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The essential guide to last-mile delivery in Southeast Asia

30 Dec, 2020 1:29:53 PM

While Covid-19 is undoubtedly a massive public health crisis with equally significant economic repercussions, it has also been a watershed moment for modern supply chain management. The coronavirus pandemic has presented a rare worst-case scenario where organisations can observe how well their systems and processes adapt to acute disruption and stress. It has also highlighted the importance of investing in supply chain continuity to support stronger long-term operations. 

In particular, the pandemic has accelerated the so-called Amazonification of the economy. The term refers to the migration of consumers away from traditional brick-and-mortar stores to online platform-based services—think online marketplaces like Lazada and Shopee and food ordering platforms like GrabFood and Food Panda. 

When Covid-19 forced governments to initiate quarantine protocols, shops around the world had to close their doors. Unsurprisingly, consumers in Southeast Asia and almost everywhere else turned online to do their shopping—sending eCommerce sales soaring as malls and stores remained closed. 

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A Bain & Company and Facebook study of more than 8,000 digital consumers in Southeast Asia found that 30% increased their online spending. In contrast, 47% said their offline purchases had decreased. An Ipsos survey also found a significant rise in online shopping activity during the pandemic, particularly in Vietnam (55%) and China (50%). 

With eCommerce activity surging, expectations for quick shipping times and no-contact delivery to comply with social distancing guidelines has shone a spotlight on the importance of reliable last-mile providers.

Why the last mile is crucial to customer satisfaction

As the name suggests, the ‘last mile’ is the final leg of the supply chain—the point in which a parcel moves from the transport hub or distribution centre to a customer’s doorstep. As an increasing number of consumers move towards eCommerce platforms and online merchants, having a competitive edge in the last mile has become a necessity for businesses in Southeast Asia and beyond. 

But even before the pandemic, smooth and quick parcel deliveries were already a critical component of the online shopping experience. A Capgemini study found that 76% of consumers are happy to spend a premium for faster and more frequent deliveries. 

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The demand for faster and more efficient parcel delivery is also the impetus behind subscription services like Amazon Prime. The expedited delivery service saw a 28% increase in revenue year-over-year in the first quarter of 2020 alone.

While most consumers probably don’t know what the last mile even means, there’s no doubt that this stage of the parcel lifecycle is what matters most to them. After all, it’s the part where they actually receive their items. 

This means that a reliable last-mile delivery experience has a significant impact on your brand’s reputation. More specifically, a great last-mile experience affects your brand in four ways:

Loyalty

Dissatisfaction over eCommerce delivery is a common problem in Southeast Asia, with 90% of complaints due to delivery delays and lack of communication about parcel status. There is a prime opportunity to nurture customer loyalty by beefing up your last-mile capabilities. 

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Reliability 

According to Bain & Company, 60% of consumers in Southeast Asia care most about experience when shopping online. Working with a last-mile partner enables your company to provide a delivery service that isn’t just quick, but also transparent, with customers getting frequent updates on the status and location of their orders. 

Practicality

Southeast Asia’s eCommerce market is fragmented due to varying levels of maturity. For example, there’s a significant disparity in the number of cashless transactions that happen in Singapore compared to countries like Vietnam and the Philippines. A last-mile delivery partner enables you to provide alternative payment options, such as cash-on-delivery (COD). This makes you a practical choice for shoppers. 

Competitiveness

Finally, improving your last-mile delivery capabilities puts you on an even playing field with the major online marketplaces and merchants in Southeast Asia. You can offer next-day and two-day delivery and still make a profit by bundling your products and offering free shipping for a minimum purchase amount. 

 

Last-mile opportunities for online merchants

While we know that lockdowns and social distancing guidelines have led to a boom in online shopping and parcel deliveries, the big question is whether online merchants in Southeast Asia will retain their newly gained customers after the pandemic. 

Evidence suggests that the acceleration of online shopping, online grocery deliveries, and work-from-home setups are likely to stick around. According to McKinsey, urban last-mile deliveries are predicted to remain above pre-pandemic levels and grow by 78% by 2030

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Similarly, Facebook and Bain & Company predict that shopping with value for money as the priority will continue to be a priority. Value-minded shoppers also prefer to make planned purchases online. 

