1. Southeast Asia: The New Hub of the Global Supply Chain

The global supply chain is undergoing significant transformation, shifting from reliance on a single source to diversification to reduce risks. The vulnerabilities exposed by the pandemic have prompted global manufacturers to seek alternative production locations. Southeast Asian countries such as Vietnam, Indonesia, Malaysia, and Thailand are attracting increasing amounts of foreign direct investment (FDI).

Among them, Vietnam and Indonesia lead in attracting FDI in manufacturing and export sectors. In 2023, Indonesia's exports reached $290 billion, while Vietnam's exports hit $440 billion. Thailand's exports increased from $257 billion in 2019 to $314 billion in 2023, and Malaysia's exports rose from $280 billion to $370 billion over the same period.

This rapid development positions Southeast Asia as a key production center in the global supply chain, highlighting the potential for logistics and infrastructure development. Logistics service providers are poised to capitalize on the growing trade flows, gaining significant opportunities from this trend.

On the other hand, driven by increased internet penetration, smartphone usage, and a burgeoning middle class, Southeast Asia's e-commerce sector is growing at an unprecedented pace. According to the "2023 Southeast Asia Digital Economy Report" by Google, Temasek, and Bain & Company, Southeast Asia's e-commerce growth rate ranked first globally in 2023 at 18.6%. The region's gross merchandise value (GMV) reached $139 billion in 2023 and is expected to hit $186 billion by 2025.

In the context of cross-border e-commerce becoming a new growth driver for China's foreign trade, Southeast Asia's e-commerce landscape, full of potential, has attracted numerous giants to enter the market, leading to fierce competition.

Recently, SHEIN announced plans to collaborate with Shopee, with its beauty brand Sheglam negotiating entry into Shopee. TEMU expanded to Vietnam and Brunei, bringing the total number of Southeast Asian markets it serves to five. Earlier this year, TikTok acquired a controlling stake in Indonesia’s second-largest e-commerce platform, Tokopedia, for $840 million. Meanwhile, Southeast Asia’s existing three e-commerce giants have seen profitability in recent years: SEA, Shopee’s parent company, achieved its first annual profit in 2023; Lazada recorded its first-ever profit in July 2023; and TikTok posted overall monthly profits in Southeast Asia at the start of the year.

This signals a new phase in Southeast Asia’s e-commerce wars. Logistics, which ensures the flow of goods, makes the region a battleground for logistics firms aiming to strike gold amid the growing ties between Chinese e-commerce and Southeast Asia.

2. What Differentiated Challenges Does Southeast Asia’s Logistics Face?

Southeast Asia’s significant growth in exports and e-commerce is driving vast changes in its logistics supply chain, presenting both opportunities and challenges for logistics companies.

One challenge is that logistics firms need to adapt to changing demands. Southeast Asia covers over 600 million people across countries like Indonesia, Thailand, Vietnam, Malaysia, and the Philippines. As e-commerce grows, consumers expect faster, more reliable, and more convenient delivery services, with a willingness to pay for new and more complex logistics services. To meet these demands, logistics providers must offer affordable standard delivery and faster, high-quality options, putting pressure on them to invest in new technologies and improve operations.

Another challenge is Southeast Asia’s underdeveloped logistics infrastructure, which lags behind growing demand. While the region is often seen as a single market, each country has different economic levels, infrastructure, cultural practices, and online shopping preferences, leading to unique logistics challenges in each.

For example, Malaysia’s diverse geography requires flexible approaches. In urban centers like Kuala Lumpur, traffic congestion slows delivery, while rural areas experience slower and inefficient processes. Singapore, with its fast-paced lifestyle and dense population, faces last-mile delivery challenges. In Vietnam, cities like Ho Chi Minh City and Hanoi are economically advanced, but rural areas lag far behind, even lacking basic asphalt roads, posing significant challenges for building logistics networks.

Indonesia, characterized by its archipelago of over 17,000 islands, faces high costs and complexity in island transportation and last-mile delivery. According to the World Bank, logistics costs in Indonesia are the highest in Southeast Asia, accounting for 25% of GDP, compared to 20% in neighboring countries like Vietnam, Malaysia, and Singapore.

Additionally, underdeveloped transport networks, limited access to remote areas, reliance on slower sea routes, and a lack of warehousing facilities all directly impact logistics efficiency and costs. The varying adoption levels of electronic payments further complicate logistics, as many consumers prefer cash on delivery, adding another layer of cash management challenges for logistics providers.

