The right place at the right time: Adapting your supply chain to the savvy urban Asian consumer

April 2024

‘Deliver for your customer’ is a clarion call for good business, yet this can be a huge challenge in markets where demographics are rapidly-shifting.

Asia is home to some of the largest and fastest-growing urban centers in the world, with metropolises like Shanghai, Mumbai, and Jakarta hosting millions of consumers who are eager to shop online and enjoy the convenience of eCommerce. These megacities pose unique logistics/ supply chain challenges and businesses need to adapt to the diverse and dynamic needs of the Asian customer. In this article, we will explore some of the key trends and strategies that can help businesses ensure their supply chains help them thrive in these growing Asian markets.

The head of Toll’s logistics business in India Prasad Nair says Asia is the continent to watch in the second half of this decade. 

In Asia, the end consumer has shifted significantly over the past five years, bringing great opportunities in eCommerce for well versed organisations.

The urbanisation movement in Asia has driven the expansion of the region’s largest cities, with millions of people moving from rural areas to the large cities for work opportunities. These urban city centres have become hubs for eCommerce, a sector that grew exponentially through the COVID-19 pandemic globally, with fastest uptake in Asia.

Rajeev Sood, who leads Toll’s Energy, Marine and Renewables logistics operations across Asia says the megacities are the heart of Asian economic growth. 

Prasad cites India’s financial hub -Mumbai as an example of opportunities presented by a megacity.

“The population of Mumbai, including its suburban areas is almost equal to the total population of Australia! Sheer quantum of people fuels consumption. Hence, the sales volumes that can be generated in a megacity like Mumbai are multi-fold compared to other cities” he says. With 70% share of India’s maritime trade and excellent road, railways and air connectivity, Mumbai is the logistics hub of India.

Rajeev says while each of Asia’s largest cities has its own distinctive flavour, what they share is a large population of digitally-savvy young people who spend significant time on social platforms – many with sales channels – and spend a high percentage of their discretionary income on consumer goods.

The dense populations of the megacities has significant supply chain implications.

Warehouse implications

Toll’s Damon Gu, Head of Strategy and Business Development, Asia Logistics, says warehouse investments become a shifting balance of cost and accessibility through rapid urbanisation.

“The property prices will typically increase through urbanisation, so while 10 years ago where the distribution centre (or last mile delivery hub for inventory holding) may have been close to the city centre, these are now pushed 50 kilometres out because of price.”

It requires a clear strategy that also accounts for future change, Damon says.

“It’s a balance between not being too far away from the city centre that you increase delivery cost and time, and not being too close where your rental costs will go through the roof over the years.”

“No one has that crystal ball to make decisions, but this is becoming more and more important for Toll and supply chain companies to pick and choose the right location.” 

Investment in automation

Along with the shifting demographic in the large urban centres, the younger generation have higher career aspirations. This has contributed to a labour shortage in manual jobs and accelerated innovation in automation, Damon says.

“But with the younger generation more interested in career paths in digital technologies, data analytics and engineering, and less willing to take a traditional blue collar logistics roles, there is more incentive for organisations to invest in automation.” Damon says.

Damon says the younger generation are also more interested in sustainable technologies and exploring ways to reduce the carbon footprint, and this is feeding into company strategies and investment.

Last mile delivery implications

Asia's huge urban centres such as Shanghai and Mumbai have dense populations with high-rise living and the last mile delivery can be a challenge in congested traffic, which is also driving innovation.

“There are some exciting operating models being trialled – there are drones that can deliver a coffee in 10 minutes. And they are designing skyscrapers now so that drones can land on your building and deliver goods straight to your window.”

Jonathon – who is based in Singapore and has worked across Japan, Philippines and Malaysia (amongst others) – says: “In China, we are seeing deliveries by robots in some university towns where there’s a high level of students – they are like a Starwars R2D2-type figure – a tube on wheels that moves around. While in Singapore, there are drones delivering goods to ships,” he says.

“We are seeing an evolution of last mile delivery technology linked to eCommerce like we’ve never seen before,” Jonathon says.

Diversity of the region

Companies that view countries as a single homogenous market are often destined to fail. For example, India is an especially diverse country with many different states comprising numerous cultures, languages, governance and levels of economic and urban development.

Better knowledge of the end consumer helps to navigate the social and cultural factors that reflect higher levels of regulatory and reputational risk for foreign companies.

Intra-Asia opportunities

Asia is rapidly emerging into the leading global consumer market. Recently, the Brookings Institution forecast that Emerging East Asia (including much of South East Asia) will surpass the United States as the world’s largest consumer market over the coming decade.

Matthew says that businesses looking to expand their volumes to their end consumers in Asia will be in the right place at the right time for the next phase of global growth.

“We are seeing a growth in intra-Asia trade – with Asia being a trading hub in its own right. We expect intra-Asia will surpass Europe to be the biggest trading entity in its own right. This will have significant impacts on shipping lines and airports, and how we execute that will be important.”