now benefitting from three socio-economic developments in Indonesia: the increasing wealth of the middle class, digitization, and the rise of ecommerce. The nation’s growing GDP created new demands and spending power. Additionally, 85 million Indonesians now have access to the internet, many of whom live outside the major urban hubs. For them, buying online is not a matter of convenience, but a necessity due to a lack of options.

These are the people driving the Indonesian ecommerce industry. According to Reuters, JNE now delivers an average of 4 million ecommerce packages per month. Because all indicators that spur online shopping are pointing up, this figure is likely to grow.

See: Barriers to Indonesian ecommerce – separating fact from friction

Growth creates opportunities

These developments did not happen overnight, as economic growth in Indonesia has been stable. Entrepreneurs with smart business acumen have cast their gaze on the region.

Among them is Peter Kopitz, a German who by mid-2005 had settled In Thailand. In 2012, he became part of Rocket Internet Thailand’s founding team when the German startup builder set foot in Southeast Asia. Kopitz then became co-founder and managing director of the Thai branch of Zalora, Rocket’s online fashion store.

With its ecommerce experience and deep pockets, Rocket was aiming to break into Southeast Asia’s ecommerce industry in a big way, with simultaneous startup launches around the region, including Indonesia. Indonesian Stanford graduate Hadi Wenas became Kopitz’s counterpart as managing director and co-founder of Zalora Indonesia.

When Rocket arrived, Southeast Asia had already made significant steps in the digital realm. Indonesia, in particular, had a flourishing culture of blogs and online forums. The internet was also being used to sell and buy. Tokobagus, a classified ads site (now rebranded as OLX), started in 2005. Tokopedia, an ecommerce marketplace, has been around since 2009. Berrybenka, an online fashion store similar to Zalora, was founded in 2011.

But local companies, at that point, did not have much financial backing. They had access to the people, but also took the environment they grew up in for granted. Slow logistics and manual payments were things they were accustomed to, and with limited resources, could do little about.

When Rocket entered the market in 2012, they did not simply accept the environment they found, they wanted to reshape it. For the large-scale business-to-consumer ecommerce (B2C) site they had in mind with Zalora, existing logistics providers were not enough.

This led Zalora Thailand to build up its own in-house delivery fleet for city-wide deliveries in Bangkok and a hub in Chiang Mai, according to Kopitz. The startup also had to adapt to Southeast Asia’s preferred payment method: cash on delivery. It worked closely with logistics partners to better integrate their processes with Zalora’s IT systems.