Determining a fulfilment strategy is complicated when the business is scaling across multiple countries in ASEAN.

Fashion industry logistics carries additional burden as it constantly need to adapt to new trends and seasonal highs and lows.

Meanwhile, the development of e-commerce and m-commerce has transformed the industry.

Apart from ensuring the availability of stock in both online and offline channels, the optimisation of costs and deadlines, supplier flexibility and inventory visibility are major concerns for fashion brands in formulating logistics strategies.

The cost and capability of logistics providers in Malaysia and Thailand are relatively competitive in the region, but there are last mile issues that need to be addressed.

As an archipelago with only about 55% of population living in urban areas, Indonesia often presents logistics challenges for fulfilment and last mile delivery.

Cross-border Fulfilment vs. Localised Fulfilment

There are two main approaches in handling logistics for selling to the ASEAN market:

  1. Cross-border Fulfilment: Under this arrangement, products are shipped from one country across borders to overseas buyers. This is more common for small businesses or small orders as it does not require too much capital expenditure. However, when business grows and order ramps up, so do customer expectations, which often motivates a company to shift to localised fulfilment.
  2. Localised Fulfilment: It requires inventory to be stored in warehouses within the target markets, such that the time for delivery is shorter. It is more common for larger scale companies or large volume of orders. It involves investments in warehouses, logistics staff and a delivery fleet to provide fulfilment nationally. Another option is outsourcing the fulfilment tasks to a third-party logistics provider, such as Kerry Logistics and FedEx.

When a business is new to a market and unsure of the demand for its products, a phased approach is an efficient way to test the market without full commitment.

Starting with a cross-border fulfilment approach means that the business would not need to invest heavily in inventory and a local team to run the operations. It allows time for estimating the business’s scalability before major local investment.

Direct Cross-border B2C Shipping and Regional Hub

There are no hard-and-fast rules to determine which approach is more appropriate. The decision ultimately depends on a set of factors unique to each business. That said, a regional e-fulfilment hub combined with cross-border shipping is widely used by Hong Kong companies to operate e-commerce sales in the fragmented ASEAN markets.

Many companies choose Singapore as a regional e-fulfilment hub to enter the ASEAN market because of the city’s low customs tax, relatively well-established infrastructure and regulations within ASEAN.

Singapore’s Zero-GST Warehouse Scheme (ZGS) allows approved companies to store imported non-dutiable goods for an indefinite period in a designated area licensed by Singapore Customs, with the Goods and Services Tax (GST) suspended.[2]

In response to the rising cross-border logistics demand in the region, DHL Express opened its South Asia hub in Singapore in 2016.

The facility is located in the Changi Airfreight Center (CAC) at Changi International Airport. Another key player, the Fung Group, a global leader in supply chain solutions, also set up its office and regional headquarters in Singapore to leverage the city’s connectivity to key markets in Southeast Asia.[3]

Alibaba, however, has chosen Malaysia for its regional distribution hub. The choice boiled down to economies of scale, as well as the lower operational and labour costs in Malaysia. The lower land cost is an additional advantage, as Alibaba requires over 20,000 acres for its e-fulfilment centre alone.

There are other benefits the e-commerce giant choosing Malaysia. First, Malaysia itself is a big market as cross-border e-commerce makes up 40% of the total e-commerce market in Malaysia. Second, Malaysia has a bigger overseas Chinese community who are users of Tmall, Alibaba and AliExpress.

Third, Malaysia is close to Indonesia, which is Alibaba and Lazada’s biggest market in ASEAN, and Malaysia is connected to Thailand’s southern part giving Alibaba land access to other ASEAN nations, such as Vietnam, Cambodia and Myanmar.[4]

Factors Affecting Logistics Strategy

Before deciding on the best strategy, there are some key factors to consider:

  1. Transportation Lead Time: Being able to deliver within a short time frame improves customer satisfaction. For a foreign brand, partnering up with a local logistics provider will help cut transport and delivery times.
  2. Duties and Taxes: Subject to the tax laws of different countries, buying goods online coming from a non-ASEAN destination ay involve much higher tax. Using Singapore as a regional distribution company may enable FTA benefits in the region.
  3. Cash-on-Delivery (COD): The lack of a regional digital payment and heavy reliance on COD in most ASEAN markets. Depending on the country, COD can be anywhere from 50-95% of total orders shipped. By not offering it, suppliers would lose out on a large portion of sales opportunities. When making a decision on logistics partners, suppliers should pick one that offers COD arrangement.

Having a localised e-commerce fulfilment strategy in ASEAN means more control over the logistics process. Local investment in the fulfilment process includes better supervision of inventory management, handover, last-mile delivery and reverse logistics. For example, going local reduces the number of parties involved, meaning easier identification of problem areas to enforce fast solutions. The reduced distance to end customers will also lower costs.

As the brand’s position becomes stronger in a country and the order volume rises, managing customer expectations remotely gets harder and could hinder businesses growth. In the long run, cross-border costs might be higher than investing in local infrastructure. Doing things locally could also increase the brand’s ability to attract more demand from consumers who may not be willing to pay for extra mile delivery or wait more than a week for orders.

Each ASEAN country has its own set of regulations for foreign brands doing business, as such challenges might differ from one country to another. Choosing the right local partner is imperative in doing business in new unknown markets. Businesses can leverage their local expertise to find the best strategy to tap into the ASEAN market.


[1] No tax/duty/VAT are required for Order values below De Minimis: Indonesia (USD100), Malaysia (MYR500), Thailand (THB1,000), and Singapore (SGD400)

[2] Singapore Customs

[3] Fung Group

[4] Primary research: interviews with cross-border logistics experts.

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