But despite its massive growth, Indonesia’s digital economy is still considered a small eCommerce market among its ASEAN peers. But it has untapped potential. Due to its almost 20,000 islands, Indonesia requires innovative approaches integrating land and maritime transportation infrastructures for successful eCommerce distribution. Businesses that provide their services to consumers directly through eCommerce have much to gain from investing in the nation. 

The nation has a solid mobile phone culture, which is integral to eCommerce growth and offers unique mobile offers. Big eCommerce companies such as Shopee, Tokopedia, Lazada, and Bukalapak provide diverse products and services to cater to all customer needs. 

Modern technology has simplified logistics and completely changed the way people shop online. Thanks to payment methods and mobile connectivity advancements, a wider audience can now access eCommerce. The Indonesian government has also backed the eCommerce sector. Lawmakers are ensuring the industry has favorable policies and growth-promoting initiatives.

Entrepreneurs in this dynamic landscape must continually develop and optimize their enterprises to meet the market’s ever-changing demands. eCommerce logistics in Indonesia is poised to become a significant global player, with countless prospects for investment and collaboration for local and international players.

The State of eCommerce Logistics in Indonesia

Indonesia, a country of 273.5 million people, is home to one of Southeast Asia’s most promising e-commerce sectors. Growth is driven mainly by younger consumers, who now view online shopping as more practical and cost-effective. By allowing cashback payments, big and small cross-border eCommerce platforms in the country are becoming increasingly popular. With the largest digital economy in the region, comprising approximately 40% of the total market, Indonesia is home to start-up “unicorns.” Some of the most notable include Gojek (a ride-hailing service), Tokopedia and Bukalakpak ( eCommerce platforms), and OVO (a digital payment platform). All these companies and many more are at the forefront of the nation’s digitalization.  

_{Indonesia eCommerce Logistics Market Size & Share Analysis – Industry Research Report – Growth Trends (mordorintelligence.com)}

But while online markets grew, the COVID-19 pandemic exposed sobering realities that eCommerce logistics in Indonesia face. The cost of Indonesia’s logistics to the government is equivalent to 25% of its GDP. Its reputation for inefficiency has grown, particularly within its region. Its Logistics Performance Index ranks far lower than other Southeast Asian countries. The eCommerce business is fast-paced and dynamic, making accurate and dependable logistics even more essential to support it.    

For instance, the nation’s underdeveloped infrastructure acts as a physical barrier that keeps cars out of some areas, particularly rural ones. Logistical administration is slowed down by its outdated central management system. Online merchants need a lot of paperwork to complete one straightforward task.    

The good news is that the Indonesian government has taken great strides to improve its logistical foundations. 

National Logistics Ecosystem

The National Logistics Ecosystem (NLE), Indonesia’s logistics platform, was introduced in 2020 as an integrated platform that links and unifies the nation’s end-to-end logistics process flow.

There are four fundamental pillars of the NLE. The first is a simplified logistics platform collaboration. Next is ease of payment through a single billing scheme. Third, a simplification of business processes for both public and private services. Finally, the ability to allow spatial planning by implementing policies that promote efficient goods movement. 

The acceptance rate is still low, with less than 30 logistics companies participating. The main platform itself is still not connected to other service platforms. But lawmakers are constantly enhancing the NLE. This is reflected in the state budget for 2024, which will allocate Rp 422.7 trillion (around $27 billion) for infrastructure. Its goal is to expedite infrastructure development that drives economic growth, such as transportation, energy, food, and connectivity. Initiatives include supplying basic service infrastructure and strategic projects. It also promotes equitable and robust access to information and communication technologies (ICT) that facilitate digital transformation.

Special Economic Zones

In 2014, Indonesia’s government prioritized the establishment of special economic zones (SEZ) due to the success of its free trade zones. There are 19 SEZs as of 2022. Twelve of the 19 SEZs are in use, and the remaining seven are still under construction. Eleven (11) SEZs are used for manufacturing and processing, and eight are intended for tourism. Over the years, these SEZs have drawn over $8.5 billion in investments and employed over 70,000 people.

In the next ten years, Indonesia hopes to draw over US$50 billion in foreign investment through the SEZs.

The SEZs are intended to function as specialized primary industries and optimize the readily available local resources.  By creating these SEZs, the government intends to divert economic growth from the island of Java. Currently, the largest Indonesian island accounts for 60% of Indonesia’s GDP and 60% of its population. 

The Indonesian government has prepared numerous fiscal and non-fiscal incentives. Benefits for investors include simplified immigration procedures and lower corporate income taxes. It also includes exemptions from excise and import charges, among other measures.

Developmental Policy Loan Project

Reducing costs and increasing the reliability of Indonesia’s logistics chain are the development goals of the First Indonesia Logistics Reform Development Policy Loan (DPL) Project.

The program paper outlines a suggested DPL to assist the Government of the Republic of Indonesia in achieving its medium-term economic growth and poverty reduction objectives. This is to be achieved by enhancing the flow of products inside and outside the nation’s borders. 

Opportunities with eCommerce Logistics in Indonesia

Trade with overseas consumers, particularly those in China, accounts for a sizeable amount of Indonesia’s eCommerce income. Cross-border eCommerce presents new opportunities for Indonesian business owners. Crossing international boundaries gives you access to a larger consumer base and the chance to broaden your product line. Additionally, it allows Indonesian companies to sell their unique goods and cultural products in foreign markets.

Thanks to public and private sector efforts to digitalize the country’s economy, logistics operations have grown significantly since 2020.

_{Q1 2022: State of E-Commerce in Indonesia – Parcel Monitor}

Faster Local Delivery Times

Indonesia’s average domestic package transit time dropped from two days in Q1 2021 to 1.46 days in Q1 2022. That’s all thanks to numerous advancements in the nation’s logistics infrastructure. First and foremost, the nation’s road network has grown significantly during the past few years. Because of this, things are now moving around the nation faster and more effectively than ever. Given the ambitious plans the government has prepared to keep upgrading the country’s road infrastructure, this trend is expected to continue.

Healthy competition exists across state-owned and private enterprises in Indonesia’s logistics services sector. It is now even more critical for businesses to innovate and expand to provide a better customer experience and attract more customers. 

For example, in March 2022, DHL inaugurated a 40,000-square-meter warehouse in Java. Businesses now use web apps to locate accessible delivery drivers and transport equipment. This is just one of the creative solutions numerous local logistics delivery companies have implemented.

Increased Collection Point Usage

Collection points are locations set aside for individuals to pick up items they have ordered from online retailers. In actuality, collection points help avoid unsuccessful delivery attempts. Ordered goods can be left at a collection center where the customers who purchased them can pick them up anytime they’d like.

According to Parcel Monitor data, collection point usage in Indonesia grew from 1.90% in 2021 to 2.15% in 2022. Further investigation revealed that clients picked up 43.75% of these packages within the first 24 hours of being delivered to the collecting locations. This shows the adaptability and effectiveness of these locations.

There are several reasons behind this development. Most notably, Indonesia has seen a consistent increase in the quantity of warehouses and collecting centers. The most growth can be observed in the largest city in the nation, Jakarta. Many local businesses have expanded their warehouse operations, creating gathering places where customers can pick up their purchases. 

Logistics businesses with headquarters abroad can hire or lease some of these facilities. This also facilitates cross-border eCommerce in Indonesia. International online merchants can enjoy greater bandwidth without the need to establish local bases of operations.

Indonesia’s eCommerce business has expanded quickly, thanks to the country’s sizable population, rising middle class, and increased internet usage. Though eCommerce logistics in Indonesia has faced many challenges in the past, both the national government and local pioneers have stepped up. With sweeping reforms and a massive push for tech integration, more internal merchants can expand into the country. 

ZhenHub is your gateway to doing business in Indonesia. Our digital tools simplify eCommerce logistics in Indonesia. Upgrade your operations from inventory management to faster fulfillment by signing up at our website.

The eCommerce sector is gradually surpassing the traditional markets in Malaysia. Online purchases are fast becoming the norm among the younger generation, particularly teenagers. The global COVID-19 pandemic brought about an increased awareness of internet marketing. With a complex and dynamic eCommerce market, understanding the logistics in Malaysia is vital to online business success in the country.

Recent years have seen a significant evolution in the Malaysian logistics sector. Improved infrastructure for logistics, rising freight volumes, and structural expansions to accommodate eCommerce have contributed to its growth. Modern developments in the logistics industry have been fueled by a concentration on specialized markets like cold chain as well as the need to expand network and scale. More logistics providers have chosen to focus on eCommerce businesses.

There are many players in the current market landscape across the value chain. Market consolidation will lead to the emergence of two main categories of logistics providers. Companies that specialize in niche markets and large integrated logistics players that are capable of leveraging their scale and reach.

An Overview of the Logistics in Malaysia

To understand how logistics in Malaysia works, we must first look at the leading industry it supports, eCommerce. In 2004, eBay launched in Malaysia, marking the beginning of the growth of eCommerce in the country. Shopee, Lazada, and Zalora debuted their online shopping marketplaces within a few years. Shopee emerged as the eCommerce marketplace of Malaysia. 