Given these developments, here are five last-mile opportunities you should consider. 

1. Agile supply chains

In January 2020, the World Economic Forum declared, “There has never been a time of greater change for the last mile.” The WEF report, The Future of the Last-Mile Ecosystem, predicted a 20% growth in online retail share by 2023 and a 10% annual growth in instant delivery. 

For retailers, such predictions only reinforced the importance of analysing consumer habits and identifying patterns in seasonal demand to anticipate peaks and valleys in shopping activity. What the report failed to anticipate, however, is that panic buying of random products (often fast-moving consumer goods) during the height of Covid-19 showed historical data is of little help during a crisis of no precedent.

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Businesses need to invest in supply chain agility and pay attention to trends and microtrends to respond quickly to changes in consumer demand. Consider evaluating your inventory management procedures and logistics contracts to improve the visibility of your stock levels and optimise delivery networks in real-time. 

Other ways to create agile and responsive supply chains include entering into buyback contracts and zero-volume contracts with suppliers. This lets you leverage your buying power to improve supply chain flexibility instead of lower prices. 

2. Prepare for convenient and contactless delivery

Over the years, there has been a steady shift in attitudes towards staying at home, working from home, and contactless innovations. For instance, Facebook and Bain & Company found that only 20% of Southeast Asian consumers said they were likely to resume going out (e.g. dining out and going to the cinema) when restrictions are lifted. This is a significant decrease from 2019, when consumers were 1.5x more likely to eat out more than once a day. 

There has also been a surge in adoption of contactless payments. In the Philippines, GCash, the country’s largest mobile money platform, saw a 150% increase in registered users since mid-March. 

Whether the shifting attitudes will be a lasting legacy of the pandemic remains unclear. But one thing’s for sure, the shift builds on already existing preferences. As early as 2016, 40% of Southeast Asian consumers already wanted the option to have their orders shipped to a convenient location, such as a convenience store, bank, or local retail store. 

Providing different last-mile delivery options gives customers the convenience to choose how, when, and where their parcel orders are delivered. In Singapore, the deadline to deploy 1,000 parcel locker stations across the island has been pushed up to the end of 2021 to ease the manpower strain of eCommerce.

Self-collection from parcel lockers gives consumers greater control over their deliveries and saves them the hassle of waiting for their parcel to arrive at home. At the same time, logistics companies can avoid wasted trips and reduce their overall carbon footprint.

3. Renew your focus on customer experience

Every little thing you can do to provide great service to your customers can go a long way towards fostering goodwill. Online retailers need to be proactive in delivering a complete experience that begins when a consumer looks at a product, clicks ‘Add to Cart’, and receives the parcel at their doorstep. 

Similarly, you should also look at the last mile as an opportunity to delight your customers one last time before they receive their purchase. Again, try to create a memorable experience instead of just moving parcels from point A to point B. 

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Addressing the common pain points customers have when ordering online is a good place to start. For instance, offering cash on delivery (COD) is a must in Southeast Asia. But you should also be ready to accept payment via contactless cards or e-wallets to comply with health and safety reasons. As Deloitte explains, “The focus on safety won’t entirely go away—any more than the coronavirus itself will disappear from the planet.” 

Evolving from traditional to digital logistics is also in the interest of improving customer experience. A simple shift from handwriting labels to printing them can make a world of a difference. Not only will it do away with highly manual and time-consuming tasks, it will also ensure that you don’t miss any critical customer information, including notes that the recipients may have left. In effect, this will reduce the chances of delays or missent parcels and customers can get their orders on time. 

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A digital-first delivery partner will save you time and money and ultimately ensure that couriers can accurately access the information they need to deliver your customers’ orders.

