DHL is set to shake up ecommerce logistics in Southeast Asia

SingPost, Singapore’s national postage service, was lauded for successfully transforming into a logistics firm. But it’s hardly the first or the biggest. That honor belongs to DHL, which, with a massive US$66 billion in revenue in 2015, makes SingPost look tiny.

Now, the German giant is raising the stakes in the ecommerce logistics battle in Southeast Asia, the home ground of SingPost and other competitors like Ninja Van and aCommerce.

“We want to become a true enabler for the smallest companies to the very largest ecommerce players,” Charles Brewer, the globe-trotting CEO of DHL eCommerce, tells Tech in Asia.

While the US, China, and India have been its three “must-win” markets, it’s increasingly focusing on Southeast Asia.

Charlies Brewer, CEO of DHL eCommerce.
Charlies Brewer, CEO of DHL eCommerce.

In January this year, DHL eCommerce established a beachhead in Thailand by launching a last-mile fulfilment service, which is basically the stage where an item leaves a warehouse and reaches the consumer’s doorstep.

Naturally, Charles talked up its progress in the country. “The demand is beyond our expectations; way ahead of our plans,” he says, without disclosing specific numbers or any of its customers.

DHL estimates that the Thai market sees about 150,000 parcel deliveries a day, while Malaysia and Vietnam have about 105,000 a day each.

DHL is now deciding which Southeast Asian nation to enter next. “The upside of ecommerce in Southeast Asia is enormous.” Charles adds that while ecommerce forms about five percent of total retail sales in Singapore, it’s more like two percent in the rest of the region.

Massive scale
DHL eCommerce’s advantage over other players is its size, he says. DHL eCommerce is just one of four divisions at DHL. The parent company has a global footprint and every type of logistics service you can think of: picking and packing, supply chain management, last-mile delivery, as well as air and ocean freighting.

“If you are a marketplace and you’re based in Singapore and you’re doing business across 25 countries, you don’t want to have to choose carrier X for country one, carrier Y for country two, and carrier Z for country three,” he says.

No one has cracked the code to last mile fulfilment.
Technology is another area where DHL wants to be seen as a leader. It has innovation centers in Germany and Singapore where it’s piloting new solutions provided by third-party tech companies. These trials cover everything from robotic arms to aerial drones to augmented reality glasses to big data analytics.

Finally, it balances its global focus with localized strategies for each market. Charles himself isn’t a stranger to Asia’s diversity. He spent two years in the Philippines and three years in Malaysia – amongst other cities in America and Europe over his multi-decade career at DHL.

No one has cracked the code to last mile fulfilment, says Charles, and that’s because there isn’t one solution that’ll work everywhere.

DHL aims to figure out which solution to implement in each country, and doing that involves a lot of trial and error. Thailand’s a good example. On top of next-day delivery, DHL will allow consumers to pick time slots for the arrival of their goods.

It has realized that choice matters to consumers, who want to choose how they receive their goods. As a result, it’s developing parcelshops in Thailand, which are locations in retail spaces that allow people to send or receive parcels.

Charles is also looking into deploying lockers in the rest of the region. Lockers allow users to collect their items simply by scanning a barcode. The locker containing the parcel then opens, and all this is done without human intervention.

Image credit: Wikimedia.
Image credit: Wikimedia.

Sure, SingPost has mindshare among consumers with its own lockers, called PopStations. But DHL is hardly a stranger to the idea, having deployed “PackStations” in Europe back in 2001. It’s likely the logistics firm will eventually employ a mix of lockers and parcelshops throughout Southeast Asia, depending on what consumers prefer.

Charles thinks lockers will work in Singapore because users prize efficiency and are more comfortable dealing with machines. In the Philippines, however, consumers want to go to parcelshops to have a conversation.

Security matters in the deployment of lockers. In areas where safety is a concern, an untended locker is like an open bank vault.

Different strokes
Parcel collection is just one area which demands different solutions depending on the consumer’s location. DHL also has to decide what delivery vehicles to use.

Two-wheelers like bikes are low-cost and agile, which means they can weave past congestion in cities like Manila or Jakarta. However, they can’t carry as many goods as vans or trucks. So, deploying bikes effectively could mean building more depots around the city so that delivery staff can shorten their travel time.
Indonesian startup Go-Jek is turning its bikes into a logistics network. Photo credit: Go-Jek.

It also has to decide whether to build out its own infrastructure or acquire smaller logistics companies as it expands in the region. Acquisitions seem unlikely, though. “Generally speaking, the current valuations of most companies are hugely inflated,” he says.