Malaysia has emerged as a hub for online enterprises due to its rapidly expanding economy and infrastructure development.

For various reasons, Malaysia achieved one of the world’s quickest rates of eCommerce growth. From 2023 to 2027, the country’s eCommerce industry is expected to expand at a CAGR of 6%. Millions of internet users power Malaysia’s e-commerce economy. Malaysia had 32.07 million active internet users as of 2022. The number is expected to increase by 35.33 million by 2028, allowing businesses to grow online and meet consumer demand. 

_{Malaysia Freight And Logistics Market Size & Share Analysis – Industry Research Report – Growth Trends (mordorintelligence.com)}

Numerous government initiatives are also in place to assist foreign investors hoping to participate in Malaysia’s expanding eCommerce market. These same initiatives also benefit local companies looking to expand their online presence. 

But naturally, there are risks and obstacles associated with the eCommerce industry. eCommerce fraud and other cybercrimes have become commonplace with the surge in online traffic. The Malaysian government is attempting to combat these growing illicit activities to make the online shopping environment secure for users and businesses. 

Malaysia’s e-commerce businesses offer food and personal care items to electronics, fashion, and furnishings. Based on market share, the fashion industry leads Malaysian e-commerce with over 31% of the total eCommerce market. 

Malaysia offers more affordable manufacturing services compared to industry giants China and Singapore. This has prompted companies to move their manufacturing operations there. Because of the shift in manufacturing, firms also relocated their procurement and supply chain departments to Malaysia.

Many major international logistics firms decided to consolidate their supply chain and procurement support operations in Malaysia. Logistics companies such as DHL, Maerks, and Kuehne + Nagel increased efficiency, lowered employment expenses, and optimized company procedures. 

Malaysia’s logistics sector includes a broad range of operations related to transportation and warehousing. It also provides for the administration of commodities within regional supply chains. Being a peninsula, the country relies on several different modes of transport when it comes to freighting. 

With a total length of 290,099 kilometers, including 2,016 kilometers of expressways, Malaysia boasts a vast road network. The use of land freight dominates domestic logistics. The nation’s primary route stretches more than 800 km from Singapore to the Thailand border. Whereas East Malaysia’s road system is less developed, Peninsular Malaysia boasts a vast network of roads. Peninsular Malaysia’s primary means of transportation include passenger vehicles, buses, and trains.

Airports and seaports connect Malaysia to the rest of the world and, most importantly, its Asian neighbors. Malaysia’s inland ports are essential to the country’s freight transportation network.  These serve as the ports of entry for both importers and exporters. As a result, Malaysia’s logistics sector is growing and contributes 4-6% of the country’s GDP. The food and beverage, manufacturing, electronics, automotive, and pharmaceutical industries are significant revenue generators for Malaysia’s logistics industry. Among the principal inland ports are Nilai, Batu Pahat, and Ipoh.

To attract enterprises and promote economic progress, logistics in Malaysia has strategically developed industrial parks and free trade zones (FTZs) across the country. Online merchants can enjoy several advantages provided by these zones. Doing business in these special economic areas provides access to modern infrastructure, streamlined customs procedures, and tax breaks. 

One of the biggest container ports in the nation and a prominent free trade zone is Port Klang, located near the capital city of Kuala Lumpur. It offers companies a prime location and logistical benefits for global trade.

The growth of eCommerce has significantly impacted Malaysia’s logistics operations. Efficient last-mile delivery has become essential to satisfy online shoppers’ expectations. Regional logistics companies are continually modifying their operations to meet the unique requirements of online retailers. 

Businesses like J&T Express have used inventive last-mile delivery options, such as digital tracking systems and easily accessible pickup locations.

Four Key Trends of Logistics in Malaysia

International retailers and brands can find profitable commercial prospects in the Malaysian market. Most of the country’s well-known eCommerce sites are powered by foreign funding. It is a prime opportunity for international merchants to invest in Malaysia’s eCommerce industry due to the government’s strong support and the market’s rapid growth. 

Malaysia offers various product trends and prospects for online merchants of any scale. Malaysia’s economy and multicultural population are developing, making it an excellent place to grow your online business. 

1. Government Initiatives and Support

The National Logistics Master Plan, the Digital Free Trade Zone, and the Third Industrial Masterplan (IMP3) are flagship programs the Malaysian government has implemented to assist the freight and logistics sector. The country has prioritized the logistics industry to encourage industry growth. With the help of these initiatives, the logistics industry is expected to thrive as trade procedures are streamlined. Digitalization is encouraged, and infrastructure is improved. 

2. Adoption of Modern Technology and Techniques

Logistics in Malaysia has adopted many new technologies due to the growth of several industries. Consumer goods, electronics, food, and beverage, among others, have seen rapid modernization using cutting-edge technology and software. For example, cloud-based platforms allow for the seamless connection of crucial elements of the logistics supply chain. Different digital workflow solutions have helped Malaysia’s logistics industry grow. Logistics companies  can benefit from digital technologies like blockchain, artificial intelligence, and the Internet of Things (IoT). These technologies can increase operational effectiveness, optimize routes, and improve supply chain visibility.

3. Emerging Global Market Leader

The proximity of Malaysia to powerful economies like China and India offers substantial prospects for international trade. Creating economic corridors and free trade agreements has increased trade volumes, raising the need for effective logistics and freight solutions.

There is an increasing need for specialized logistics services catered to the particular needs of online retail. Companies must have comprehensive eCommerce logistics solutions, such as order fulfillment, reverse logistics, and warehousing, to become successful. 

_{Malaysia Freight Logistics Market Size & Share Report | 2031 (growthmarketreports.com)}

4. Push for Sustainability

In the freight and logistics sector, sustainable practices are becoming increasingly important. Malaysia is working to provide green logistics solutions because it understands the value of environmental sustainability. Logistics firms with a competitive edge in the market are those who use environmentally friendly procedures and provide carbon-neutral services.

A deep understanding of the local supply chain landscape, transportation infrastructure, eCommerce dynamics, regulatory compliance, and talent development are essential for navigating Malaysia’s logistics market. Online merchants can improve their logistics operations by identifying and applying best practices tailored to Malaysia. They’ll be able to satisfy client demands, and contribute to the country’s growth.

Success in Malaysia’s dynamic logistics sector requires ongoing education, keeping up to date with industry developments, and cultivating partnerships with reliable logistics partners. Malaysia boasts an advantageous location, robust infrastructure, and a growing eCommerce sector. Logistics in Malaysia offers eCommerce enterprises exciting prospects to succeed in a dynamic supply chain ecosystem.

ZhenHub gives you a clear path to expanding into the Malaysian eCommerce market. Logistics in Malaysia can be hassle-free with our vast network of fulfillment centers powered by cloud-based software systems. Sign up at our website and explore all our eCommerce logistics services. 

Japan is a highly developed nation with a digitally sophisticated population, a high credit card and smartphone penetration rate, and enormous spending power. Japan offers straightforward tax rules and easy-to-navigate trade restrictions.

Japan’s economy depends heavily on foreign trade. However, there are significant non-tariff trade barriers in place, particularly in the agriculture sector. Japan is the fifth-largest exporter and fourth-largest importer of products globally, with 37% of its GDP coming from international commerce. Japan is also the world’s second-largest exporter of automobiles, accounting for 18% of total exports. Top exports include machinery, electronic equipment, commodities, and optical and medical device components.

_{Doing business in Japan | Exports to Japan | Discover DHL}

Japan’s eCommerce growth of 10.29% (CAGR 2023-2027) is a little below the global average but is a respectable number for a developed nation. Online shopping is still growing in Japan, with total user penetration expected to hit 78.5% by the end of 2023. It is important to remember that Japan is the third largest economy in the world, right after the USA and China. So, while Japan has been a little slower to adopt online commerce, it is still a double-digit billion-dollar market.

A Crash Course in Shipping From Japan

You must understand a few fundamentals to send goods outside of Japan. There are forwarding and shipping businesses that can ship internationally from Japan, and each follows unique protocols. It can be challenging to figure out where to ship your goods and how to do it. Here’s what you need to consider and figure out when it comes to having Japanese items sent abroad.

_{How to send packages overseas Beginner’s Guide – Japan Post}

Parcel Services

There are several services available for use when shipping from Japan. These can be divided into two groups: private and public. The domestic mail service in Japan, known as “JP Post,” is considered a public service. It’s similar to government-backed shipping services like the United States Postal Service (USPS). Shipping through JP Post can be more affordable, but it’s limited to what products you can send over and the total weight. This option is better for sending over small packages such as souvenirs or items for personal use.

Private shipping firms cover a broader range of shipping enterprises that provide international shipping services. Among the most well-known businesses are Sagawa Express, DHL, FedEx, and Yamato Transport (formerly Kuroneko Yamato International Ta-Q-Bin). Compared to governmental services, these companies typically charge more and offer more specialized services. This is the preferred method when shipping delicate items or oversized products such as appliances and furniture.

Modes of Transportation

Japan is an archipelago, so there are only two ways to get items into and out of the country: airfreight and ocean freight. 

