Not surprisingly, the e-commerce industry across Southeast Asia is entering a golden era. The region has more than 620 million people (accounting for 8.58% of the world’s population) across 11 countries, where seven major languages are spoken.
Aside from the fast-growing e-commerce markets, the region is becoming a highly conducive launchpad for small and medium-sized enterprises (SMEs) that are getting into retailing and entering cross-border e-commerce across the region.
The e-commerce market value in Southeast Asia was estimated to be about US$5.5 billion in 2015. In 2021, the regional market has grown to an estimated value of about US$100 billion. As if that is still not enough potential, global tech site Mashable.com forecasts the Southeast Asian e-commerce market to grow up to US$300 billion by 2025—translating to a whopping 90% industry growth in just 10 years.
E-commerce companies can easily see Southeast Asia as a region with high potential, especially for cross-border transactions and shipments. Mobile and internet penetration continues to rise in the region, averaging up to 90%. Moreover, competition is relatively low for international products, making it even easier to market and sell cross-border across the region.
Cross-border shipping in the region
Cross-border shipments facilitate the transport of goods from an e-commerce company in a source country directly to consumers in another destination country without storing inventory. The merchandise still goes through applicable customs as well as import duties. Fortunately, despite differences in regulations in nations within the region, it is still feasible and achievable.
Through cross-border shipping, the need to create inventory in destination countries can be skipped. This spares e-commerce companies from costly inventory exposure, as there is no need to shoulder inventory storage and warehousing expenses.
Setting up and keeping warehouses or offices in other countries will always require additional investments and risks. Thus, cross-border shipping is an ideal option for SMEs that intend to try carrying out transactions in other markets within the region as there is no need to put up physical storage houses, offices, and storage facilities in a destination territory.
The cross-border shipment model is not as costly as putting up a local distribution model. Storage costs could only be incurred in the hub or origin country using a centralized logistics model. Furthermore, shipping costs would be incurred only when there are sales. Thus, cross-border shipping becomes cheaper and at the same time more flexible in terms of logistics when introducing or selling products across borders.
Cross-border shipping costs within Southeast Asia remain lower compared to entry costs in China, Japan, and other Asian countries. With this e-commerce practice still relatively new in the region, businesses can expect to enjoy the advantages in the next several years to come — a potential that is expected to further boost the regional e-commerce market.
An e-commerce company within the region has to tap cross-border shipping partners to ensure fast, reasonable, and reliable delivery of goods to customers. Luckily, there are now enough options for such service in the market, which can further drive the growth of sales across Southeast Asia.
Prospects of region-wide cross-border e-commerce
According to Mordor Intelligence, the cross-border e-commerce sector currently accounts for over 40% of the overall e-commerce market in Southeast Asia. This is attributed to the high, yet still growing regional population, complemented by increasing disposable income, consumers’ improving internet access, and continuous development of transport infrastructure paving the way for efficient logistics services and improved last-mile delivery.
Mordor Intelligence has also identified the most common reasons why numerous consumers are opting for cross-border e-commerce. First, Southeast Asian consumers are getting more discerning and demanding when it comes to the availability of preferred products domestically. Second, they are more conscious of overall purchase costs. Third, consumer-focused targeting when it comes to marketing is paying off, and lastly, higher quality products can be found across borders.
As mentioned, cross-border e-commerce and shipping are also more advantageous to SMEs across the region. Such businesses enjoy the empowerment facilitated by the transactions, which bring about the expansion of their businesses without the need to physically set up physical sites just to cater to customers in other countries within the region. SMEs can skip getting into the usually complex supply chain to deliver merchandise to more consumers.
To date, Malaysia and Singapore are the two most active nations for cross-border shipping among countries in the region. The two countries currently account for more than 50% of the overall cross-border e-commerce segment in Southeast Asia. In Singapore, up to 55% of online transactions are cross-border mainly because its customs do not impose a 7% of goods and services tax for cross-border goods below S$400 (US$286).
Thailand is the third biggest market for cross-border shipping in the region. Mordor Intelligence cites Thailand 4.0 policy for this strength. The government policy is significantly enhancing internet connectivity in each village across the country, an ideal factor for the rising e-commerce industry. E-commerce growths in Vietnam, the Philippines, and Indonesia are also carrying huge potential when it comes to cross-border transactions.
The ASEAN Vision for cross-border e-commerce
No less than the Association of Southeast Asian Nations (ASEAN) is recognizing the “tremendous” opportunities from cross-border e-commerce and shipping. In August 2020, the organization presented a Vision Map to guide all stakeholders in the region—governments, the private sector, and the consumer communities—to further make cross-border e-commerce flourish in the region.
ASEAN’s Vision Map for cross-border e-commerce is proposing important initiatives, based on commissioned research by Singapore-based KPMG and the US-ASEAN Business Council (US-ABC), a 35-year-old premier advocacy group for US companies that operate within ASEAN.
The study highlighted the growing opportunities for cross-border e-commerce in the region — propelled by the growing middle-class population, emerging digital lifestyles, and a shift in consumer behavior due to the changing business landscape and the impact of the global COVID-19 pandemic. It reiterated the potential of seamless cross-border shipping for enabling economic recovery and empowerment of SMEs and micro-, small-, and medium-sized enterprises (MSMEs) online.