DHL’s rising focus on Southeast Asia will certainly light the fire under SingPost, its closest analogue in the region, as well as competitors big and small like Ta-Q-Bin, Go-Jek, and Ninja Van. While DHL eCommerce declined to name its clients, Charles says that all the big online marketplaces are its customers, and there are only so many of them.

While DHL eCommerce declined to name its clients, Charles says all the big online marketplaces are its customers, and there are just a handful of them. Various news reports have mentioned its partnerships in China with JD, Amazon, and eBay. While it doesn’t do last mile deliveries in China, it handles parcels traveling out of the country.

Last-mile is a brutal space for players with insufficient scale – witness how Singapore’s Zyllem closed its delivery operations despite raising US$10 million in funding, which is sizable for a startup.

While last-mile isn’t as competitive in Southeast Asia as in India and especially China (where deliveries cost only about US$0.50 each, subsidized by abundant investment money), things could turn hot, only to cool because of tough unit economics. It’s possible consolidation can happen once venture capital dries up.

By then, DHL may not find valuations as inflated.

DHL’s revenue converted from Euros. US$1 = €0.89.

Alibaba’s cloud computing service launches in US, wants to rain all over Amazon

Alibaba’s cloud computing service is expanding outside of China for the first time. Alibaba today announced that its Aliyun platform, which started in China in 2009, is now adding a data center filled with servers in Silicon Valley and going after businesses who need cloud horsepower across the US.

Yu Sicheng, vice president of Alibaba’s Aliyun division (“yun” means cloud in Chinese) and head of its international business, says in today’s announcement (on the company’s blog) that US-based servers are just the beginning. By the end of the year, the enterprise cloud service is planning to expand to Southeast Asia and Europe.

Aliyun will compete head-on with Amazon Web Services (AWS) to offer enterprises remote computing power (like AWS EC2). At a later date Aliyun will add in web storage as well (to be called OSS), meaning that the Chinese firm will also compete against AWS S3, Microsoft Azure, and Google App Engine.

Keeping data away from Chinese authorities
To allay fears of China’s government accessing data through Chinese servers, Alibaba says that US companies and startups that use the service will be served only by the Silicon Valley data center.

Alibaba’s cloud platform already competes with the likes of AWS in China. Aliyun’s Chinese data centers are in Beijing, Hangzhou, Qingdao, Hong Kong, and Shenzhen.

“For the time being, we are just testing the water,” Yu said today. That means Aliyun will focus first on Chinese companies doing business in the US. “We know well what Chinese clients need, and now it’s time for us to learn what US clients need,” he added.

To prove that Alibaba’s cloud service can take the strain, the company points to China’s crazy web shopping day on November 11. During the last November 11 shopfest, Aliyun held up Alibaba’s Taobao and Tmall estores under the strain of 80,000 orders per second. Last year’s sales hit a new record as China’s web shoppers spent a total of US$9.3 billion on Alibaba’s two stores in just 24 hours – more than the entire US spends on every single ecommerce store during Cyber Monday.

Why Google’s Android One is a game-changer in budget smartphones

The budget smartphone market got shaken up again with the unveiling today of Google’s much-awaited Android One in India. In partnership with local phone-makers Micromax, Karbonn, and Spice, Google unveiled the Spice Android One Dream UNO Mi-498, Karbonn Sparkle V Red, and Micromax Canvas A1, with prices starting from as little as INR6,399 (US$105).

The Karbonn Sparkle V Red is available on Snapdeal, the Spice Dream Uno Mi-498 on Flipkart, and the Micromax Canvas A1 on the Amazon India site. Soon, these will be available at offline stores too.

India is the first country to get the Android One phones, which offer a relatively pure Android experience devoid of telco or OEM add-ons. Budget Android One smartphones will pop up in Indonesia, the Philippines, and other emerging Asian markets in the months to come. Google revealed today that it has signed up more phone-makers for upcoming launches, such as Asus, Xolo, HTC, and Lenovo.

The smartphone market in India appears clogged with a number of local and global players jostling for position. Samsung currently leads the smartphone race in India ahead of Micromax.

But there are at least five good reasons why the Android One looks like a game-changer in even such a crowded market. Here’s a look at what makes it stand out:

1. Redefining value for money
The price of the first set of Android One smartphones – even if it is a tad more than what was expected – will force leading players like Samsung and Motorola to rethink how much value can be delivered in a US$100 smartphone. The disruptive Chinese phone-maker Xiaomi has already raised the bar with the launch of the Redmi 1s at INR5,999 (US$99) a couple of weeks ago, but a similarly priced gadget from Google could have even more appeal. Here is what the Karbonn Sparkle V Red offers for $105 :

Android 4.4.4 KitKat
4.5-inch screen, 480 x 854 pixels resolution
1.3 GHz quad-core Mediatek processor
4GB storage expandable up to 32GB
5MP front camera, 2 MP rear camera
1700 mAH battery
G-Sensor, Proximity sensor, Light sensor, E-Compass, Gyro Sensor
All this for US$105. Though the Xiaomi Redmi 1S has better specs for a few dollars less, the company is unable to meet the huge demand in India. In its flash sale two weeks ago, 40,000 units of the Redmi 1S sold out in 4.2 seconds, but many prospective buyers were let down.