The most popular shipping option chosen by importers is ocean freight. It allows the transport of small and large shipments for a lower price compared to airfreight. Shipping costs can even be optimized by choosing the appropriate type of container. Full Container Load (FCL) is used when shipping larger and heavier shipments that can fill up a 20’DV or 40’DV container. Less Than Container Load (LCL) is used for smaller shipments that would not fill up a whole container.

Online merchants must consider lead times when shipping through the sea. Ocean freight is the slowest shipping option available when importing from Japan. On average, Japanese shipments arrive on the US West Coast in 15-20 days. Ships dock at ports located on the East Coast in 25-30 days.

Some of the most important ports in Japan include Nagoya Aichi, Chiba,  Yokohama, and Tokyo. These locations have easy access to the capital city.

Air freight is more expensive to send items from Japan to anywhere else. Because of the increase in cost, it is a less common choice than ocean freight. Due to fuel considerations, oversized shipments cannot be delivered via air freight. Airports provide more security steps, so it’s better to ship smaller, more valuable products via air freight.

The travel times that air freight provides, however, constitute a significant advantage. Orders shipped via cargo airlines can be delivered within two to four business days. This makes it a significantly faster shipping method than ocean freight. Like ordinary air freight, using express shipment reduces transit time by eliminating the need for convoluted paperwork. Major airports in Japan include Narita and Haneda, located in Tokyo, and the Kansai International Airport in Osaka.

Legal Requirements and Import Taxes

When sending a package abroad, you must submit the recipient’s and sender’s details and any other pertinent information through customs. It can be achieved in different ways. An EAD (Electronic Advance Data) must be completed before sending via JP Post. Essentially, this is an electronic sending label you can print and attach. Handwritten ones are no longer accepted in some countries. If you choose to work with a private freight company, you might have to handwrite the label in English or the language of the country of destination. You may also have the option to fill these details up digitally. 

You will need an import declaration form, which includes all the details about the goods you are shipping from Japan. Other important documents include:

• Shipping invoice
• Bill of Lading
• Certificate of Origin
• All licenses and certificates required by your state of origin
• Customs duty payment slip

For low-value freight (priced at less than ¥200,000 or around $1,337 at ¥150/$1), such as small packages, Japan has a streamlined tariff system that makes determining tariff rates easier. This technique reduces customs broker fees and eliminates the need to classify the goods and assess their value precisely. Importers can choose between the basic tariff and the standard rate, which varies based on the goods. You may get the complete details on the Japan Customs website.  

Tariff classification and duty rate judgments can be obtained in advance from Japan Customs. Japan and its partner nations have many foreign trade agreements (FTAs). As a result, numerous tariff reductions are available to importers, allowing more commodities to be imported with reduced charges. However, aside from your state’s sales tax, importers must pay customs duty on any orders over the duty-free level.

Making the Most of Shipping From Japan 

Japan has a rich and diverse culture, a strong tradition of craftsmanship, and a reputation for quality and innovation. There is a massive demand for products from Japan in the global market. That’s especially true if you sell anime merchandise, electronics, cosmetics, or fashion. If you do plan to import Japanese products, here are some tips and best practices to ensure you make the most of this lucrative opportunity.

Be Familiar With the Prohibited Products

While there are many items from Japan that you can import, certain goods are restricted for safety and health concerns. Illegal substances, firearms, and counterfeit products are prohibited from import. Some consumer goods that are restricted for air freight include alcoholic beverages with more than 24% alcohol level, hair dyes, nail polish, lithium batteries, and flammable substances. These items pose a safety risk when subject to air cabin pressure.

Compare Freight Services for the Best Price

Compare different carrier rates for various modes of transportation. Understand what product you plan on shipping from Japan, and then decide whether you want to go private or public. If you need those products sooner, consider express air freight (which is more expensive). Buying in bulk and sending them through sea freight is a more cost-efficient option. But you’ll need to plan the delivery schedules thoroughly to receive them in an acceptable time frame. 

Shipping from Japan can be a rewarding and profitable venture for online merchants who want to tap into a large and diverse market. As the online global market is growing rapidly, bringing Japan’s products closer to the world is an exciting opportunity. Take advantage of competitive shipping rates and reliable delivery services from both public and private freighting companies. With careful planning and compliance with various rules and regulations, you can ensure a smooth and successful shipping experience. 

ZhenHub is your global partner in eCommerce expansion to new markets. Scale your business with cutting-edge tech integrations that help manage your shipping and logistics services. Shipping from Japan is easier when you sign up at our website for free.

Indonesia’s digital economy is an excellent opportunity for online shopping. With almost 20,000 islands, Indonesian eCommerce distribution necessitates specialized methods integrating marine and land transportation infrastructures. Businesses that provide consumer products and services have much to gain from investing in the nation. 

Indonesia is a promising eCommerce industry in Asia-Pacific, with several regional and international businesses vying for market share. eCommerce growth has been fueled by increased internet usage, rising digitization, and the proliferation of websites.

Future eCommerce growth in Indonesia is predicted to be in the high double digits. The 260 million+ Indonesian population will drive eCommerce growth, drawing millions of new online buyers every year. However, their online marketplaces are less developed than eCommerce in Thailand or Singapore. With a nearly 75.47% internet penetration rate in 2022, Indonesia has one of the highest rates in Asia.

^{Data Source: https://finance.yahoo.com/}

Indonesia’s logistics sector has been booming in the past few years but is also marked by extreme inefficiency. This is evidenced by the high cost-to-GDP ratio of more than 23% since 2015. Intending to be the fifth to seventh-largest economy in the world by 2045, Indonesia has begun to emphasize improving the efficiency of the logistics and supply chain sector. The nation has already taken steps to reduce logistics and supply chain expenses to 17% by 2024. One of their major initiatives was creating a national logistics platform and a marine toll program.

Current Challenges of Logistics in Indonesia

Indonesia improved its Logistics Performance Index rating in less than ten years by strengthening its logistics and supply chain infrastructure, particularly roads and highways. These developments have allowed it to move up 29 ranks from 75th in 2010 to 46th in 2018. However, Indonesia’s performance still needs to catch up to other nations due to subpar logistics and supply chain services and many underlying problems. Thus, Indonesia must develop a mature logistics and supply chain industry with effective and affordable services.

The Indonesian government has actively worked on improving this, and they have made noteworthy improvements. President Joko Widodo has launched a big infrastructure campaign since taking office in 2014, investing as much as $450 billion in urgent infrastructure improvements. In addition to other infrastructure improvements, this has led to the construction of over 3,382 km of new highways, 782 km of new toll roads, 19 km of new seaports, and 10 km of new airports.

This improvement, nevertheless, has slowed. According to the most current World Bank evaluation of logistics in Indonesia, highlighted by the Ease of Doing Business Index, the country showed minor gains, rising to a score of 69.6 in 2020 from 68.2 in 2019. 

The logistics industry in Indonesia is fragmented despite having one of the largest eCommerce markets in the world. The logistics industry must embrace digitalization if it hopes to maintain its expansion. Indonesia is an archipelago with thousands of islands. Projections are optimistic as the Indonesian freight and logistics market is projected to grow at a Compound Annual Growth Rate (CAGR) of 10.27%.

An Expensive and Inefficient Supply Chain

There are many different obstacles that logistics service providers must overcome, particularly in the area of last-mile delivery. Due to strict timetables, conventional shipments, for example, take longer to arrive. On-demand services may deliver more quickly but at a higher cost and over shorter distances.

Indonesia’s logistics cost-to-GDP ratio is three times higher than in five benchmark countries (Germany, Japan, Singapore, South Korea, and China). This is the result of underutilized transportation capacity and lengthy domestic delivery times. Additionally, Indonesia needs clear information about the state of the market to plan supply and demand to maximize utilization effectively. 

Shipping is also notably more expensive in Indonesia compared to its neighboring countries in Southeast Asia. An outbound load can be three times more costly than an inbound load, which illustrates inefficient capacity usage. Additionally, logistical difficulties result in subpar operations and two to three times longer domestic delivery times than in competitor countries.

The country’s inadequate ports, trains, and roadways present a significant problem for the logistics sector as it takes a long time to deliver commodities. Only Java and Sumatra have access to commercial train operations. Inter-island connectivity faces significant challenges due to the unreliability of domestic shipping caused by underperforming ports. There are also considerable ship backhaul issues, intricate supply chains, and delivery delays.

Lack of Support

Logistics in Indonesia and its supply chain ecosystem perform below expectations due to an extremely fragmented industry and insufficient technological adoption. Suppliers need more capabilities in technology and funding to deliver high-quality goods and services. Inland modal and warehouse managers are widely dispersed and need access to digital technology. Local trucking companies lack the technology and skills to automate their processes. They also do manual recording of delivery logs. 

Customs procedures in Indonesia take nearly a day longer compared to China, Singapore, and Malaysia. Many logistics providers operate in a subpar environment without the assistance of effective administrative processes for exports or imports. Due to physical and technological infrastructure issues, Indonesia’s logistics and supply chain ecosystem isn’t as efficient as other countries.

