Logistics companies struggle to realize growth potential

Posted by tabitha

Despite being a core factor of Indonesia’s flourishing e-commerce sector, logistic companies are still unable to meet the sharp growth of e-commerce businesses. As a result, online retailers still lack options for transporting their products, especially to outside Java.

According to the Indonesian Logistics Association (ALI), the logistics sector is estimated to grow 12 percent this year, above the average growth of most business sectors, but it would be far below the growth of the e-commerce sector, which according to Bank Indonesia (BI), could be between 100 percent and 150 percent a year.

ALI chairman Zaldy Ilham Masita said the e-commerce sector was not actually the biggest customer for logistics services as it made up only around 6 percent of the goods shipped by logistics companies.

“Consumers used to only browse e-commerce platforms for fashion items and maybe gadgets, but now they even shop for daily necessities online,” Zaldy said at an event recently. “Today, e-commerce platforms represent 14 percent of the retail sector as opposed to 3 percent just four years ago.”

Nevertheless, the development has not been enough to boost the logistics sector, which grew well below its actual potential at 10.5 percent in 2018, he said.

“For logistic companies, raising their service capacity is not as easy as for e-commerce platforms. A lot of logistics companies are finding it hard to develop when they focus only on e-commerce shipments,” Zaldy said.

He also quoted a report by global consulting firm McKinsey, which estimates that Indonesia will see a record high of 1.6 billion packages being shipped in 2022.

However, in an archipelagic country like Indonesia, e-commerce logistics relies heavily on air transport, Zaldy said. With a limited number of air cargo services, shipments will not only be costly, but they will also take a long time and experience delays.

“Our e-commerce sector is growing rapidly, but our logistics can’t keep up. This can become a major constraint for online sellers,” he said.

Fajrin Rasyid, cofounder and president of local e-commerce unicorn Bukalapak, raised a similar concern over the lack of shipment options for online sellers, especially those based outside of Java and Bali.

“In Bukalapak, over 70 percent of e-commerce transactions are still recorded within Java,” Fajrin said in the same occasion. “The larger businesses may be able to support themselves […] but those in the more remote parts of the country cannot yet benefit from those infrastructure facilities.”

Bukalapak has recently signed a partnership with Paxel, a logistics company cofounded by ALI’s Zaldy, to provide a same-day package delivery service for online sellers.

Fajrin said the partnership was in line with a survey from PricewaterhouseCoopers that shows that 41 percent of e-commerce shoppers were willing to spend more money to receive their order faster through a same-day delivery.

“At first, [Bukalapak’s] same-day delivery service is only available for sellers and buyers residing in the same city, but with Paxel, we hope to expand such services. This service also caters to our sellers who offer fresh produce like fruit, as their growth is starting to pick up,” he added.

Paxel, which uses a relay system that links multiple couriers and transportation means to deliver a package, guarantees an eight-hour delivery time for shipments within Greater Jakarta, and 10 to 15 hours within Java and Denpasar in Bali. It introduces sorting boxes as a replacement for sorting centers and automates the process in order to accelerate it.

“We plan to expand our services to Medan in North Sumatra and Makassar in South Sulawesi by the third or fourth quarter this year,” said Zaldy.

Sumber: thejakartapost.com

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