4. Plan for delays in cross-border shipping

Cross-border shipping is a complicated process in Southeast Asia. Each of the 11 countries that make up ASEAN has unique tax regulations, border controls, and safety guidelines for parcels. There’s also the problem of flight scarcity and varying levels of infrastructure, all of which strain the supply chains of thousands of companies, causing customers to experience delays in getting their parcels. 

However, this situation also presents the opportunity to make your supply chain and relationship with your customers more resilient to disruption and delays in production and shipping. Events that affect your supply chain continuity are bound to happen. Now is as good a time as any to plan for delays and create procedures for addressing your customers’ frustration.

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For instance, retailers must be careful about setting customer expectations at all times, more so when shipping across borders in the middle of the pandemic. Communicate with customers and let them know that due to quarantine protocols, orders may take more time to arrive at their doorstep.

5. Provide or improve the transparency of deliveries

Shipping delays naturally lead to customer complaints about late parcel deliveries. In Singapore alone, the Consumers Association of Singapore recorded 255 complaints relating to delivery issues during Circuit Breaker. 

There’s not much that retailers can do about the circumstances causing delays. But what you can do is be transparent about the actions you’re taking to get customers their orders. Remember, one of the biggest sources of frustration customers have when shopping online is the lack of communication from vendors. One study found that most one-star ratings are due to a lack of communication during the delivery period. Customers expect not to be left in the dark about the status of their orders. Retailers must take the extra step of providing customers with real-time information of their orders’ location, especially at the last-mile stage of the parcel lifecycle. For example, you can provide customers with regular SMS updates about their parcels during the delivery period. This assures them that they haven’t been scammed and that their item hasn’t been lost.

 

What to consider when choosing a reliable last-mile delivery partner

With consumers having higher expectations for the speed, reliability, and transparency of their parcel deliveries, you must look for a last-mile delivery partner that can help you create a satisfying shopping experience. Look for a last-mile specialist capable of providing the following:

Quick delivery times

Quick transit times are the primary reason to work with a last-mile partner. Delays in delivery can cause satisfaction levels among happy customers to fall by as much as 15% for each time bracket. As mentioned earlier, it’s important to set expectations for next-day and two-day delivery, informing customers when it’s possible and not. News of a delay is preferable to no news at all.

 

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Look for a last-mile specialist with quick transit times for both domestic and cross-border parcels. Southeast Asia being the diverse region that it is, you will need a partner with an established network of local infrastructure, from transport hubs to couriers.

Comprehensive last-mile delivery infrastructure

Last-mile partners come in all shapes and sizes. Make sure to ask them about the size of their fleets and vehicles. Do they use lorries or vans? How much capacity does a single vehicle have? How many packages do they successfully deliver in a given period of time

Look for a partner with a variety of vehicle types, especially in a diverse region like Southeast Asia. Some vehicles are more suited to certain conditions or terrains than others. For example, in Indonesia, which is heavily congested and where roads are not always fully developed, J&T operates a fleet of 18,000 motorbikes and 1,300 vehicles. But in Singapore, whose infrastructure is already well-built, the fleet mainly consists of small vans and large trucks.

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Vehicles aren’t the only parts of a last-mile specialist’s fleet. Ask them about how their packages are sorted, too—do they have an automated sorting machine, or do they rely on manual pickers and packers?

In the hopes of delivering the best customer experience, you want to minimise your packages’ transit times. This will also depend on the size and number of warehouses the specialist has, and where they are located across the country or region. 

Safe parcel packing

Buyers want to receive their orders quickly and safely. Even if the box gets bent during packing or shipping, the products themselves should arrive in perfect condition—that’s the entire point of great packaging. 

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There are plenty of cases where buyers will take stars off their review for poor packaging that contains damaged products. They might even demand that you replace the product with a brand new one in good condition.

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When you entrust your picking-and-packing to a last-mile delivery provider, you’re entrusting your products’ condition to them. Regardless of what your products are or how they are shaped, your provider should be able to handle these differences and pack them safely, according to the most common best practices and ecommerce expectations. 

For example, according to Shopee guidelines, you should pack all orders in at least three rounds of bubble wrap. And to avoid breakage or cracks, you should also fill the box completely with packing material such as paper or packing peanuts.