The nation’s progress toward a better national logistics and supply chain is being delayed by these underlying problems, causing a vicious loop. Digital solutions are being used by nations worldwide to rebuild their supply chains and logistics industries. In this industry, digitalization has the potential to significantly enhance operations and provide the ecosystem with the necessary capabilities.

The Future of Logistics in Indonesia

The country is home to many Southeast Asian eCommerce juggernauts, including Tokopedia, Lazada, Shopee Indonesia, and BukaLapak. As the market expands, so will the volume of goods stored in warehouses. The country’s internet penetration rate is rising at the same time. Many foreign investors are investing in the eCommerce logistics industry due to the prospects in the Indonesian eCommerce market. Investors know money is to be made and are already making moves to reap the benefits.

_{Data Source: https://www.mordorintelligence.com/}

All logistics players must adopt advanced technologies if Indonesia’s logistics industry is to be digitized. Although many participants in Indonesia’s logistics ecosystem have begun to use technology, it still needs to be improved. For instance, the quality of port operations is still largely dependent on manual labor. Last-mile services such as storage and in-land distribution still use outdated infrastructure. Looking at the success tales of benchmark nations, Indonesia will need to speed up the adoption of cutting-edge technologies. Service providers can study and compare the digital logistics solutions being used in Singapore, Vietnam, and Thailand. The government is already working with local start-ups that offer training and software to logistics providers. Better tools lead to higher-quality services, reduced national logistics costs, and more market competitiveness.

The essential building block for powering e-logistics is a national logistics platform. Opening the digital infrastructure will improve logistics and supply chain services and offer greater nationwide access with an integrated platform. The National Logistics Ecosystem (NLE) is an integrated platform that connects and streamlines Indonesia’s end-to-end logistics process. It was first introduced as the nation’s logistics platform in 2020. The adoption rate is still quite low, with less than 30 organizations now working together. The NLE platform is still not connected to other service platforms but presents a strong foundation for digitized logistics.

Indonesia’s Industrial Revolution (IR)4.0 national road map wants to implement a modern logistics and supply chain across the country by building a “smart logistics” plan. But implementation has slowed because the government has mostly focused on projects involving physical infrastructure. The project is one of the most critical upgrades for Indonesia’s logistics and supply chain sector. It will serve as a crucial foundation for the digital industry to enable the growth of logistics companies that will provide significant benefits and value. Logistics providers will be able to improve their services by adopting digital solutions. More advanced logistics and supply chain technologies are easier to adopt with a minimum standard for technology across the nation.

With the country’s favorable demographics and the enormous growth of the retail and eCommerce sectors, logistics in Indonesia are expected to continue to grow rapidly.  

When the local government’s efforts to strengthen the nation’s logistics infrastructure are complete, it may significantly help the industry and the nation’s economy expand even more.  

ZhenHub is your gateway to the Indonesian eCommerce market. Overcome logistics challenges with our eCommerce solutions, such as trackable shipping services and inventory management. Sign up at our website and get instant access to our online dashboard.

Vietnam is a good source of supply chain diversification because of its reduced labor prices, proximity to China’s manufacturing center, trained workforce, and technological improvements.

Vietnam’s government is concentrating on opening, deregulating, and privatizing the country’s economy to spur growth. These initiatives are all part of a multi-decade economic reform. As part of this economic upheaval, the Vietnam supply chain has streamlined its legal and administrative procedures to foster an environment favorable for foreign investment. Vietnam received US$27.2 billion in inbound foreign direct investment (FDI) in 2022. 

A young and relatively low-wage workforce has greatly aided Vietnam’s appeal as a location for FDI. It also helps the country have continuous economic reforms, an expanding middle class, and political stability.  

But the lack of a strong infrastructure, inconsistent agency interpretation and regulations, and insufficient protection of intellectual property rights hound it. Foreign investment into the nation has recently encountered a capacity challenge. This is because Vietnam lacks the personnel and facilities necessary to absorb the volume of FDI intended for its borders. Regarding economic complexity, Vietnam is presently ranked 58th out of 131 economies as of 2021. 

The Current State of the Vietnam Supply Chain

Due to its many advantages, Vietnam is one of the countries that stands to gain the most from the ongoing manufacturing exodus from China. The world’s largest manufacturer – China – is strategically close to Vietnam. Second, labor costs in Vietnam are competitive and low compared to most other Southeast Asian nations. These costs range from one-third to one-half of those in China. Vietnam also has a large labor pool. As a result, much of the world’s production has moved from China to Vietnam.

Vietnam allocated about 6% of its GDP on infrastructure, compared to the other ASEAN countries’ average of 2.3%. Due to this considerable disparity, Vietnam is now the ASEAN nation with the highest infrastructure spending. Despite how encouraging that may sound, there is still a disconnect between Vietnam’s infrastructure and its desire for a rapidly expanding economy.

_{Image Source: https://www.sourceofasia.com/}

According to the Global Infrastructure Hub, Vietnam’s infrastructure needs US$25–30 billion annually to support economic growth. However, only $15–18 billion (7% of GDP) can be accommodated in the national budget.

Therefore, it is necessary to raise the last US$ 10-15 billion from private investors. Vietnam’s infrastructure is anticipated to grow by about 4% annually between 2022 and 2027.

Manufacturing is heavily concentrated in three main economic areas: North, Central, and Southern Vietnam. These regions are more developed and have seen more infrastructure, logistics, and facilities expenditures. In addition, the availability of labor and particular financial incentives are crucial. 

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North Vietnam

One or more low-cost markets like Vietnam supplement existing manufacturing in China. The Northern Key Economic Region of Vietnam is well-positioned as a hub for these activities. Many businesses have invested there to benefit from Northern Vietnam’s lower labor costs while staying close to Chinese suppliers.

The Northern Key Economic Region is dominated by heavy manufacturing, partly due to China Plus One expansion initiatives. Investors in large industries, like the automotive industry, take advantage of the infrastructure and talent concentration. It’s also important to note that electronics production is largely concentrated in the North, notably in the Red River Delta region.

Southern Vietnam

The Southern Key Economic Zone features a wider range of industries and services than the Northern Key Economic Zone and greater economic diversification. Thus, businesses in more specialized or niche sectors will find that the South provides a more favorable investment environment. Small and medium-sized enterprises (SMEs) benefit from this, as Ho Chi Minh City is a hotspot for startups and IT entrepreneurs.

Central Vietnam

The main industries in the Central Vietnam area are textile, building, paper, and forest goods. Other industries, such as shipbuilding, logistics, and other high-tech sectors, are expected to grow rapidly.

The Central Key Economic Zone receives a steady supply of trained labor from Da Nang, the region’s economic center. It also provides high-quality industries for rent in prominent locations. Da Nang has more advanced urban planning and development than many other Vietnamese cities,  benefiting industrial manufacturing. As a result, various investors in the area will likely receive compounding benefits with their investments.

The Vietnam Supply Chain: eCommerce Opportunities 

Vietnam enjoys several advantageous bilateral and regional free trade agreements (FTAs). The EU-Vietnam FTA, the UK-Vietnam FTA, the Regional Comprehensive Economic Partnership (RCEP), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are some of the FTAs that make it easy to do business in Vietnam. The Vietnamese government and authorities actively promote the industrial industry through various incentives. Local leaders have pushed for tax cuts or exemptions as well as streamlined paperwork and processes.

These benefits have helped Vietnam gain ground as a viable manufacturing hub and sourcing market, particularly in Asia.

Infrastructure Transformation

In April 2021, the Vietnamese Ministry of Transport unveiled its master plan for the nation’s transportation system. Between now and 2030, its expected costs range from USD 43 billion to USD 65 billion.  The state intends to catch up to nearby economic powers to provide the necessary infrastructure and sustain the economy’s rapid expansion. As part of the master plan, Vietnam will build tens of thousands of kilometers of new expressways, high-speed rail lines, deepwater ports, and international airports. Vietnam’s development strategy is modeled after high-income countries like Singapore, Taiwan, and South Korea.

These moves will make it easier for businesses to transport their goods across the Vietnam supply chain easily.

The Rise of Vietnamese Logistics

In December 2022, The Vietnam government signed Resolution No.163/NQ-CP to “promote the synchronous implementation of key to enhance competitiveness and boost the logistics industry in the country.”

Government officials will integrate the growth of goods production, import-export, and domestic trade with expanding the national transportation infrastructure. The result is a high-value logistics sector. 

Expanding the market for logistics services while enhancing the competitiveness of logistics service businesses will lead to a stronger local economy and increased foreign investment. Additionally, the resolution will use Vietnam’s geographic advantages by enhancing connectivity. Improving logistics with sustainable supply chains will transform Vietnam into a major logistics hub in the area. Emphasis will be placed on fostering digital transformation and technology application, as well as improving human resources skills.

Booming eCommerce

The eCommerce sector in Vietnam reached a value of $16 billion in 2022 and might rise to $32 billion by 2025. According to Google’s e-Conomy SEA 2022 report, Vietnam will be one of the top three nations luring the most investment into the eCommerce industry. Vietnam’s local eCommerce marketplaces, such as Tiki, Lazada, and Sendo, are backed by financial giants such as AIA Insurance Inc, SBI Holdings, and Alibaba.

