How E-commerce Positively Affects Indonesia’s Logistics Industry

image source: kontan

The logistics industry has extremely benefited from the prominent growth of online shopping trends. With most people confined to their homes during the COVID-19 pandemic, the demand for delivery express services has shown a significant growth in many countries, including Indonesia. The main factor that contributes to this soaring logistics industry is the rise of e-commerce. Today, we will discuss how e-commerce positively affects the logistics industry in Indonesia. Read on.

 

E-commerce and Logistics: Two Sides of a Coin

E-commerce and logistics work hand in hand to meet rising market demands. The national average of delivery volume has increased 30% during the first half of 2021, compared to the same period last year. This growth also includes local or same city delivery service. The segment of retail logistics recorded a significant increase of performance compared to bulk logistics. The increase in retail logistics is largely attributed to the swift in consumer’s behaviour in online shopping

According to Kontan’s interview with an economist of Institute for Development Economics and Finance (Indef), Nailul Huda, there is a great opportunity that investors will be eager to invest in logistics service companies. The most influential factor to this is the ever growing prominence of digital economics or e-commerce. This trend can be seen from two largest e-commerce sites in Indonesia: Shopee and Tokopedia. The number of Shopee visitors in 2019 was 55.9 million people and by the end of 2020, the number of visitors reached 96.5 million or an increase of about 72%. In the third quarter of 2019, the number of Tokopedia visitors reached 65.9 million while in the third quarter of 2020 it rose to 84.9 million, marking an increase of 28%.

E-commerce companies are also working hard to accommodate the needs of delivery service by establishing their own dedicated logistics service. This initiative has been pursued by two giant e-commerce companies, Shopee Express from Shopee and Tokopedia with Gojek after their recent merger (GoTo). Nevertheless, many e-commerce companies still heavily rely on third-party logistic service providers to let their customers have more varied delivery options.

Although the major change happened in the digital industry, the moving of goods is inseparable from delivery service. Thus, the competitiveness of the logistics industry is enhanced by the demand of digitalization. There is a mutual connection between the advancement of technology and the readiness of logistics operations.

Read Also: Current and Potential Opportunities for Road Freight in Southeast Asia

More Companies, More Investors

With very little barriers to entry, entrepreneurs and investors can rapidly develop their businesses in the logistics sector. In Indonesia, logistics firms are making the most out of the e-commerce trend by providing a lot more types of delivery service. Within this past year, the number of companies providing delivery service has also increased significantly. According to data, there are currently 367 companies registered in this industry, with 50 of them being newly registered.  

Seizing this opportunity, Indonesian logistics service companies have to actively attract investors to grow their businesses. Even if venture capital or giant fintech companies are not answering the call, logistics firms are still optimistic that big funds investors are willing to invest in this industry.

With a very promising prospect of the logistics industry, many big funds have been starting to invest in this industry. This growth is in line with the stock market performance of logistics companies listed in Indonesian Stock Exchange. For example, PT Tri Adi Bersama (Anteraja), a subsidiary of PT. Adi Sarana Armada Tbk (ASSA), made the highest contribution to the total revenue of the company in the first half of 2021.

 

Indonesia’s Logistics Service Milestones in 2021

During the first half of 2021, leading companies in express logistics service expanded package delivery volume by tens to hundreds of percent compared to last year. JNE, One of the most popular logistics services in Indonesia, admitted that the ongoing demand from e-commerce forces logistics services to keep up. Amidst the increasing number of newcomers in logistics service, JNE sustains its business with an increasing growth up to 30%. Growing demand for logistics services brings not only a great opportunity but also a tough challenge for companies. In order to hold on with the surging requests, JNE adds more mega hubs and networks along with supporting infrastructure to accommodate the delivery capacity that grows more and more every day.

JNE’s biggest rival, J&T express, successfully reached a 25% growth during the first half of 2021, in comparison with the same period last year. As of today, the estimated number of customers of J&T Express in Indonesia has reached around 100 millions. Moreover, the daily rate of package delivery is at 2.5 millions packages daily and keeps increasing during peak seasons.

As a newcomer in the logistics industry, Ninja Xpress service company has delivered a total of 15 millions of packages only within July 2021 to August 2021. Additionally, a company named Anteraja recorded a satisfying number of average deliveries, with 500,000 packages delivered in a day, which doubled or increased 100% from last year. Compared to Ninja Xpress and Anteraja, another logistics firm namely Sicepat Ekspres successfully recorded the highest growth rate of 180% during the first half of this year alone.

 

With the rapid increase in users and transactions of Indonesian e-commerce, which is estimated to reach $133 billion USD by 2025, logistics service companies must also adapt and continue to develop various innovative strategies to be able to respond to the challenges and needs of consumers. With the promising opportunity in this industry, it is expected that companies in logistics service can have a good competitive environment, which provides consumers with various choices in delivery service
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