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171220_Addressing challenges for cross border e-commerce logistic and payment in ASEAN-6

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Spire participated as a speaker for Global Supply Chain Council’s (GSCC) live webinar held on Wednesday, 20 December on diversity among Southeast Asia cross-border e-commerce shoppers.

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171220_Addressing challenges for cross border e-commerce logistic and payment in ASEAN-6

  1. 1. By Jeffrey Bahar Deputy CEO Spire Research and Consulting Retail, Distribution and Logistics Forum Jakarta, December 20, 2017 ADDRESSING CHALLENGES OF CROSS BORDER E-COMMERCE LOGISTIC AND PAYMENT IN ASEAN-6
  2. 2. 2 CUSTOMERJOURNEY Online Consumer (Ronnie is looking to buy the newest edition of Nike Golf Shoes. Unfortunately, it is not available in Indonesia) Nike Lunar Control Vapor 2 1 2 3 37% Clothing, Accessories and Footwear 22% Cosmetic, Health and Beauty Product 17% Books, CDs, DVDs, and Video Game 13% Computer Hardware, Software, and Peripherals 12% Toys Top 5 Products Purchased by ASEAN Countries from Abroad Check Out (Once he checked out and made a payment, the E- Commerce platform will proceed the order). The costs include cost of goods, shipping cost, and import duty Get it Online (He then decided to search it on many websites, and found it in the US e-commerce platform) Occurs domestically Occurs internationally Customer journey starts when the need of particular product is not offered domestically PAYMENT Source: Google Consumer Barometer, n=8750 Source: SP Commerce, Various Sources and Spire Analysis Paypal / Alipay Others Bank Transfer Cash on Delivery Credit Card Most Preferred Domestic Payment Methods in ASEAN-6 Paypal / Alipay Others Credit Card Most Preferred Cross-Border Payment Methods in ASEAN-6
  3. 3. 3 CUSTOMERJOURNEY 4 5 6 Occurs domestically Occurs internationally Warehouse at Origin Country (The e-commerce platform will give notice to dispatch goods for delivery to destination country) – fulfillment process International Shipping (The International logistic will take care all of the delivery processes and the custom in destination country) Custom Clearance (In this case, the import duty for “Nike Lunar Control Vapor 2” to be shipped to Indonesia will be charged 25% of import duty and 10% of VAT) North America South America Europe Africa Asia Australia North America 1-2 2-9 2-9 3-4 3-4 3-4 South 2-3 2-3 3-4 6-7 6-7 6-7 Average Cross Border Shipping Time (in Days) USPS EMS UPS EMS (Post) DHL FEDEX TNT Worldwide Logistic Players From To LOGISTICANDCUSTOM The challenges of SEA cross border e-commerce include geographic, economic, lingual and regulation. Source: Various Sources and Spire Analysis
  4. 4. 4 CUSTOMERJOURNEYLOGISTICANDCUSTOM USD 204.75 USD 192.5 USD 202.99 USD 187.25 USD 258.67 USD 231 3 1 2 4 5 6 A pair of golf shoes (USD 175) through cross border e- commerce from the United States to ASEAN-6 may vary depends on the import duty, VAT, STLG and income tax. In this case, the costs does not include shipping and insurance cost. Custom (Lead Time Needed) Additional No. of Days North America 1-2 South America 2-3 Europe 1-2 Africa N/A Asia 1-4 Australia 2-3 Custom Time (in Days) *The Average (WORLD) Number of Days needed for custom clearance is 3 days *Rates based on the calculation of golf shoes as a product. Each product may have different rates. Custom affects as one of the hurdles purchasing from cross border e-commerce Source: Various Sources and Spire Analysis Country Import Duty VAT STLG additional Tax Singapore 0% 7% - - Thailand 5% 7% - - Custom Rate
  5. 5. 5 CUSTOMERJOURNEY 7 8 9 Occurs domestically Occurs internationally Warehouse at Destination Country (Order is Ready for Delivery) Local Delivery (Order is Delivered by Using Local Carrier) End Customer The delivery received by clients LOGISTIC The rate of logistic effectiveness and efficiency is affected by the development of infrastructure within the country. However, infrastructure for archipelago countries such as Philippines and Indonesia are still underdeveloped. Source: Various Sources and Spire Analysis The Development of Infrastructure in ASEAN 6 SG MY TH ID PH VN LALAMOVE NINJA VAN DELIVEREE The Emergence of ASEAN 6 Cross-Border Logistic Players Decent Less Decent Note:
