Asia Pacific presents tremendous growth potential for the e-commerce business, and Deutsche Post DHL Group is expanding its worldwide logistics expertise to enlarge its footprint in emerging markets and help digital business players across the region.
DHL eCommerce, formerly known as the Global Mail division, recently began operations in Thailand, offering end-to-end domestic and cross-border delivery service for e-commerce merchants as its main clients. Thailand is the first country in Southeast Asia to launch the domestic service.
Its cross-border delivery service operates in other 10 countries including China, Hong Kong, Australia, New Zealand, Japan, Singapore, Malaysia, South Korea, while India and Russia (considered part of Asia Pacific by DHL) also having domestic service.
Malcolm Monteiro, Asia Pacific CEO of DHL eCommerce, says emerging markets and e-commerce are the two primary areas of focus in the company's 2020 strategy. Asia Pacific offers a strategic combination of economic and demographic characteristics while the markets in Europe and the US are maturing and becoming saturated.
"We will go beyond our current 11 markets [in Asia Pacific], bringing more products and services," he said. "Half of the world's population is in Asia Pacific and the purchasing power is increasing. The role that we play here is to facilitate that. In Asia, that's our job and we have learned a lot from the western world."
In Asia Pacific, demand for delivery services is growing exponentially with the increasing popularity of new product categories that people are ordering online, such as groceries and furniture, and especially for cross-border deliveries of products not available in consumers' home markets.
According to the DHL database, the ratio of delivered parcels per capita in the region is set to increase dramatically. China is forecast to record the highest increase in the region, from 1.9 in 2014 to 6.3 by 2020, with the figure in Southeast Asia rising from 0.2 to 0.8 parcels per capita.
DHL eCommerce aims to provide both high-volume shipment service for B2B (business to business) clients and B2C (business to consumer) service for lower-value items.
In Asia, however, the share of online retail business relative to total retail turnover remains low. Mr Monteiro puts the figure at just 1-2% compared with 10% and above in other markets, posing a challenge for a logistics company.
"But that means there is a huge opportunity," he said, noting that India, China and Southeast Asia combined were home to over 3 billion people whose desire for quality and reliable e-commerce services will only grow.
"We will not ignore because it's small today. We look at our size in the long term and see what it could be at that time if we did something today," said Mr Monteiro.
In Thailand last year, for instance, the gross merchandise volume (GMV) of e-commerce was only 1.7% of total retail sales, compared with 11.9% in the United States and 10.5% in China. However, DHL is forecasting a compound annual growth rate of 22% between now and 2020, putting the Thailand share at 3.5% of total retail sales or 3.6 billion euros.
Online sales in Indonesia, Asean's largest economy, are forecast to grow 29% by 2020, the highest rate in the region.
Governments in developing nations have high expectations for the online industry to make a greater contribution to economic growth. DHL sees Thailand as a stepping stone and is keen on seeking opportunities at all Asean markets where more governments are offering incentives not only to logistics players but also SMEs and e-commerce.
"As a strong enabler and facilitator, if governments can focus on enabling the digital world, it complements what we are trying to achieve to facilitate trade," Mr Monteiro said. "We need all players to understand the opportunities and address their respective 'pain points' in their areas.
"The Southeast Asian market is very strong with 600 million people who want to trade both domestically and across borders. We are here to stay, we are here to invest and to bring our proposition [to this market] because we strongly believe those SMEs will become big merchants tomorrow."
VALUE-ADDED ARENA
Rising infrastructure investment in Asean will help logistics operators, as will the expected increase in movement of goods within the region as a result of the Asean Economic Community. However, foreign players such as DHL face challenges in penetrating domestic markets where state-owned postal systems still dominate the business.
Competition will intensify, possibly setting off price wars. Other global competitors such as US-based UPS and FedEx and Dubai-based Aramex, are also looking for a piece of the pie.
DHL says it chooses not to compete on price, but prefers to offer a value-added proposition with quality service. But even though affluence is on the rise in emerging markets, consumers remain very price-conscious.
"We are aiming at high quality, and that might not be a proposition for every customer in the market, but we firmly believe that there is a big enough, attractive segment where our service will find a good place," said Thomas Kipp, CEO of DHL eCommerce. "Price is one factor, but if the experience is not good, people will not come back."
According to the company's research, consumers want convenience but complain of several "pain points". These include lengthy transit time, damaged goods, and limited availability of cash-on delivery payment in markets where credit-card use is still low.
"It's not about price at the first place, it's about experience, because a good experience will create trust in the e-commerce space and will drive repeat purchases," he said.
DHL in Thailand aims to overcome those pain points with offerings such as SMS notification, at-the-door pickup across Greater Bangkok, cash on delivery with daily remittances, and access to a multilingual call centre.
"We will cover the market that needs our attention and expertise," said Mr Monteiro. "It's really where the opportunity exists, and where we believe there is a big gap that current players are not fulfilling.
"We will determine where we can bring the biggest value, we will focus on those markets earlier, so that we can make a big difference in a shorter period of time."