- Innovation in logistics in Asia Pacific moving upstream to asset-light, cross-border digital solutions that reduce costs and information asymmetries.
- These digital solutions open up opportunities for local marketplaces and merchants to reach more markets for suppliers and customers, unlocking Southeast Asia’s export potential.
- Logistics startups digitize corridors of growth for these marketplaces and merchants, integrating entire supply chains onto a platform and/or upgrading capabilities of key components along the supply chain (eg trucks, freight, warehouses).
Innovation in logistics shifting upstream to asset-light, cross-border services
Logistics has emerged as an important vertical for innovation in the Asia Pacific. Startups in the space took a lion’s share of Softbank’s $100B Vision Fund deployment. Ecommerce retail fueled this logistics boom, with an increasing mass of transactions and demand for more convenience requiring more efficient warehouse-to-doorstep infrastructure.
Initially, innovations covered low-hanging fruit like the first and last mile delivery space, but it has since crowded and become a price-driven battlefield with thinning margins and consolidation by marketplaces, as with Lazada’s heavy investments into logistics. Momentum in innovation is now shifting upstream to more asset-heavy cross-border logistics services like transhipment management.
Given the heavy infrastructure costs associated with providing logistics services, startups cannot afford to build from scratch. Instead, they take an asset-light approach, implementing digital solutions that reduce costs and information asymmetries for companies extending their logistics network across markets.
This momentum towards asset-light, cross-border solutions stems from a new wave of foreign retail and logistics companies looking to pave more inroads for imports into the region’s demand-driven economies. This comes on the heels of macroeconomic uncertainties arising in more mature markets, shifting the gravity well of innovation towards Southeast Asia.
Cross-border logistics scaling Southeast Asia’s export potential
At the same time, this same shift to cross-border logistics also comes from local marketplaces looking to expand within and beyond the region. Motivated by expansion, these online platforms are taking on a regional approach to growth.
There is only so much that can be done within their home markets. True growth means Southeast Asia and beyond. For the merchants on these marketplaces, this means more export opportunities. It also means more options for sources of inputs to boost production of export goods or cheaper sources of goods for resellers.
“While Southeast Asia is predominantly demand-driven, there is potential for countries like Indonesia and Malaysia to start exporting out. They’re exporting to places like the Middle East, going from Indonesia to Turkey, and from Indonesia to the Philippines as well.” – Janio co-founder and CEO Junkai Ng
One such opportunity lies in cosmetics, especially for halal products, as most cosmetic products have alcohol content. This creates a huge market opportunity for countries like Indonesia to start exporting halal cosmetics. Another is modest fashion, where Indonesia broke into the top ten biggest spenders and its overall textile shipments forecasted to reach $15B this year, thanks to more active participants on global runways.
Dominating the competition to acquire more merchants are the unicorn marketplaces like Bukalapak. Through BukaGlobal, the unicorn is beginning to target the Indonesian diaspora across the Asia Pacific, where there are pockets of demand for Southeast Asian products.
Digitizing corridors of growth for local marketplaces and merchants
The challenge for these marketplaces and merchants is setting up the logistics infrastructure to support this expansion. Logistics companies address this by creating corridors of growth for these marketplaces. But these corridors are not always efficient, transparent, or cost-effective.
With digitization, technology startups in this space can bring the entire supply chain onto one platform. Capabilities of key components along that chain can also be upgraded, from more optimal routes for truck drivers to monitoring the movement of products across multiple vehicle types.
With logistics startups resolving information asymmetries through digital-first tools and ecosystems, these marketplaces are able to build their own pathway of logistics and fulfillment partners. For example, one combination could be bulk freight streamlining, 3PL management, and last mile fulfillment.
Unburdened by what would have been heavy logistics costs, platforms like Zilingo, Blibli, and Zalora are able to focus on utilizing these corridors to grow their seller base, creating more options for the customer and reducing customer and merchant acquisition costs over time.
As local marketplaces and merchants gain more access to markets and suppliers outside of Southeast Asia, exports will play a stronger role in the growth of the region. As Junkai says, “It’s only a matter of time.”
Paulo Joquiño is a writer and content producer for tech companies, and co-author of the book Navigating ASEANnovation. He is currently Editor of Insignia Business Review, the official publication of Insignia Ventures Partners, and senior content strategist for the venture capital firm, where he started right after graduation. As a university student, he took up multiple work opportunities in content and marketing for startups in Asia. These included interning as an associate at G3 Partners, a Seoul-based marketing agency for tech startups, running tech community engagements at coworking space and business community, ASPACE Philippines, and interning at workspace marketplace FlySpaces. He graduated with a BS Management Engineering at Ateneo de Manila University in 2019.