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The “eCommerce in 2022” report from the Ministry of Industry and Trade (MoIT) predicts that the average value of online purchases will also rise. This year, it’s expected to increase to US$260–285 per person. A young population, high internet usage, and rising incomes are the causes of this.

The majority of the Vietnamese population is under 40 and extremely tech-savvy. These early adopters of digital technology have contributed to a shift in consumer behavior in Vietnam. By 2023, it’s predicted that Gen Z will make up 40% of the country’s consumption.

Additionally pushing the boundaries of eCommerce, young customers are discovering new online buying options. For instance, Facebook Pages have become a significant customer source for Vietnamese businesses.

This is supported by a digital banking infrastructure that enables free, real-time money transfers and deposits. With all these factors, Vietnam’s eCommerce industry is projected to match traditional retail’s market size by 2025.

Due to the relatively well-developed infrastructure, the availability of labor, financial incentives, and the assistance of the government, the majority of Vietnam’s manufacturing is concentrated in key economic zones.

Although there is still much room for improvement in Vietnam’s infrastructure, the benefits are clear. This is especially true given that the Vietnamese government has recently invested more actively in the nation’s infrastructure than its Asian neighbors. This results in a significant anticipated expansion in the infrastructure sector for years, which is great news for the Vietnam supply chain industry.

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By 2023, eCommerce sales are expected to account for 10% of all retail sales in Thailand, according to Statista data. This is notable, especially given Thai’s preference for offline shopping. Thailand’s eCommerce industry is also expected to grow at a CAGR of 11.93% (2023-2027), resulting in a projected market value of US$32.81bn.

eCommerce will undoubtedly be one of Thailand’s best industries in 2023 in terms of consumer acquisition and return on investment.

Internet shopping is becoming increasingly popular among consumers compared to traditional retail. Thailand’s society is becoming increasingly dependent on the Internet. Its usage will grow, especially as new technologies emerge and new ways are used to deliver to customers.

Increased internet, mobile phone use, enhanced logistics, and e-payment systems give consumers the confidence to shop online.

The Thai government has committed to online expansion through its “Thailand 4.0” policy. National leaders and lawmakers have set aside a budget to build a nationwide broadband network for every town and city. This nationwide broadband network will support modern economic development by fostering eCommerce and bridging the digital gap. 

Their government plans to develop new digital application platforms to support and improve online operations, including e-government, e-payments, and the e-marketplace. The ultimate objective is for the locals to begin operating eCommerce enterprises for their goods and services. Government support is expected to boost the widespread adoption of digital wallets to coincide with rising smartphone usage. 

A Quick Look at Thailand eCommerce Consumers

Thailand is Southeast Asia’s second-largest digital economy, after Indonesia, and ahead of the Philippines. Online travel and media are only second to eCommerce in the nation’s thriving online retail business. The largest forces behind Thailand’s eCommerce businesses are e-transportation and food delivery. According to reports, there are about 43.5 million potential consumers in Thailand’s e-commerce market, with a gross merchandise value (GMV) of $19bn.

Thai consumers can be classified into three groups based on their shopping habits: ages 51 to 71, ages 37 to 50, and those aged 17 to 36. eCommerce participation rates for the first section are 5.39%, the second segment is 32.69%, and the third sector is 61.92%.

Those from 17 to 36-year-old consumers are often seen as the best target market for online businesses. In addition to spending the greatest time on any eCommerce site, they also have the highest expectations of these companies. 

Online shoppers from Thailand have expressed satisfaction with the online marketplace. A report said that 71% of the population uses these platforms twice a month, raising the website or app engagement and retention rates. Thai consumers’ ability to make purchases online is steadily growing. There is no better time for online merchants to explore expanding their businesses into Thailand. 

Many international eCommerce platforms have been drawn to Thailand’s growing online shopping scene. Business owners start online stores in several marketplaces to meet local customer demands. 

Lazada

Lazada is a well-known eCommerce platform globally, as it presents every category on its application and website. It features electronics, fashion & lifestyle, health & beauty, groceries, toys, automobiles, etc. Lazada covers almost everything a customer would want, thus, making it one of the best marketplaces for Thais. 

Shopee

A Singaporean multinational company has established a strong foothold in Thailand. It is among the top marketplaces in the country. It encompasses a variety of lifestyle categories, such as apparel, electronics, and others. Additionally, it offers the convenient option of doorstep grocery delivery. 

Jib

This online platform exclusively sells tech products. This includes IT products, personal computers, laptops, and gaming accessories. Jib provides customers with an appealing selection of electronics at reasonable prices. This marketplace targets tech-savvy consumers who want to purchase new goods and equipment online. While Shopee and Lazada are accessible in several Southeast Asian nations, practically all of Jib’s revenue comes from the Thai market.

HomePro

HomePro is a local marketplace that, as the name suggests, focuses on selling home products. On their website, you can find everything from toilets, refrigerators, shower handles, and doorknobs. Examples of well-known brands sold on the website include LG, Samsung, Electrolux, Hitachi, and Xiaomi.

Kaidee

The biggest classifieds site in Thailand was launched in 2011. Platform users can purchase and sell various products and services, including cars, houses, electronics, apparel, and more. Kaidee facilitates transactions by bringing together buyers and sellers in nearby communities Kaidee is one the top-rated marketplace for buyers and sellers in Thailand for real estate, cars, and other goods and services. 

Note that the website is only available in Thai and offers no cross-border sales.

Rising Trends for Thailand eCommerce

At the height of the COVID-19 pandemic in 2020, Thailand’s online retail growth experienced phenomenal growth. That year, the nation had the largest percentage of new users participating in the digital economy. And 58% of families were grocery shopping online.

Online product browsing time is increasing among consumers. Time spent browsing products on eCommerce and social commerce platforms in 2022 is around 1-3 hours. The largest market and source of 48.6% of Thai eCommerce sales is Food & Personal Care. Other notable segments include:

• Furniture & Appliances at 7.2%
• Electronics & Media at 27.0%
• Fashion at 8.8%
• Toys, Hobby & DIY at 8.5%
• Fashion at 8.8%.

Due to the increase in foreign interest in Thailand’s eCommerce sector, local businesses are investing more in online commerce, fintech, and artificial intelligence (AI). As a result, more collaborative relationships between physical wholesale enterprises and online businesses emerged.

Digital Financial Services

Despite eCommerce gains, Thailand is still very much a cash-based country. However, online payment methods are now becoming widely used. Fifty-five percent (55%) of Thai consumers use credit cards as payment for online purchases. The convenience of doing so has significantly fueled the rise of online shopping in Thailand. Other payment options are also gaining popularity because of the widespread use of smartphones. Digital wallets like TrueMoney, PromptPay, and Rabbit-LINE Pay have grown in popularity over the past two years.

Specialized Marketplaces

Vertical and horizontal markets are vying for market dominance in Thailand, where the terrain changes quickly. Incumbent marketplaces, which comprise 51% of the Thai eCommerce business, are currently valued at 770 billion baht or $22.18 billion.

Thailand’s e-commerce is moving toward vertical category-specific markets that meet specific consumer demands, following international trends. Some local examples are Pomelo for clothing and Konvy for cosmetics. With a focus on delivering groceries and meals in under an hour, quick commerce is another vertical marketplace growing quickly.

Soon, more vertical business-to-consumer markets should quickly appear, opening up opportunities for handicrafts, luxury goods, pets, and even vehicles.

AI Integration

More online merchants are engaging in and implementing AI across all facets of their retail and eCommerce operations. Eighty-four percent (84%)of e-commerce companies are either actively working on integrating AI solutions or have it as a high priority.

A focused marketing strategy that uses deep personalization based on client interactions is one advantage that comes with integrating AI into eCommerce operations. AI systems can accurately meet customer demand by analyzing large data, thus increasing retention rates and sales.

A more effective and seamless sales process can be achieved by automating customer assistance, discount choices, invoicing, and email marketing.

Using customer data insights can help improve the efficiency of the sales process.

The adoption of AI tools reduces operating expenses and boosts productivity by lightening the workload of employees.

What You Need to Know Before Getting into Thailand eCommerce

Starting an online business is simple, but it takes much effort to succeed. Along with creating the company, you must also complete some legal documents & requirements before you start selling in Thailand.

You need legal permission documents for your business before selling online. These include an eCommerce license and registration under the Office of the Consumer Protection Board (OCPB). This safeguards the consumer’s rights as it considers your eCommerce company as a registered one, fit for direct sales. Foreign businesses must also acquire a Foreign Business License (FBL) or Foreign Business Certificate (FBC) from the Department of Business Development (DBD). 

As a legally licensed online merchant in Thailand, your business will be subject to product liability, data protection, and customer protection laws. You will also need to be current on any regulations regarding payment solutions and foreign exchange. 

Every Thai corporation is legally required to have a Thai shareholder holding 51% of the company’s shares or one of the owners listed in the Foreign Business Act of 1999. However, a foreigner can launch an online store in Thailand with a Board of Investments (BOI) company license. With this BOI company license, you can benefit from tax and non-tax advantages and full control of the business.

