Southeast Asian e-commerce: Leading the charge

Lions_yellow_starLeading the charge

While there are many Southeast Asian countries emerging as serious lo­gistics markets, Vietnam is at the tip of the spear. Forty years after American troops left the war-torn country to its Communist government, Vietnam has been reborn as one of the fastest-rising economic powers in the region, ironi­cally attracting another foreign “inva­sion” in the form of manufacturers and logistics firms. Companies such as Converse, Gap, H&M, Lacoste, Reebok, and Zara all have factories there, pro­ducing $20.8 billion in garments and $10.2 billion in footwear, boosting the country’s annual export growth by 15.8 percent in 2014.

And that’s just the apparel industry. Vietnam is not only one of Apple’s fast­est-growing consumer markets in the world, it is also becoming one of the leading manufacturing centers. Other high-tech companies like LG, Microsoft and Samsung Electronics have in­vested billions of dollars in Vietnamese factories to build smartphones, tablets and various appliances.

U.S.-based forwarder and trucking firm C.H. Robinson recently opened an office in Ho Chi Minh City – the city through which more than 70 per­cent of the country’s cargo volume is shipped – to be near the center of the action in the region. “Several compa­nies are beginning to explore manu­facturing options throughout South­east Asian countries as a result of the region’s increasingly affordable and high-quality labor options,” said Matt Castle, director of global airfreight services at C.H. Robinson. “Vietnam, in particular, has experienced steady economic growth due to its strategic location and growing population. Viet­nam’s total volumes, along the U.S. trans-Pacific eastbound trade lane, are second only to China.”

Agility’s Damgaard says interest in Vietnam is only going to increase for the next few years, at least. “Vietnam has also seen strong growth in its air­freight market as high-tech manufac­turers and retailers have expanded into the country to take advantage of its relatively low-cost production base.”

Next in line

While Vietnam is getting attention for its manufacturing potential, many other countries in the area are show­ing just as much promise, not just as sources of inexpensive labor, but as a consumer block. “We are seeing growth across the region, with specifically the Philip­pines and Indonesia looking stronger,” Damgaard said. “Based on its demo­graphics, Indonesia has a lot of po­tential for airfreight growth due to its fast-growing middle class consumers and large domestic market.”

Agility has a well-established pres­ence in Southeast Asia that has been built up over the years, starting with a Singapore operation in 1975. In recent years, the forwarder has opened its doors to much more restrictive re­gimes, such as Myanmar, in response in demand from customers. “In the last few years, we have expanded contract logistics and domestic distribution capabilities in Indonesia and Malaysia and are constantly assessing the need for additional facilities,” he said.

Indonesia, he added, “stands out as a ‘next-tier’ emerging country,” in terms of its technology, pharma/life sci­ences, retail, and perishables sectors, as well as its “huge consumer base” of 250 million people. “While some [Indo­nesian] companies have moved parts of their supply chain to ocean freight, there will still be demand from these sectors.”

There is also growing domestic de­mand in Malaysia, a strong manufac­turing base in Thailand, and robusteconomic growth in Philippines, Damgaard added, all of which “position the region well for continued growth.”

Samsung may help make the case that Indonesia could be the next most promising market. The world’s largest cell-phone maker opened a plant there earlier this year capable of producing 1.5 million phones per month, using labor that is less than half as expensive as it is currently in China, and a large consumer base that is more interested in Samsung’s lower-cost phone – a shrinking demographic in China, with its growing middle class.

If Samsung builds more factories in Indonesia, there will be a greater demand to ship the most sought-after new releases via air. “As the world clamors for new technology, electronic products, such as televisions, laptops, tablets and smartphones, continue to drive demand in the global air freight market,” said Castle, of C.H. Robinson. “Although more expensive than other methods of shipment, airfreight is by far the fastest, and potentially the most reliable, method of transportation.”

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