ASEAN is proposing a coordinated e-commerce market in the region that will present more opportunities for businesses, promote intra-regional transport of goods, and bring about socio-economic gains for ASEAN members. To collectively achieve the goal, impactful and practical efforts must be implemented to advance the single-market e-commerce vision.
The proposed initiatives in the ASEAN Vision Map for cross-border e-commerce were strategically crafted to address existing and potential challenges and impediments to cross-border shipping transactions. The main proposed initiative is the institution of an ASEAN E-Commerce Association (AEA) that will address e-commerce issues and represent MSMEs and companies when dealing with those problems.
ASEAN is also looking at putting up an e-commerce Trust Mark. It will certify goods that are sold online across the region to ensure high quality, authentication, and strong confidence among online consumers in the region. At the same time, regular public and private e-commerce dialogues are proposed to strengthen relationships among e-commerce stakeholders in the region.
Also among the highlights of the proposal is an ASEAN Parcel Locker Network. This proposed regional locker network will allow any consumer within the ASEAN region to easily receive and return parcels and lower the pressure among last-mile delivery players. Thus, costs could be further lowered and MSMEs will not find the expenses for getting last-mile delivery as prohibitive.
Lastly, a proposed ASEAN Low-Value Shipment Program will simplify customs procedures, especially for low-value shipments regardless of weight or transport mode. This will address the most common issues regarding complicated custom rules per country that usually intimidate and discourage MSMEs to take cross-border shipments within the region.
Cross-border shipping best practices
In the meantime, industry experts are sharing easy best practices to make cross-border shipments work, both for e-commerce companies and consumers across the region. The idea is to identify and prevent falling into the possible pitfalls when shipping cross-borders. They are:
Compliance with varying customs regulations
Regulations in customs, duties, and shipping are different in each country in the region. But those are not making it impossible to ship cross-borders, as long as policies are adhered to. This is why before shipping to any country in the region, an e-commerce firm must first understand and comply with the customs laws of destination countries.
Some goods are commonly restricted for cross-border shipments. Interestingly, shipping chewing gum products will be difficult in Singapore, but not in other countries. However, there are unlikely items that may not pass through customs in most Southeast Asian countries. These include imitation tobacco products, controlled drugs, and other psychotropic substances, smuts (obscene publications, videotapes, and software), treasonable/ seditious materials, and firecrackers.
Strategic packaging of shipped goods
When it comes to shipping, packaging is highly important, especially in cross-border transactions. E-commerce companies must always ensure that their products will reach customers intact and in good condition. Thus, packaging must be of the right size and must be tough enough to withstand harsh weather, rough handling, and even possible changes in humidity.
Not to be missed for a firm’s consideration is the last-mile delivery model. For fulfillments via trucks or vans, big boxes are logical, while in destinations where goods are delivered to customers through motorcycles (in Indonesia, Thailand, and the Philippines), packages are ideally small enough to fit within the standard motorbike top-box.
Consciousness about parcel weight
Shipping costs are directly proportional to weight, especially for cross-border shipments. This is why e-commerce firms must weigh every package accurately while packaging and before shipping. Logistics providers re-weigh packages onsite and charge additional fees if the parcel exceeds original or declared weights.
However, a package that is lighter but bulkier may incur higher shipping fees than a package that is heavier but smaller in size. That is because some shipping companies now shift to volumetric weight pricing that assigns charges based on the amount of space occupied instead of the actual weight.
Putting correct shipping labels
Double-check the recipient’s delivery address before putting it into the package label. An accurate and valid delivery address will make sure the shipment will arrive at the customer’s doorstep in time and without any unnecessary hassle. E-commerce firms know that a wrong delivery address incurs added costs and unlikely delays, which in turn also lead to thin bottom lines. Shipping the package for the second time will impact profits.
When labeling for cross-border shipments, it is a must to include the e-commerce firm’s origin country (and address). Any hazardous material in the package must also be declared on the label.
Cash on delivery option
One of the issues in cross-border e-commerce is the preferred mode of payment of customers. Credit cards or electronic payments are ideal. However, in Vietnam, Indonesia, and the Philippines, most online consumers still prefer paying cash on delivery. E-commerce companies must be aware of this and must take proper action to facilitate such a preferred payment mode.
Whether the payment option chosen is cash on delivery or charging through a credit card, e-commerce companies must always make sure transactions remain secure, convenient to the customers, and safe. There is also a need to offer options for payment in various currencies. Most customers in the region prefer to pay in the local currency, so be sure to facilitate such payments.
Choosing an ideal shipping company
Fortunately, numerous shipping and logistics companies offer cross-border shipping across the region. Comparison shopping is still the best way to find and tap the best among the rest. An e-commerce company will never go wrong with the more reputable and expert carriers. Shipping firms with an established presence in shipment destinations always have the advantage in terms of costs and timeliness of deliveries. But it does not mean other logistics providers will be overlooked.
Cross-border e-commerce continues to gain popularity among highly discerning and demanding consumers across Southeast Asia. Despite the challenges brought about by the archipelagic locations and differences in customs practices among countries, cross-border e-commerce continues to enjoy tremendous growth. It empowers more MSMEs and SMEs across the region and brings about greater and better shopping options to meet the preferences of Southeast Asian customers. This segment of e-commerce holds strong potential.