There’s a steep learning curve to follow when packaging items, and it's best to leave it to experts who know exactly what they’re doing. For example, here are J&T’s packing protocols for liquid products:

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Look for last-mile partners that have standardised packing guidelines in place, and a good reputation for handling different types of products and ensuring they are safely delivered.

Parcel tracking and SMS updates

Aside from quick delivery times, customers also expect constant communication about the status and location of their parcels. In countries like the Philippines and Indonesia, where the eCommerce markets are still underdeveloped, consumers may have concerns about whether they’re being scammed or if their parcels have been lost.

Look for a last-mile delivery partner with a parcel tracking API. This lets you give your customers parcel tracking numbers, which they can plug into the tracking page/app of their logistics provider or eCommerce site they purchased from. This system will also send your customers SMS/text messages to inform them that their parcels are on the way. 

Clear protocols

Different last-mile providers have different guidelines and procedures for delivering parcels. For example, some companies may only deliver parcels on business days and others may deliver all seven days of the week. Certain companies may have specific timeframes for cross-border shipping. Others may have specific provisions in their return and exchange policies that directly affect your business.

Bottom line? Take the time to read the fine print when working with a third-party last-mile specialist. 

Seller insurance policies 

Package insurance policies are designed to help sellers recoup their costs in the case of a mistake made by their shipping partner. However, just because a last-mile specialist offers insurance doesn’t mean that their policy will adequately protect you or your packages. 

For example—what is the maximum amount of time you can take to make an insurance claim? Are the products you are shipping covered by the policy? Your partner should be invested in your success, and work with you on all processes to achieve the results you need. 

Handling and safety

Your last-mile partner must have clear protocols for handling lost or damaged parcels and, if necessary, compensating customers for their parcel’s value or insured amount. Remember, damaged or lost packages reflect poorly on your brand, regardless of whoever’s fault it is.

Your last-mile delivery partner must be aware of the role they play in preserving your brand’s reputation and customer loyalty. Companies that stand by the reliability of their services will have reasonable claims processes for lost and damaged parcels. 

Great customer service

Because the last mile is the stage of the parcel lifecycle that directly involves your customers, 

your last-mile partner must provide customers with the channels to share feedback. Any complaints about damaged, opened, or lost parcels must then be addressed quickly. Again, the level of care shipping companies put into getting parcels to your customers’ doorsteps directly affects your brand’s reputation. 

Another aspect that must be considered is the quality and professionalism of the last-mile delivery partner’s couriers. Unprofessional or impolite couriers and consistent delays can leave a lasting negative impression on customers. Ensure that your delivery partner has steps in place in the case a customer has a negative experience with a courier—and that they will help take responsibility.

Pricing 

Finally, there’s the issue of cost. A last-mile partners’ services should be included when calculating your cost of goods sold (COGS). This allows you to get a clear picture of how to price your products and protect your margins. 

However, the last-mile of the parcel lifecycle is also where you can squeeze out savings. According to one study, it represents 28% of the total delivery cost, which means there’s plenty of room to make your shipments more efficient with the help of a last-mile partner. To control costs, we recommend thinking long-term with one partner rather than use different delivery services to ship out parcels. 

The right long-term delivery partner can also help you spread across the region once you feel you’re ready to grow. If you’ve seen signs that new geographic markets might be interested in your products, consult with your potential partners to see whether they can affordably, accurately deliver packages to other countries.

 

Start preparing for the new normal with J&T Express

Retailers will have to work hard to adapt to the changing delivery demands and expectations of consumers in the new normal. Shipping products to customers is no longer just about speed, but also about safety, transparency, and overall reliability. 

Working with a last-mile delivery partner ensures that the most delicate phase of the parcel lifecycle is in the hands of a specialist—one with a network of transport hubs and courier partners in Southeast Asia. Look for someone who can help you navigate the region’s different customs policies, border regulations, and safety protocols during these trying times. Contact J&T Express today. 

JTEXPRESS

Written by J&T Marketing Team

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