Google is partnering with Qualcomm for the Android One, so the next generation Android One smartphones will run on Qualcomm chipsets, which should prove more appealing to shoppers than the Mediatek ones.

Google Android One Spice

2. Stock Android
The plethora of Android adaptations is a put-off even for very aggressively priced smartphones with great specs. A long delay for OS updates and concerns over security issues prompt many to opt for phones with stock Android – but Google itself, the original developer of Android, until now only provides it in the higher-end Nexus series. The other manufacturers’ Android-based skins – like Samsung’s Touchwiz, HTC’s Sense, Xiaomi’s MIUI – struggle to give users updates immediately, even when there’s a major Android security bug that needs fixing.

One reason for Motorola’s resurgence in popularity is that its no-frills Android operating system avoided all the clutter and crapware. Now Android One offers a cleaner experience direct from Google itself and at way less than half the price of a Nexus phone. That’s a big deal in markets like India which are 90 percent Android.

The three phones launched today come with stock Android, so users will get the latest OS update before the vast majority of Android users.

3. Partnerships with local players
In many of the Asian markets, there are strong local players with a wide distribution system. In India, the budget smartphone market is huge. People are racing to ditch their feature phones for smartphones. So the demand is likely to be huge for these smartly priced new devices.

Google’s partnership with Micromax, Karbonn, and Spice will ensure that the supply and reach will be more than that of its global rivals. There are also multiple distribution channels. Homegrown ecommerce sites Flipkart and Snapdeal will sell Android One smartphones from Spice and Karbonn, while the Indian branch of Amazon will sell the phones made by Micromax. This is smart, because Google’s primary interest is in a standardised platform for its services, which is the Android-based software, and having locally made hardware would hopefully avoid bottlenecks in manufacture, shipping, and distribution.

Micromax, Karbonn, and Spice already account for about 30 percent of India’s fast-growing smartphone market, according to IDC data for June.

4. Global software, local hardware
Google’s tie-up with the Indian trio comes with an important rider – that the local phone-makers can do only minimal tweaking of the Android operating system. So the only differentiation between the three Android One smartphones will be in the hardware.

Google is also localizing the features. Today’s three devices will let Indian users give voice commands, type messages, and use almost all major mobile applications in the country’s national language, Hindi. The phones will support seven other Indian languages as well.

Google also has tie-ups with various telecom operators, including Bharti Airtel and Reliance, to provide free bundled data plans on purchase of Android One phones. Google will also provide free data to download OS updates on Android One phones.

5. Global product launched first in India
The boom in the Indian smartphone market has attracted disruptive phone-makers from the West and East alike – but for a marquee product like Android One from Google to be launched first in India is rare. It shows where the US-based tech giant expects the smartphone action to be centered, as it gears up to bring the next one billion into the Android ecosystem.

As Sundar Pichai of Google put it to TV channel NDTV today: “This is one of the biggest launches we’ve done anywhere, not just India… For us, Android One was a journey to try and reach the next five billion people. And India accounts for a substantial portion of the share. Android One was conceived deeply with India in mind.”

India, the world’s fastest growing smartphone market, has become a battleground for low-cost smartphones, and consumers are gleefully lapping them up. One of the chief grouses Indian consumers have against companies like Apple, Samsung, and Xiaomi is that their latest devices come late to India. For example, the iPhone 6 is scheduled to come to India on October 17, a month after the US launch. Xiaomi’s Mi4 is already out in China, but only the Mi3 and Redmi 1S are currently available in India. So Google choosing India as the launchpad for Android One comes as a breath of fresh air.

China’s ecommerce spending to blast past $1 trillion in 2017

China’s online shoppers are on course to spend US$672 billion in 2015, according to the latest data from Emarketer. While China’s economy has struggled and slowed down over the summer, the country’s ecommerce growth looks set to remain strong. The estimated figure for 2015’s expenditure is up 42.1 percent on last year’s US$472.91 billion.

The Emarketer team reckons China’s ecommerce market will only slow moderately as the mature industry edges closer to saturation. By 2017, data suggests China’s shoppers will cross the trillion bucks milestone by spending US$1.21 trillion online.