The growth of Thailand’s eCommerce isn’t slowing down. Online retailers can play a more significant role as consumers continue to engage in the digital economy. By bringing a seamless online shopping experience to the locals, you can reap the benefits of one of the largest eCommerce markets in Southeast Asia. 

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Online platforms are becoming the most popular method for distributing goods and services. Due to the increased demand for online retailers, more people choose digital shopping experiences. Customers in Thailand choose eCommerce because of lower online prices, a wide selection of goods, free delivery, and excellent customer service. 

Understanding the ins and outs of shipping to Thailand is a great jump-off point to expanding your business to the region.

Thais have demonstrated an unprecedented interest in internet shopping after the COVID-19 pandemic. According to a 2022 survey, over 54 million people in Thailand, mostly between 16 and 64, are Internet users. eCommerce businesses are eager to establish themselves in Thailand since they have a vast customer base.

JP Morgan claims that rising domestic eCommerce vendors will significantly increase sales volume. The Thai eCommerce market is composed of roughly 30% cross-border transactions.  Nearly 50% of online buyers have already made an international transaction.

The top five e-commerce websites currently are Shopee, Lazada, Kaidee, AliExpress, and Amazon, all of which are seller platforms with cutting-edge shipping and logistics systems.

The Basics of Shipping to Thailand

To get to Thailand, you’ll need a logistics service that can reliably and quickly deliver your goods to Thai customers. Look for partners who know what you can and cannot transport into the country and how to get paid for your goods. Although shipping partners’ experiences may differ, it always pays well to research and communicate your needs properly.

Cargo delivery involves several steps in cross-border shipping. That includes the first mile, customs clearance in the country of origin, air freight, customs clearance in the land of destination, distribution, and final mile delivery.

For example, your merchandise could be transported by truck from an Indonesian supplier’s warehouse to Jakarta’s Soekarno-Hatta Airport (CGK). After clearing customs, it takes air freight to travel to Bangkok’s Suvarnabhumi Airport (BKK). The final delivery is then made to the customer’s address using a vehicle or motorcycle.

Different shipping partners are more efficient in specific supply chain segments. While some businesses solely focus on a single delivery stage, others offer end-to-end fulfillment services that cover every step. Find a shipping partner that can best meet your eCommerce logistics requirements. 

It’s a good idea to take your delivery deadline, the shipping partner’s areas of expertise, and the mode of transportation into account when choosing a shipping partner. Here are the three main ways that global goods are transported into Thailand.

1. Air Freight

Due to its quick and dependable deliveries, air freight is the preferred means of transportation for many online retailers when shipping to Thailand. Bangkok Airport, often known as Suvarnabhumi Airport, and Don Mueang Airport are Thailand’s two main airports.

2. Sea Freight

Sea freight is much slower than air freight but also significantly cheaper. Be aware of any lead times when transporting your items by sea. Bangkok Modern Terminal (THBKK), Laem Chabang (THLCH), Map Ta Phut (THMAT), and Sattahip Commercial Port (THSAT) are Thailand’s principal ports.

3. Cross-Border Trucking

Road transportation accounts for a sizable share of freight transportation in Thailand due to its advantageous location in the Greater Mekong Subregion. Roads in Thailand are well-developed and connect up to 98.5% of the population. They serve as a crucial last-mile transportation route, especially for many Thai eCommerce clients in Greater Bangkok.

You might consider road freight as a fulfillment option if your supply sources are closer to Thailand, such as Southern China or Malaysia. Trucks are more affordable than air freight for shorter distances, and goods reach Thailand. When choosing your road transport partner, consider their geographic coverage of Thailand and the costs of transporting your clients.

Shipping to Thailand: Customs Clearance, Import Duties, and Tax

The Thai government introduced its “Thailand 4.0” economic model to reorient and improve the nation’s economy from production to knowledge- and service-based. Thailand wants to lead South East Asia’s digital hubs within the next ten years.

Before approving products for import, Thailand’s customs demand significant documentation. For this, most carriers work with regional customs brokers familiar with the established practices and necessary documentation formats. 

For you to be able to start shipping to Thailand and bringing your products into the country, you’ll need to provide the following documents to the concerned agencies:

• Import Declaration
• Commercial & Pro forma invoice 
• Packing List
• Airway bill or Bill of Lading, if needed

The Thai Ministry of Commerce has authority over some products, and those goods are subject to various standards and regulations. For instance, to simplify their clearing through customs, some commodities require additional paperwork, such as a permit and/or import license from organizations like the Thai Food and Drug Administration.

You’ll need to be aware of the import laws before shipping to Thailand. A quick look at Thailand’s restricted and prohibited items reveals the following:

Restricted Goods

• Fresh Food
• Hazardous Goods
• Firearms and Weapons
• Medicine
• Explosives
• Cosmetics

Prohibited Items

• Drugs
• Questionable Publications
• Fake Currency
• Counterfeit Goods

Imported goods may be held in a customs-bonded warehouse for up to 45 days without submitting an import entry and 60 days with the request of an import entry. Customs duties are due upon the vessel’s arrival carrying the imported goods.  Before the goods are released, all landing and storage fees must be paid.

The cost, insurance, and freight (CIF) method is employed in Thailand to determine import duties and taxes. This is based on the imported products’ value and related shipping expenses.

Customs law violations typically result in the recovery of back taxes and fines. The most severe offenses include smuggling and evading customs duties. Other common offenses are failing to follow customs procedures and making false claims. The applicable Customs Act clauses specify the statutory penalties.  

Depending on the duty shortfall stated in the import entry, a duty evasion offense is usually resolved with a punishment ranging from 50 to 200 percent.  A value-added tax (VAT) fine will also be assessed based on the duty fine. 

In addition, import taxes will be assessed depending on the Harmonized System Code‘s classification of the items. You can use the search feature on the Thai Customs website to find out how much import duty will be applied to your items. Typically, depending on the type of goods being sent, they impose an import duty of between 5 and 30 percent.

On the other hand, there is a VAT exemption for online purchases made from merchants outside Thailand and delivered to Thailand that cost less than 1,500 Baht (about US$45). For online purchases of goods costing more than 1,500 Baht, the VAT is currently set at 7%.

Import Duty Product Categories

Depending on which is higher, duties are assessed on a specific or ad valorem basis. The applied ad valorem taxes range from 0% to 80%. According to the Customs Tariff Decree, certain commodities are eligible for exemptions from import taxes.  Preferential duty rates are available on imported goods from nations with which Thailand has a preferential free trade agreement (FTA). 

These include the member states of the Association of Southeast Asian Nations (ASEAN). Other countries also enjoy preferential trade agreements when shipping to Thailand. They are Australia, New Zealand, Chile, India, Japan, Peru, China, Hong Kong, India, Japan, and South Korea.

For your reference, here are the applicable import duties for the various goods that can be brought into Thailand.

Importing your goods and shipping them to Thailand can be complicated and intimidating. That’s why it’s a great idea to work with a third-party logistics (3PL) partner that knows the in-and-outs for moving goods into and around Thailand. 

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The Philippine eCommerce sector has experienced tremendous growth, particularly in the last five years. Its use exploded in 2020 as a result of the COVID-19 pandemic. By 2025, its burgeoning expansion is anticipated to increase by a factor of four, reaching $12 billion. Regarding all sources of GDP contribution, the digital economy grew by nearly 55% in 2020. In 2022, the Filipino eCommerce sector outperformed India, Argentina, and Australia for eCommerce retail growth.

The Philippines is a rapidly expanding E-commerce sector in Southeast Asia thanks to its thriving economy and a sizable population that are technologically adept. Several websites and digital applications are vying for market share with national, regional, and international competitors. More and more of the country’s population is now accessing the Internet thanks to the improved internet connection in the Philippines.  Public and private sectors and investing in strengthening the internet infrastructure there. Connected Filipinos use computers and mobile devices to access the country’s eCommerce economy.

Philippine eCommerce had a rocky start. Early adopters of the eCommerce marketplace included local company Sulit.com.ph (now known as Carousell) and online forums. Still, these were hindered by issues, including the shipping of the items and the actual payment. 

Common issues that affected early online shoppers included unfulfilled delivery, unpaid purchases, and even the sale of fake or damaged items. 

However, firms eventually overcome those obstacles, especially tech businesses jumping on the eCommerce bandwagon. Local telecom companies began to introduce reliable and convenient digital wallet services and online payment portals. Major examples include Globe’s GCash e-wallet service and their rival Smart’s Smart Money, which was eventually superseded by PayMaya (now rebranded as Maya). Now Filipinos can pay for online purchases hassle-free without fear of unsuccessful transactions.

In addition to payment options, new online marketplaces such as Zalora, Lazada, and Shopee began to appear in the late 2010s. With its Marketplace, Facebook also made a foray into the eCommerce platform market. Although these businesses assisted in giving Filipinos choices to buy their goods, the early 2010s were marked by poor internet service and prohibitive costs. 

