Cross-border logistics scaling Southeast Asia’s Export Potential

JANIO

Cross-border logistics scaling Southeast Asia’s Export Potential

This article was produced by Paulo Joquino of Insignia Ventures.

Innovation in logistics shifting upstream to asset-light, cross-border services

Logistics has emerged as an important vertical for innovation in the Asia Pacific. Startups in the space took a lion’s share of Softbank’s $100B Vision Fund deployment. Ecommerce retail fueled this logistics boom, with an increasing mass of transactions and demand for more convenience requiring more efficient warehouse-to-doorstep infrastructure.

Initially, innovations covered low-hanging fruit like the first and last mile delivery space, but it has since crowded and become a price-driven battlefield with thinning margins and consolidation by marketplaces, as with Lazada’s heavy investments into logistics. Momentum in innovation is now shifting upstream to more asset-heavy cross-border logistics services like transhipment management.

Given the heavy infrastructure costs associated with providing logistics services, startups cannot afford to build from scratch. Instead, they take an asset-light approach, implementing digital solutions that reduce costs and information asymmetries for companies extending their logistics network across markets.

This momentum towards asset-light, cross-border solutions stems from a new wave of foreign retail and logistics companies looking to pave more inroads for imports into the region’s demand-driven economies. This comes on the heels of macroeconomic uncertainties arising in more mature markets, shifting the gravity well of innovation towards Southeast Asia.

Cross-border logistics scaling Southeast Asia’s export potential

At the same time, this same shift to cross-border logistics also comes from local marketplaces looking to expand within and beyond the region. Motivated by expansion, these online platforms are taking on a regional approach to growth.

There is only so much that can be done within their home markets. True growth means Southeast Asia and beyond. For the merchants on these marketplaces, this means more export opportunities. It also means more options for sources of inputs to boost production of export goods or cheaper sources of goods for resellers.

“While Southeast Asia is predominantly demand-driven, there is potential for countries like Indonesia and Malaysia to start exporting out. They’re exporting to places like the Middle East, going from Indonesia to Turkey, and from Indonesia to the Philippines as well,” Janio co-founder and CEO Junkai Ng points out.

One such opportunity lies in cosmetics, especially for halal products, as most cosmetic products have alcohol content. This creates a huge market opportunity for countries like Indonesia to start exporting halal cosmetics. Another is modest fashion, where Indonesia broke into the top ten biggest spenders and its overall textile shipments forecasted to reach $15B this year, thanks to more active participants on global runways.

Dominating the competition to acquire more merchants are the unicorn marketplaces like Bukalapak. Through BukaGlobal, the unicorn is beginning to target the Indonesian diaspora across the Asia Pacific, where there are pockets of demand for Southeast Asian products.

Digitizing corridors of growth for local marketplaces and merchants

The challenge for these marketplaces and merchants is setting up the logistics infrastructure to support this expansion. Logistics companies address this by creating corridors of growth for these marketplaces. But these corridors are not always efficient, transparent, or cost-effective. 

With digitization, technology startups in this space can bring the entire supply chain onto one platform. Capabilities of key components along that chain can also be upgraded, from more optimal routes for truck drivers to monitoring the movement of products across multiple vehicle types.  

With logistics startups resolving information asymmetries through digital-first tools and ecosystems, these marketplaces are able to build their own pathway of logistics and fulfillment partners. For example, one combination could be bulk freight streamlining, 3PL management, and last mile fulfillment. 

Unburdened by what would have been heavy logistics costs, platforms like Zilingo, Blibli, and Zalora are able to focus on utilizing these corridors to grow their seller base, creating more options for the customer and reducing customer and merchant acquisition costs over time. 

As local marketplaces and merchants gain more access to markets and suppliers outside of Southeast Asia, exports will play a stronger role in the growth of the region. As Junkai says, “It’s only a matter of time.” 

 

Read more industry insights and lessons from founders at Insignia Review.

Insignia Ventures Partners is an early stage technology venture fund started in 2017 focusing on Southeast Asia and managing more than US$150 million from premier institutional investors including sovereign wealth funds, foundations, university endowments and renowned family offices from Asia, Europe and North America. Portfolio companies include Carro, Payfazz, Logivan, Janio and many other technology market leaders.

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