China’s ecommerce spending to blast past $1 trillion in 2017

A trillion dollars is a lot of cash. If the money were stacked up, it’d be taller than the Burj Khalifa.

China’s ecommerce spending to blast past $1 trillion in 2017
(Illustration by Tech in Asia’s Andre Gunawan)

Retail shift
In 2015, China’s ecommerce spending will represent 15.9 percent of all retail sales, and by 2017 that’ll go up to 23.8 percent. By 2018, it could hit over US$1.5 trillion in spending, representing nearly 30 percent of all retail purchasing.

China is well ahead of the US in ecommerce in general as well as the seismic shift away from brick-and-mortar stores. America’s online spend will hit a predicted US$347.3 billion in 2015, which represents 7 percent of total retail sales.

We will no longer use mobile apps in future

There’s an app for that.”

It’s the trademarked slogan that defined the mobile world since 2008. Surely, apps seemed to be the way to go. Coding bootcamps that claimed to teach you app development chops within weeks popped up everywhere; products used commercials to go out of their way and show off their new apps; heck, even that family restaurant around the block got its own menu app built.

With the release of the App Store in 2008, Apple was the first to popularize the idea of nicely packaged, downloadable applications on your phone.

People don’t care how it all works, they just want to throw birds at pigs and show off their #nofilter selfies.
However, this concept of centralized software distribution isn’t actually new. Many handheld and desktop devices already had some form of application store built in years before Apple’s App Store debut. The reason why Apple succeeded, in retrospect, is a combination of timing and technology. By 2008, the iOS (then “iPhone OS”) platform was able to offer access to a maturing 3G network, a well-documented development environment, great handheld graphics, and most importantly, the backing of a technology giant. Mobile apps made sense. They were the most efficient way to deliver the newest content and services with native experience and performance.

People don’t care how it all works, they just want to throw birds at pigs and show off their #nofilter selfies. The ability to download and run cool apps was the iPhone’s winning feature for a short while. Android soon followed suit. Smartphones became cheaper; networks became faster; handheld processing power quadrupled; apps prevailed.

Ok Sherlock, so what’s wrong?
Nothing. But we can do better now. “Better than this app that lets me feed and play with cute cats?” Yep.

You see, mobile apps succeeded because of the right combination of fast network and capable handheld processors. Technology has progressed much further than that in the meantime, and the world of apps has grown beyond a healthy size. Among all of the headaches that follow the impenetrable mobile market today, the two most urgent would be the delivery and discoverability of content.

Delivery and discoverability
Everyone with a smartphone has experienced this at some point: “Wow, this restaurant/shop is offering 20 percent off the special entree…oh, but only if you have this app,” or “Wait, I have to download an app for this? I just to want to see what my friend posted.” You probably heard from a friend or saw in a billboard about this really cool app that’ll transform your life, but hesitated to install it, or worse, pay for it.
Photo credit: Branch Metrics

The problem is twofold. Let’s start with the first: delivery.

Your average digital couch potato now has a shorter attention span and less patience. Paying for and installing an app, what was once a magical, fast, and smooth experience, is an act of commitment for many nowadays. You won’t believe how many people demand a convincing reason, your heartfelt speech, and your first-born child just to get them to try out a new app. Just think about that one friend who still refuses to download the Messenger app (seriously just get it already). Companies want to deliver content and services to customers as fast and easily as possible, but the increasing reluctance for the perceived installation-barrier is putting up a delivery obstacle. Our home screens are the new San Francisco — space is at a premium.

The second problem, discoverability, is a little bit more subtle, but was well articulated by a few tech journalists in the past.

Many popular apps, such as Instagram and The Daily, began as mobile-only apps that surfaced great content only within a closed platform. You had to download and register for Instagram in order to see your friends’ Instagram photos. I’m sure that there are many more apps out there today that I’m not aware of, with useful content that is not searchable or viewable on your browser. A fragmented internet where creative and original content are locked up in proprietary platforms is not the internet we know and love.

App linking and indexing works, but not well enough

Gif credit: Branch Metrics

Now that we understand the problems, let’s take a look at the current solutions. The word “app linking” may not sound familiar to you, but every time you tap on a YouTube link in another app and the YouTube app opens up to play the video, you’re experiencing it. Google, Apple, and Facebook have all implemented variations of this technology. App linking brings you to the app that best presents the content you want. Great.

The other half of our existing solution to compliment app linking is app indexing. Google and Apple have provided ways for third-party content providers to show their own in-app content in a search query, allowing previously locked away content to surface on Google and iOS Spotlight.

