1. In-house logistics is increasing steadily, but 3PLs expected to dominate the mix

The exponential growth and adoption of eCommerce in SEA has given push to the growth of in-house or captive logistics arm of eCommerce players. The presence of eCommerce players across multiple countries in SEA has led to the flow of investments towards developing in-house logistics infrastructure. However, the share of in-house logistics continues to be much lower than markets like India where in-house logistics account for 75-80% of all shipments.

Growth in captive logistics share SEA, Bn Parcels

2. E-commerce market in the region is different from India and China’s, which is expected to drive dependence on 3PLs

The structure of SEA’s eCommerce market is different from China and India. In SEA, eCommerce market is dominated by marketplace model while in China and India the markets are dominated by the retail/B2C model where the platforms own the inventory.

This difference in operating model changes the value chain significantly. C2C heavy markets have a complex value chain with a wide network of drop-off points instead of few warehouses as is in the case of B2C models.Moreover, the need to expand across countries results in facing challenges associated with those countries.

This makes setting up logistics infrastructure capital intensive and difficult particularly for eCommerce players.

eCommerce Market Comparison, CY20, $ Bn

Key Logistics challenges across countries, CY20, $ Bn

3. Most 3 PLs are either concentrated in the first mile or the last mile, with substantial opportunity for downward and upward integration for better control over operations

The top 3PLs in SEA, can be bucketed under 5 key heads (i) New age last-mile players (ii) State-owned logistics players (iii) Legacy logistics players (iv) Legacy trucking players (v) New age etrucking players. We see that while new-age last-mile players and state-owned players are heavy on the last mile there is a sizeable opportunity for them to integrate backwards into the first mile. On the contrary, legacy trucking players and New age etrucking players are skewed towards the first mile with the opportunity for integrating downwards.It will be interesting to note, how these platforms move towards integrating the other parts of the logistics value chain to have better control over operations and ensure enhanced efficiency and profitability.

Mapping key 3PLs based on their focus

Note: While mapping players on their assets, motorcycle fleets have not been considered

4. Most 3 PLs are either concentrated in the first mile or the last mile, with substantial opportunity for downward and upward integration for better control over operations

The structural difference in the region’s eCom market and the limited potential of in-house logistics to scale across countries makes the region a fertile ground for 3PLs to prosper.However, it becomes important to focus on the right aspects to make the most out of the opportunity. Some of the key winning levers include:

• Offering deliveries in smaller cities and towns as they would be key in bringing the next phase of growth in eCommerce
• Geographic presence across multiple countries: With the introduction of new ACTS (ASEAN custom transit system) cross border logistics has become easy facilitating 3PLs to expand their presence and forge cross country partnerships. 
• Asset heavy presence will ensure 3PLs to ensure better control over operations and costs making them more efficient