How on-demand ridesharing can give e-commerce a necessary boost
E-COMMERCE in the Southeast Asia region is seen as a growth market, estimated to surpass US$25 billion by 2020. A recent study by Frost & Sullivan finds that the region will likely be the fastest-growing e-commerce market in the next five years, although some challenges persist. In particular, logistics prove to be a concern for both Business-to-Consumer and Peer-to-Peer e-commerce players in countries like the Philippines and Indonesia, which have complex geographies, hampering speedy and inexpensive fulfillment and delivery of goods.
Apart from logistics, payment systems are yet another challenge in this region, particularly in markets like the Philippines and Indonesia, where cash-on-delivery is still the preferred mode of payment over digital means.
Even with these challenges, e-commerce and m-commerce players in the region remain stable, with the likes of Lazada, Tokopedia, and Alibaba seeing continued success in serving B2C markets. Meanwhile, OLX, Shopee and Carousell service the needs of the P2P crowd. The market is ripe for disruption, particularly by frictionless and cheap payment services, as well as innovative means of handling logistics.
Even before global ridesharing services like Uber launched in Southeast Asia, the region already had local and regional startups servicing the scene, such as Indonesia’s Go-Jek and the Philippines’ Tripid. Currently, the region counts Uber, Grab and Didi Chuxing as major players in the transportation network business, providing premium and mainstream services, as well as carpooling, motorcycle services and even rickshaws.
These companies have also expanded into non-passenger services, which include delivery services like Grab Express and UberRUSH. In addition, companies like Deliveree have launched dedicated peer-to-peer delivery and logistics networks.
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These services leverage the system of utilizing existing vehicles on the roads, such as drivers or motorcycle riders plying their regular routes. These P2P courier services provide same-day delivery service that traditional logistics firms are currently unable to satisfy.
There are differences among services, however. For example, UberRUSH only caters to businesses in select U.S. cities as a B2C service. Grab Express provides P2P delivery via motorcycles, while Deliveree focuses on moving larger items through bigger vehicles.
The potential for e-commerce
While both B2C and individual e-commerce sellers already use traditional logistics providers in lieu of slow or uncertain local postal services, this segment is also ripe for disruption from P2P logistics providers that can offer certain advantages. For example, Grab Express’ motorcycle service offers same-day delivery of items within the same city or vicinity – something common in P2P transactions. Another advantage is lower cost of transporting bigger packages, as is the case with Deliveree. Most P2P courier services also offer an option for cash or card payment, which gives users some flexibility.
Compared with traditional logistics providers, these transport networks also provide real-time tracking of packages through GPS. In contrast, the former can only update their database on certain instances, which means the actual time of delivery is difficult to confirm.
Of course, P2P courier services do have some disadvantages. First, there is the aspect of supply. These services work best when users are situated in densely populated areas such as cities. Second, the driver has to accept a delivery before it can be made, which means there is no 100 percent guarantee that the goods can be delivered at any given time – users are advised of the optimal times during the week and day to book deliveries. Also, some services offer only limited insurance when transporting goods of value, which might limit its usefulness in e-commerce activity.
In addition, we have yet to see P2P courier services scale, which means it is more likely to succeed among smaller e-commerce providers and individual sellers rather than big companies like Amazon or Alibaba, which manage their own logistics for better control over cost and supply.
Perhaps the best advantage that on-demand ridesharing companies have today is their ability to utilize data from trips, traffic and demand and translate these into usable decision-points when optimizing arrangements for on-demand courier services. At this point, network providers are able to tap into latent demand for same-day delivery, along with a growing market of drivers and riders willing to co-opt their vehicles for added income. The question now is how these services can scale beyond select cities and same-vicinity deliveries.