Perfect. That seems to have solved our delivery and discoverability problems. User searches for something, in-app content shows up in the results, user clicks the link and gets brought into the app.

You might have already noticed the problems here. What if the app doesn’t support app linking and indexing? App indexing requires the the content provider to actively put effort into implementing it, so by default, your content is not visible to the world wide web, exactly the opposite of how most web-based content work. And only until recently, in order for your app to be indexed by Google, developers had to build mirroring web versions. Just imagine the trouble.

On the consumer side, what if I don’t have that app to begin with? What if I don’t want to install that app just to read an article? The list goes on.
Gif credit: Alex Bauer

Think about that one time when you tried to check out something and it redirected you into App Store instead. Very annoying. And no, no one wants to install your app.

I don’t want to maintain a walled garden of apps. I want to consume and create content.

“So then, what is the solution?”

Just get rid of “apps.” Let’s see how we might be able to do this.

App Streaming from Google
Google’s approach to the delivery and discoverability problem has relied on app indexing and linking. If the developer puts in the effort, users can see previously mobile-only content surfacing on Google search results. This is great for Google to stay relevant in a mobile market that is increasingly reliant on native app content instead of web search.

But in countries like China and India, where mobile phones are the first computers for millions of people and mobile-only content is king, where does a search engine provide their links to begin with? Suddenly, “everything is just a Google search away” loses its magic.

Roughly four months ago, Google rolled out an impressive technology that almost no one remembers — App Streaming. It does exactly what it sounds like; instead of installing applications like we’re used to, you tap a link to the content and Google will stream the right parts of the app to you on-demand. No need to install it, ’cause you’re already running it. It might be Google’s first pilot experiment of their cloud platform, but the idea of streaming applications onto your phone is not new. In fact, the very technology itself was bought by Google from Agawi a few years back.

Combine App Streaming and App indexing, suddenly you remove the two barriers to all information previously locked away in mobile apps.

On-demand resources from Apple
While Google’s fantastic solution is still in an experimental stage, Apple is nudging its developers in more or less the same direction, albeit characteristic of Apple, in a less obvious or more incremental way.

On-Demand Resources (ODR) is a technology released with iOS 9 that downloads a small core application only on installation, and then downloads extra parts and content as needed. ODR currently is being used mostly in games, where a user only downloads the assets (graphics, videos, etc.) for a few beginning levels. iOS will then download more levels as the user progresses, and delete assets for completed levels to make space.
Photo credit: Apple

How does this mirror Google’s approach? It doesn’t. However, if ODR becomes commonplace and the supporting infrastructure is flexible enough, you can reasonably imagine Apple extending the framework to a more general use case. In any case, they got this wonderful tool under the belt that will potentially blossom into a form of installing free applications.

The underrated quest for web apps
While we’re on Apple, I want to bring up Steve Jobs’s vision of the first iPhone. You might still remember fondly that the first iPhone was a closed platform with no developer environment or third-party apps. His solution? Web apps.

Web apps don’t need to be installed. They run (relatively) securely in closed browser environments. They are web friendly, meaning they can be indexed and surfaced by search engines. Oh wait, isn’t that exactly what we want today? Probably.
This is probably the one billionth time you’ve seen this picture. But I’ll put it up anyway.

I’m still leaning on the belief that web apps were simply Steve Jobs’s transitional plan to native apps, but even so, I think he was (at least accidentally) onto something. If we had in 2008 the powerful Javascript frameworks we have today, perhaps web apps would have taken off. Feel free to paint the story into one where Jobs the Visionary foresaw the discoverability and delivery problem, because perhaps he did predict this.

A future without apps
A lot of what app streaming offers competes with other sophisticated web app technologies (React Native, etc.) that are quickly closing the gap between native and web. However, one decisive differentiating factor would still be the native look and feel, or possibly performance, that web apps sorely lack. There is just no perfect solution yet.

On top of all, what we really need is a platform-agnostic solution to app streaming that truly overcomes content delivery and discoverability problems. We want something akin to Java applets on browsers (yikes) on mobile. Imagine the possibilities: regardless of the OS or the brand of supercomputer you have in your pocket, you will able to run an app and view its content with zero friction and with native feel and performance. As for developers, you can write an app once and stream it to all devices and browsers.

With Google streaming apps to your phone and Apple nudging developers to store parts of their apps in the cloud, we may have just entered the beginning of a future where installation becomes obsolete and the border between “website” and “native app” is blurred. This is a future without apps. And it’s wonderful.

The user forefront of all these insanely complex, powerful, and cool technologies is one of ultimate simplicity and elegance.

Welcome to a future without apps.