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Logistics players face rising demand for faster deliveries
As competition tightens, logistics companies and digital app-based companies are facing a new challenge with consumers demanding faster delivery times
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span>As competition tightens, logistics companies and digital app-based companies are facing a new challenge with consumers demanding faster delivery times.
As a frequent online shopper, 26-year-old South Jakarta resident Kinara Imananda Putri gives preference to companies that provide the fastest delivery services. In this case, she favors services that are able to provide same-day delivery, or at least, within two days.
“I am an impatient buyer who wants to use the items I buy online as soon as possible because I only buy when I need them,” she told The Jakarta Post recently, adding that she did not mind paying more as long as the goods she bought arrived promptly.
For same-day delivery services within Greater Jakarta, Kinara chooses Go-Send and GrabExpress, delivery features provided by ride-hailing app companies Go-Jek and Grab, respectively. For outside Jakarta, Kinara chooses logistics firm JNE Express for same-day delivery, or J&T for delivery within two days.
Kinara is just one of the growing number of Indonesian consumers demanding faster logistics services, as reflected in the latest consumer insight report from global consulting firm PricewaterhouseCoopers (PwC).
The report shows that the majority of online shoppers, 51 percent, choose same-day delivery services. It also found that 74 percent of respondents were willing to pay more for same-day delivery, outranking other delivery service features, such as delivery tracking and free return shipping.
“In Indonesia, same-day delivery is very important for retailers to offer. In terms of same-day delivery, people do not care whether their package arrives within an hour, two hours, or longer, as long as it is on the same day,” said PwC’s advisory partner Sharly Rungkat recently.
Sharly said that, with the high demand for faster delivery services, online retailers and parcel service providers faced the challenge of increasing their delivery speeds.
The existence of new online and app-based courier companies, which offer same-day and instant delivery services, such as Go-Send and GrabExpress, posed a considerable threat to existing logistic players, Sharly said.
“Although the existing players are growing very healthy as a result of the rise of e-commerce, they also still face tough challenges because of emerging delivery startups. Thus, conventional company players also need to invest in new technology to keep pace with emerging market trends and demand,” she said.
According to PwC, Indonesia’s delivery service revenue grew by 40 percent from 2015 to 2016. PwC data show that e-commerce contributes up to 25 percent of total revenue in the delivery sector.
Joseph, chief financial officer of courier service and logistics company PT Tiki Jalur Nugraha Ekakurir (JNE), said that the same-day delivery model was not originally designed for an express company like JNE. However, he acknowledged that the company was eyeing the market.
“As the market evolves, same-day delivery has become more important especially for intra-city deliveries,” he said. “E-commerce is offering a lot of perishable products like food that have to be delivered on the same day, so I think the challenge we are facing is not to change the model itself but how we can do direct delivery.”
Unlike Go-send and Grab Express, which have point-to-point models, JNE has a hub-and-spoke model where the couriers deliver from multiple points to multiple destinations.
To provide a faster delivery service and, if possible, a direct delivery service, JNE is currently establishing an automated mega hub, also called the automatic sorting center, to increase JNE’s capacity to sort packages. With faster sorting, the company could, therefore, deliver packages faster.
“If we can apply a new technology whereby the hub will eliminate the sorting activities in each smaller hub then we can do faster delivery,” said Joseph.
Currently, JNE serves approximately 20 million package deliveries every month. Parcel deliveries from purchases made through e-commerce platforms contribute around 60 percent of JNE’s total package deliveries.
Meanwhile, Go-Jek’s head of logistics Junaidi said that, at the moment, there were more than 55 e-commerce firms in Indonesia that had partnered with Go-Jek for Gosend, with the most transported goods being food, clothes and documents.
Go-Jek has two types of delivery service — instant and same-day — with the former allowing for four-hour delivery time, while same-day requires eight hours.
“Through the partnership with e-commerce partners, there are more than 203,000 merchants who use Go-Send to transport their products [...] From the overall goods transported using Go-Send, 35 percent are contributed by e-commerce,” he said.