Philippine eCommerce After the COVID-19 Pandemic

The COVID-19 pandemic drastically drove up demand for online shopping in the Philippines. The economy still depends on it to recover from the outbreak. Data from the Philippine Department of Trade and Industry (DTI) reports that in 2020, eCommerce raised the country’s GDP by 3.4%, or USD 12 billion. The DTI is also optimistic about the growth of local Commerce enterprises. New e-commerce companies rose from 500,000 in 2020 to 750,00 by 2021.  In 2022, there were more than 1 million new businesses.

Philippine eCommerce is expanding due to the rapidly growing middle class, rising consumer expenditure, and a burgeoning technical populace.

In a survey, the Malaysian company iPrice Group found that the lockdown increased eCommerce in the Philippines. Here’s what the rest of the report said:

• Based on shopping apps,  the country had the highest demand at 53%. 
• Spending by Filipinos on online services increased by 57%. 
• The proportion of internet companies engaged in retail increased to 80% in 2021. 

The positive effects of eCommerce on Filipinos during the COVID pandemic were acknowledged by Ramon M. Lopez, secretary of the DTI. In a 2021 speech, he explained,

 “We saw this, especially last year, with eCommerce coming to our rescue during the COVID-19 pandemic. Online retail, delivery services, online entertainment, digital services, telehealth, work-from-home arrangements, digital payments—all of these helped us in the past year and continue to do so until now.”    

According to a survey published by GlobalData, the Philippine eCommerce sector was estimated to have grown by 31.3 percent in 2022 to reach PHP 500.9 billion (USD 9.8 billion). This reflects the consumer’s decision to switch from making purchases offline to online.

Following this trend, the Philippine eCommerce market is expected to expand by 22.9 percent in 2023 to reach PHP 615.7 billion.

Cards have quickly become the most favored payment method for online purchases in the Philippines. The report said credit and debit cards accounted for more than half of all transactions in 2022, the report said.

Opportunities in Philippine eCommerce

The e-commerce market in the Philippines offers numerous chances for development and expansion. Filipino customers, who lead digital lifestyles, are the primary driving force behind this.

Around 73% of Filipino consumers are likely to continue or grow their online buying activity even after the epidemic. 

According to the Philippine eCommerce Roadmap 2022, the government favors accelerating eCommerce’s growth. It aims to address or modify issues and obstacles that prevent the nation from developing eCommerce to its full potential. Plans include more systematic government regulation for proper taxation, consumer protection, and infrastructure development.

Growing Middle Class with Spending Power

Oddly, the Philippine economy growth rate decreased by 3.8% in 2022. This year, it grew by 8.3% year over year in the first quarter of 2023. The government’s 7-9% growth this year was also met in the first quarter. 

The World Bank also projects to grow into an upper-middle-class nation. They project the middle-income country in 2020 with a gross national income per capita of US$3,430 to grow to an upper middle-income country soon. This is due to forecasts seeing the per capita income increasing to US$4,096-US$12,695. 

This means nearly 47 million Filipinos have greater spending power and the technology to access online shopping.

Government Support

According to recent Department of Trade and Industry (DTI) research, 99.5% of businesses in the Philippines as of 2022 are categorized as micro, small, and medium enterprises (MSMEs). This is almost the same as a million businesses supporting the neighborhood economy. The Philippines steadily grew during the previous ten years thanks to this accomplishment. It was noted as one of the most promising economies globally, not just in Asia.

These changes have prompted the DTI to promote the “Basta e-commerce, madali” campaign.  This government campaign aims to streamline eCommerce transactions nationwide to strengthen the domestic economy and support expanding MSMEs in the Philippines.

The Philippine eCommerce Association (PECA) was founded to foster unity among the nation’s eCom players. This move will provide them more authority to speak up and act as their representatives to the larger businesses and conglomerates in the local economic scene. In addition, PECA, as envisioned by the founders, is a non-profit organization that fosters eCommerce development by establishing regulated, well-implemented programs that actual practitioners accept.

High Interest in Foreign Goods

Before the pandemic, Filipino shoppers were frequent travelers, typically shopping for products unavailable from local stores. Before the fashion retailers Uniqlo and H&M opened shops in the Philippines in 2012 and 2014, many Filipinos traveled to Hong Kong and Singapore to shop at the locations. Many even placed online orders delivered to customers in the Philippines despite the high shipping fees. 

The total value of imported products in 2022 was USD 137.22 billion, representing a growth rate of 17.4% per year. Philippine-based internet merchants can still differentiate themselves by providing goods that might not be available locally. The same is true for distinctive Filipino goods that could be hard or even impossible to find at nearby or local brick-and-mortar stores, especially in provincial areas. 

Mobile Shopping Experience

The 110.3 million-strong population of the Philippines is predominantly made up of youthful, tech-savvy Millennial and Gen Z customers; the average age is 25.7 years. Unsurprisingly, these customers are frequent Internet users, spending an average of more than 10 hours online.

Like other nations in Southeast Asia, the rise in Internet usage among Filipinos is primarily due to the development of robust and reasonably priced mobile devices. According to Hootsuite and We Are Social, the Philippines has been a mobile-first country since 2014, and 98.5% of adult Filipinos own a mobile phone. In comparison, only 77.3% of people can access a laptop or desktop computer.

As a result, you must offer mobile-first customers an online purchasing experience optimized for smartphone screens. This entails easier navigation with fewer clicks required and clear call-to-action buttons. Your products should have vibrant but lean images that load quickly. You’ll want to provide a natural browsing experience. Consider online eCommerce marketing tailor-made for mobile devices.

Philippine eCommerce businesses that can find a unique niche and gain a foothold online benefit greatly. However, doing so requires an exceptional understanding of the local eCommerce scene. You should be able to adjust to the demands and tastes of eCommerce customers in the Philippines with careful preparation, focused marketing, and a capable shipping and logistics partner by your side.

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Almost 86% of Filipinos use the internet to purchase through local eCommerce apps – that’s enough reason to start thinking about shipping to the Philippines.

Additionally, there is a market for cross-border eCommerce because of the nation’s growing middle class. More citizens have higher spending power and a growing population of tech-savvy Filipino youth. 

Philippines internet users now order various products from the US and other countries, including cell phones, clothing, and jewelry. Research is essential before entering the Philippine market to minimize costly shipping and delays with foreign shipments. 

US government research shows that the Philippines’ eCommerce business is expected to grow to $24 billion by 2025. The nation imported items worth $12.49 billion in June 2022 alone. China, Indonesia, Singapore, the Republic of Korea, Japan, and other countries with substantial import and export volumes are this country’s main trading partners.   

Although there is a sizable demand for imports and exports in the Philippines, firms must follow certain stringent regulations. The import and export industry is relatively reliant on several variables, including clearances and selecting the best delivery partner. 

Getting Started with Shipping to the Philippines

There is a strong demand for online shopping in the country. Even with the Philippines ranking 80th globally for mobile speeds and 40th for fixed broadband connections, digitally savvy Filipinos increasingly favor online shopping. There are several online selling platforms that Filipinos enjoy using. Shopee received 71.94 million site views between January and March 2022, according to Statista. Lazada received 36.55 million over the same period.

Shipping to the Philippines: Product Information

But before you can even begin to introduce your products to the Filipino eCommerce community, you must first understand what can be imported. The local government has regulations on specific items to maintain the stability of the economy as well as for health and safety reasons.

Free Goods 

Products that can be freely imported without the need for any additional licenses or permits.

Regulated Goods

Products require certain permits, seller licenses, and clearances before being imported and sold. These include some food products, plant, animal, and aquatic products. Used motor vehicles will need additional declarations. Finally, the government strictly monitors the entry of electronics and tobacco products into the country and is strictly monitored by the government.

Restricted Goods 

These items are not allowed for import and sale unless authorized by the law. Gunpowder and ammunition must go through a lengthy process before being sold locally. Marijuana, opium, and narcotics are subject to local anti-drug laws and are only legal to sell for very specific cases.

Prohibited Goods

Products that are outright illegal for both importation and exportation. These include written propaganda materials for treason and rebellion and obscene images. Mislabelled food products and improperly labeled precious metals are prohibited by law.

The geography of the Philippines has a significant impact on what mode of transportation will be used for shipping. Over 7,000 islands comprise the nation’s archipelago,  with more than 2,000 populated. Therefore, it should be no surprise that seaports are essential to its shipping infrastructure. With total container traffic of 7.9 million TEU in 2022 alone, seaports outnumber airports in terms of the volume of cargo handled and the number of ports.

Three main groups of islands make up the Philippines. These are the Luzon Islands, the Visayan Islands in the middle, and Mindanao in the south. Luzon is the most populous of the three islands. All three regions have major seaports and airports, which will serve as the gateway for your products when shipping to the Philippines. 

Understanding the Costs when Shipping to the Philippines

You won’t be charged customs and taxes for your shipment if the value is less than the de minimis value of US$200 (around Php 10,000) for the Philippines. Any load exceeding a de minimis value will be subject to charges and taxes at customs. This is done to promote national consumption.

