Market insights

How omni-channel retailing in asia is transforming logistics

21 November 2016 by Alys Francis

With the rise of the Internet and smartphones, Asian shoppers increasingly use both online and offline channels to order, pay for, collect and return purchases. This move is forcing manufacturers and retailers to adapt to the modern shopper’s journey.

According to DHL, traditional multi-channel-based approaches have proven problematic, as the different channels are operated in silos, leading to cannibalistic competition and variation in the customer experience. Additionally, traditional approaches have failed to keep pace with the shopping habits and delivery expectations of today’s consumers.

Omni-channel retailing, a more complex approach, improves on multi-channel strategies by catering to the modern shopper’s journey. Omni-channel approaches offer customers the same experience in every channel and allow them to seamlessly switch from one to another. Customer preferences and interactions can be captured in every channel – including physical stores – and shared in real-time. The data collected can be leveraged to gain purchasing behaviour insights and influence shoppers’ behaviour.  

As Southeast Asia’s largest e-commerce market with more than 100 per cent smartphone penetration rate, Singapore has big potential as a thriving market for omni-channel retailing. DHL’s Omni-Channel Logistics report predicts that this will be a key requirement for companies in the future.

Consumer demand as main driver for omni-channel approaches

DHL’s 2015 survey included 56 companies across Asia, and the report reveals how these businesses are adapting to the omni-channel approach. Consumer demand is the main driver behind the omni-channel trend in the region. Asian consumers expect fast delivery to the most convenient point of collection as well as the ability to select the quickest delivery option on mobile and Internet platforms.

Companies need to keep a close watch on how the omni-channel trend is playing out in Asia. Singaporean consumers, are mainly “omni-channel buyers”, says Mike Ghasemi, research director, IDC Retail Insights Asia Pacific. “They use smartphones, tablets and laptops to explore and compare products 24/7, connecting with brands through every conceivable channel: websites, physical stores, call centres, you name it.”

Multinationals in Singapore need to weigh the case for omni-channel retailing by also considering costs, says Tamanna Dahiya, director, DHL Asia Pacific Innovation Center.

“The high costs of retail space and labour influence the need for an omni-channel approach, and encourage more use of digital channels for businesses in Singapore,” she points out. “Businesses are seeing a shift from heavy retail stores and distributor-driven sales to a more equal spread of sales across a combination of physical and online channels.”

Why logistics providers should pay attention to omni-channel adoption

As the back-end of the retail supply chain, logistics providers are crucial to the success of omni-channel implementation. They must provide services that meet consumers’ expectations for fast delivery, and have teams capable of working across channels.  

In Singapore, one of the world’s most densely populated countries with nearly 7,700 people per square-kilometre, traffic congestion poses a risk, and meeting consumers’ growing expectations for fast delivery is a particular challenge. It has become imperative for companies to build capacity in last-mile logistics.

Businesses in Singapore are already pioneering omni-channel models. Take, for instance, the growing number of large grocery companies that offer services allowing customers to order online or drop off shopping lists in-store, and have items delivered to their homes. Online grocery start-up Red Mart is but one example, allowing customers to place orders anytime, anywhere using its mobile app, and select a two-hour time slot for delivery to their doors. “Innovations in last mile delivery are also evident – from lockers to convenience stores, consumers now have the flexibility to pick up and return shipments anytime,” says Dahiya.

Lee Eng Keat, Director of Logistics at the Singapore Economic Development Board also observed an increasing number of companies using Singapore as a base to carry out omni-channel retail activities throughout Asia.

“This is a trend we are very supportive of as it translates into many potential opportunities for logistics providers in Singapore to serve the growing base of retail customers in Asia. It is vital that logistics providers here can innovate and enhance their offerings in order to meet the changing needs and demands of consumers,” he said.

Indeed, DHL’s report shows that retailers are making investments that set the stage for an “omni-channel future” in Asia. Supply chains are being enhanced for greater efficiency and speed, with investments in automation, click-and-collect models and same-day deliveries.

The survey found 58 percent of companies are investing in cloud-based logistics, which allow companies to monitor supply chains and identify inefficiencies in real-time. Predictive logistics, which provides more accurate forecasts of future demand based on past demand data, is a growth area, with 29 percent planning to invest in it.

Logistics providers must pay attention to Asia’s evolving retail landscape and adoption of omni-channel. As brands switch from channel-based approaches in reaction to consumer demand for fast delivery, providers must keep pace – both to satisfy consumers' expectations, and stay ahead of the competition in the region.   

Meeting omni-channel demands requires organisational overhaul

Omni-channel approaches require an organisational overhaul. Key operations like marketing, merchandising, ordering, fulfilment and returns must be managed to work seamlessly across offline and online channels.

“Logistics companies need to take a serious look at how they can offer a seamless, real-time experience to their customers by introducing digital platforms in fulfilment and end-to-end solutions,” adds Dahiya.

Dahiya explains that logistics providers need to tailor fulfilment options and supply chain processes to match the modern shopper’s journey. “A well-aligned supply chain would give consumers the flexibility of anytime, anywhere delivery while maintaining cost-effectiveness for the business.”

One such delivery system that meets consumers’ demands for speed, while maintaining cost-effectiveness is being piloted by China’s largest B2C website Tmall.com. When Tmall.com receives orders for Danish retailer Jack & Jones, rather than shipping the order from a warehouse, its system analyses merchandise availability across Jack & Jones’ stores and dispatches the order from the store closest to the customer; thus speeding up the delivery process.

To answer demands arising from the omni-channel trend, Ghasemi says providing fast, reliable delivery, returns, refunds and scalable physical space will be “crucial for any logistics company”. “The transition to omni-channel requires a total transformation of the retail supply chain so that it becomes consumer centric,” he explains.

DHL is currently helping traditional retailers in Asia redesign supply chains to serve the growing need for speed in digital channels. This involves evaluating omni-channel fulfilment options such as ‘click and collect’ and ‘pick up from stores’ for online deliveries.

Dahiya suggests that logistics companies also offer integrated, flexible solutions. “At DHL, for instance, we can provide integrated B2B and B2C fulfilment,” she says. One way DHL does this is by designing fulfilment centres that can support the different requirements of both B2B and B2C shipments.

Another tip is that logistics providers need to provide solutions for Asia’s diverse payment practices. In some Asian markets, cash on delivery (COD) is a key requirement, which “poses a lot of challenges in the collection and management of funds”, says Dahiya. DHL is testing mobile wallets to collect COD funds.

As the largest and fastest growing B2C ecommerce market in the world, Asia Pacific is witnessing a phenomenon that sets the stage for omni-channel. “Increasing e-commerce shipments with smaller packs and more stock keeping units introduce a different level of complexity in supply chains,” says Ghasemi. “This presents even greater opportunities for logistics providers to partner with and advise retailers on optimising supply chain networks in a cost-effective way.” 

Edited by Kritika Srinivasan and Goh Wei Ting