  6. 6. MARKETOVERVIEW 416 538 696 900 25 34.5 47.5 65.3 0 1,000 2,000 3,000 4,000 5,000 6,000 2017 2018F 2019F 2020F Global & Cross Border E-Commerce Market (in Billion USD) Global E-Commerce Market Global Cross Border E-Commerce Market Cross Border E-Commerce Market in ASEAN 6 > Global&CrossBorderE-CommerceMarket Contribution 2017 2018F 2019F 2020F Global Cross Border E-Commerce Market to Global E-Commerce Market 18.17% 19.39% 21.06% 23.20% Cross Border E-Commerce Market in ASEAN 6 to Global Cross Border E-Commerce The trends of cross border e-commerce higher than the growth of global e-commerce itself, particularly in ASEAN 6 which the growth is reached 37.58% Source: Various Sources and Spire Analysis 2,290 2,774 3,305 3,879 Total of Global E-Commerce Market 25 416 34.5 538 47.5 696 65.3 >90 0 6
  7. 7. MARKETOVERVIEWASEAN-6E-COMMERCE 7 Number of Internet User (in Million) 4.71 46 22 60 50.5 132.7 30.34 2.9 24.74 33.26 13.98 11.58 29% 17% 35% 45% 51% 9% E-Commerce Penetration (Number of Purchases Compared to Total Population) The e-commerce market has an extensive potential to grow owing to significant growth of total internet user in ASEAN 6. Source: Various Sources (2016) and Spire Analysis 18% 25% 66% 64% 62% 17% Conversion Rate (Number of E-Commerce Purchaser to Internet Users) 1 2 3 4 Number of People Purchasing Product Through E-Commerce (in Million)
  8. 8. MARKETOVERVIEW 8 67% 49% 48% 38% 33% 4% Number of People Did Cross Border E-Commerce ASEAN-6CROSSBORDERE-COMMERCE Source : Google Consumer Barometer, n=14174 Notes : the percentage is based upon the e-commerce users Source: The Consumer Barometer Survey 2014/15. N=8750. The challenges faced in cross border e-commerce transaction involved logistic and payment issues 36% 39% 46% 53% 47% 73% I Prefer to Buy Products Within My Country Source : Google Consumer Barometer, n=18587 Notes : the percentage is based upon the internet users Delivery time takes too long30% Website seems insecure28% No international shipping offered26% Supply issues when conducting cross-border transaction: Demand side: why SEA customers do not purchase cross-border e-commerce? Perceiving product is more expensive31% Assuming delivery time will be longer29% Perceiving the return procedure will be difficult and costly 27% 24% 23% It wasn’t convenient I worry about paying in a foreign currency No suitable or convenient payment methods24% 23% Process for ordering wasn’t clear Notes: Logistic Issue Payment Issue
  9. 9. RECOMMENDATION Current Situation Current Challenges Need to be Taken Care of Possible Recommended Actions Focusing on last mile delivery alternatives to guarantee service and to adapt the challenges Numerous payment solution providers available, such as: Paypal, Alipay, etc. to facilitate cross-border transaction Notes: Logistic Issue Payment Issue Expensive shipping cost owing to limited number of logistic provider for cross-border delivery Poor transport infrastructure & warehouse readiness Available logistic providers that can accommodate cross-border delivery. Increase the number of local transhipment warehouse to reduce shipping cost Insecure transaction owing to inconsistency of conversion rate, import duty and tax clearance No single payment system that ensure safety and trustworthy one single integrated platform to remove complexity of international payment (to cooperate with PSP) Integrated trade information for regional ASEAN by ATR (ASEAN Trade Repository) provide clear return procedure, available contact for customers and engage omnichannel Clarity on return, payment procedure and delivery process. 9
  10. 10. Tel: (62-21) 5794 5800 Fax: (62-21 5794 5808 Wisma 46 Kota BNI, 25th Floor, Unit 07 & 09 Jalan Sudirman Kav. 1, Jakarta 10220 INDONESIA