You will be responsible for paying additional customs and taxes if your cargo is valued at more than $200. This usually includes a value-added tax (VAT) or Goods & Services tax rate of 12%. Import duties can also range between 0-20%, which brings the total tax percentage up to 32%. 

Even if you send items in multiple packages, remember that your sample computations will be based on all your shipments in a single day.

The type of products you plan to import will also affect the import fees. The Philippines uses a classification system for commodities known as the Harmonized System Classification of Commodities (HS Codes) to identify the types of imports into the nation. The Philippine government has an official online tariff finder. You may use this free tool to determine the duties that will be applied to your shipment depending on its HS Code.

To fully illustrate total landed costs, let’s say you plan to bring a shipment of leather jackets into the Philippines. These jackets cost around P12,000, with a shipping fee of P1,600. 

Because this is over the de minimis rate, you calculate your cost, insurance, and freight (CIF) duties to be around 15%.  It should come out to P2,039.81. The 12% VAT tacks on an additional P1,889.51. Your carrier also charges an additional P1,000 for an advance fee and currency conversion costs.

Your total landed cost will be P18,529.32. 

Shipping to the Philippines Made Easy

You must know existing government compliances to ensure easy expansion into the Philippine eCommerce market.

First, businesses must get an Import Clearance Certificate from the Bureau of Internal Revenue to register as importers. Then, importers create an account with the Client Profile Registration System (CPRS) and register with the Bureau of Customs (BOC). While the Customs Client Profile Accreditation must be updated yearly, the Import Clearance Certificate only lasts three years. The processing time for CPRS accreditation takes 15 working days and costs P1000 (about $20).

New exporters must register with the CRPS through the Philippine Exporters Confederation.

Firms must renew their CPRS accreditation annually. It usually costs P1000 and takes around 15 business days, much like with importers. 

Also, the Philippine government  requires additional registration for specific exporters. For instance, coffee exporters need to register with the Export Marketing Bureau. Companies operating out of free port zones must register with the relevant free port. Exporters operating out of special economic zones (SEZs) must register with the Philippine Economic Zone Authority (PEZA).  After registering, exporters will also receive a Unique Registration Number, which is required for all export-related activities.

A rigorous document verification procedure is required when opening a business in a foreign nation, and this is also true for Philippine eCommerce. Prepare a list of the permits the authorities need and send it to them for confirmation. Here are the various taxes and licenses required by the Philippine government for importation:

• Duly endorsed Bill of Lading or Airway Bill or certification by the carrier.
• Commercial Invoice, Letter of Credit, or any document that verifies the evidence of payment.
• Packing list
• Duly notarized Supplemental Declaration on Valuation (SDV)
• Import permit or clearance 
• Authority to Release Import Goods(ATRIG) 
• Proof of Origin for Free Trade Agreements(FTAs) 
• Copy of an Advance Ruling
• Load Port Survey Reports or Discharge Port Survey Reports
• Documents evidencing exemption from duties and taxes
• Tax Credit Certificate (TCC) or Tax Debit Memo (TDM)

Learn about the courier services that operate in the Philippines. The nation is served by international carriers such as DHL and FedEx. Smaller things can be delivered locally directly to clients using motorcycles. Find out the most effective services for your items to ensure the highest consumer happiness.

Make sure to reserve and pay for the precise service you require. Consider using a motorcycle courier if you can get by. Save the larger, more expensive stuff for the bigger, more expensive truck fleets. Getting your product to your clients will be accessible after you choose the ideal services for your company. Maximizing delivery times and managing accessorial costs can give you a bigger bottom line.

Expanding your market to foreign countries is a daunting task. You must familiarize yourself with numerous laws, regulations, and provisions. You’ll also have to deal with foreign customs to get your products into the country. However, you may speed up the import procedure and manage your eCommerce business effectively if you understand the Philippine importing rules and regulations.

Shipping to the Philippines presents excellent opportunities for your business because of the growing market of online shoppers. Working with third-party logistics (3PL) can help your entry into the Philippines become even easier. ZhenHub offers a wide range of logistics software solutions specifically designed for eCommerce. Ensure your products reach every corner of the Philippines with our global distribution network and cost-efficient shipping services. Sign-up at our website for free and get your products ready for shipping. 

If you’re not familiar with Chinese New year, the scale of this most important Chinese holiday and its effects on the supply chain is challenging to say the least. Chinese New Year shipping delays are pretty common since it can be an incredibly chaotic period. The impact of this holiday is global, and most online retailers should expect to be affected even a few weeks after the holiday. 

In this article, we’ll tell you how big the Chinese New Year is, handle the supply chain, and the best ways eCommerce retailers can prepare for the season. 

What is the Chinese New Year? 

Otherwise known as Lunar New Year or Spring Festival, the Chinese New Year is the most important holiday in China. This event is similar to Thanksgiving or Christmas in the States or Diwali in India for those unfamiliar. It is a week-long holiday when most employees get time off to spend with their families and friends. 

But what sets CNY apart is the immense scale of celebrations. It is known as the “world’s largest human migration,” with over 500 million workers traveling across the country to visit their hometowns. While Chinese New Year is officially only a week-long, most operations will be reeling from the sheer demand for a few weeks after the event. Unlike Christmas, the date of CNY varies from year to year. Therefore, it is crucial for companies that source their product from China to be aware of the exact dates of the holiday. In 2022, the Chinese New Year starts on February 1. We’ve provided actual dates when CNY falls in the coming years:

• Chinese New Year 2022 – Tuesday, February 1
• Chinese New Year 2023 – Sunday, January 22
• Chinese New Year 2024 – Saturday, February 10
• Chinese New Year 2025 – Wednesday, January 29
• Chinese New Year 2026 – Tuesday, February 17
• Chinese New Year 2027 – Saturday, February 6
• Chinese New Year 2028 – Wednesday, January 26
• Chinese New Year 2029 – Tuesday, February 13
• Chinese New Year 2030 – Sunday, February 3

How Chinese New Year Affects Businesses?

Over the last few years, China has become a powerhouse in product development and manufacturing. It is now known as the world’s factory because of the sheer number of manufacturing operations in its territories. 

During Chinese New Year, most factory operations halt to allow workers to celebrate the holiday. This stoppage in business can affect a retailer’s supply chain. Here is what to expect: 

• Production Shutdowns

As mentioned earlier, most manufacturing operations shut down during CNY. Workers are on holiday for at least a week, but retailers should expect a slow down in production weeks before the date and weeks after that. 

With the holiday beginning on February 1 this year, retailers expect suppliers to slow down production by mid-January. Only a skeletal workforce would be working the factories by the last week of January. On the 31st, production will officially shut down. Most employees would return to work in the middle of February. It wouldn’t be until the end of February when factories return to normal operations.

• Compromised Product Quality

With factories on a skeletal workforce leading up to the holiday, operations will be nowhere near-optimal. Often, the remaining staff can’t meet the usual volume of work. It may even affect product quality standards.

Likewise, not all workers come back after the holidays. After CNY, some suppliers scrambled to replace staff that went AWOL. These workers do not get the training that they need. As a result, retailers might receive substandard products for the rest of their orders.

• Shipment Delays

Most retailers try to be diligent about preparing for the holiday to prevent Chinese New Year shipping delays. Some get more inventory to prevent items from selling out. While this is a good strategy, the increase in orders can lead to an overload of shipments right before the holiday. With that, shipment delays are sometimes inevitable around this time of the year. 

How to Avoid Chinese New Year Shipping Delays 

Chinese New Year happens every year. As a result, retailers have time to prepare for the event and ensure that the business remains running smoothly. Below are a few suggestions on how to stay ahead of the rush: 

• Plan Early

In avoiding Chinese New Year shipping delays, forewarned is forearmed, so data is essential. The ability to forecast the demand is key to managing inventory well. That said, in the weeks and months leading up to the holiday, it is best to order additional merchandise for those in-demand items. Try not to stock up on fast-moving inventory a month before the event.  As discussed earlier, Chinese New Year shipping delays are unavoidable around this time. It is best to pad the list and build up a stash throughout the year to prepare for the rush.

• Communicate with the Supplier

Communication with suppliers is vital in handling factory shutdowns for retailer sourcing from Chinese retailers. More often than not, these suppliers have experience dealing with the rush. Therefore, it is always best to communicate concerns and issues directly with the suppliers.

• Communicate with Customers

Again, delays could be unavoidable during this time of the year. Even with proper preparation, shipments may arrive well after the holidays. It is good to communicate the delays directly to the customers in such cases. If possible, put products on pre-order to set the buyer’s expectations. The more transparent a retailer is, the better experience a patron would have from buying from the eCommerce site. 

The chaos of Chinese New Year is a stressful time for most online retailers – often only second to the post-Thanksgiving, pre-Christmas holiday rush. As a result, it is tempting to close down the shop to avoid all the hassle the season has in store. 

But with the right partners, you don’t have to miss out on profit opportunities because of the challenges Chinese New Year brings. ZhenHub offers a slew of logistics solutions that can better prepare your operation for the delays brought on by the holiday. With our support, you can rest assured that packages seamlessly get from point A to B. Reach out to us today to learn more.