Southeast Asian countries have announced or launched infrastructure upgrade projects to meet growing needs, but current investment levels fall short of what’s needed for future trade flows. To unlock Southeast Asia’s potential, significant investment in logistics infrastructure is required. According to a McKinsey report, Southeast Asia may need an additional $60 billion to develop its logistics infrastructure. The region will need new logistics capabilities, and both existing players and new entrants will capture the most value from this transformation.

3. How Did a Veteran Logistics Firm Overcome These Challenges?

In Southeast Asia’s booming e-commerce market, where consumers expect lightning-fast delivery and seamless returns, logistics has become a key differentiator. Best Inc., a veteran in overseas logistics, has gradually made a name for itself in Southeast Asia, offering a typical case study of success.

Founded in 2007, Best Inc. launched Best Supply Chain in 2008, Best Express in 2010, Best Freight in 2012, and Best International in 2015, marking the start of its international business journey. The company officially entered Southeast Asia in 2018, starting with Thailand, followed by Vietnam in 2019, Malaysia and Singapore in 2020, and the Philippines in April 2024. In August 2024, Best Inc. launched cross-border supply chain services in Indonesia, alongside a full-suite SaaS solution service.

Best International Vice President Wang Xiaoqing noted that Southeast Asia has become a key destination for Chinese companies going global. Best focuses on building express and freight networks in the region but has faced numerous challenges. Each country in Southeast Asia has different logistics development levels, prompting Best to adopt a localization strategy to meet specific market demands.

In Southeast Asia, Best began by entering more developed countries like Thailand and Malaysia, rapidly establishing networks through a franchise-dominated, direct-ownership-assisted model. This approach helped balance service quality and costs.

Best has also emphasized recruiting and training local talent, blending dispatched personnel with local experts, and developing information systems tailored to local needs. For instance, in Vietnam, Best customized its automatic sorting system based on local geography and traffic conditions, optimizing delivery routes and improving efficiency.

To cater to various industries and businesses of different sizes, Best built a global supply chain service, covering domestic collection, cross-border logistics, overseas warehouses, express, and freight networks. This allows them to offer tailored supply chain solutions to meet customers’ personalized needs.

As of March 2024, Best's international business covered Thailand, Vietnam, Malaysia, Singapore, the Philippines, Indonesia, and the U.S., with 33 self-operated sorting centers, 1,128 sites, and 47,000 square meters of overseas warehousing in Southeast Asia alone. By leveraging its local express services, Best has expanded its warehousing network, freight network, cross-border logistics, and software services across the region, gradually building a B2B2C and cross-border business network between China, Southeast Asia, and North America.

In terms of technology, network, and supply chain services, Best continues to innovate. On one hand, Best Software has integrated with major e-commerce platforms such as Shopee, Lazada, TikTok, Amazon, TEMU, and SHEIN. On the other hand, in response to cross-border e-commerce companies’ needs for digital transformation, Best has launched several user-friendly software products, offering end-to-end SaaS solutions. These include "Qianyi ERP" for comprehensive management of cross-border sellers, "Qianyi WMS" for warehouse management, and "Qianyi TMS" for logistics and delivery management.

Looking forward, Best will continue to pursue its international strategy, expand into new markets, and enhance service quality and operational efficiency. According to Vice President Chen Peng, Best has three key plans: First, strengthen localized service capabilities to provide support tailored to different countries’ cultural practices; second, accelerate global expansion, with plans to enter the Americas in 2024; third, enhance digital management to solve pain points in cross-border e-commerce, such as exchange rate fluctuations and supply chain management.

According to its financial report, in the first quarter of 2024, Best’s international business revenue reached 281 million RMB, up 42.6% year-on-year. Cross-border business volume grew 256.4% year-on-year, with Southeast Asian parcel volume increasing 39.4%. This growth highlights Best's competitiveness in the global logistics supply chain.

Conclusion

As the boundaries between online and offline retail continue to blur, logistics companies that can adapt to support seamless omnichannel experiences will thrive in the next phase of Southeast Asia’s e-commerce growth. Ultimately, those logistics firms that prioritize agility, sustainability, and customer-centric strategies will be best positioned to seize the enormous opportunities in Southeast Asia’s vibrant e-commerce market.

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