Author | Yangzi

Editor | Liu Jingfeng

Many Chinese merchants who first arrive in Southeast Asia still feel the differences in an unfamiliar market. In this cross-border e-commerce market that cannot be missed, the maturity of logistics infrastructure is still insufficient compared to domestic standards, posing a barrier to the acceleration of cross-border merchants. An interesting phenomenon is that most of the logistics delivery vehicles seen on the streets and alleys of Southeast Asia are not delivery trucks but motorcycles. Due to complex terrain, motorcycles can navigate varied conditions and even in heavy traffic, maneuver through narrow streets and congested areas more efficiently than large trucks. However, motorcycles have limited cargo capacity and struggle with bulky shipments. Naturally, Southeast Asia comprises many island nations with archipelago and mountainous terrain, challenging the “last mile” of e-commerce logistics. Despite the efforts of many logistics service providers in Southeast Asia, domestic logistics services still outshine them. Southeast Asia is a rapidly growing blue ocean market for those venturing overseas. In 2023, the e-commerce market in Southeast Asia ranked first globally in growth rate, marking the third consecutive year of being the fastest-growing region in the world (source: eMarketer).

Unlike domestic price and product competition, for any merchant to establish competitiveness in the Southeast Asian market, the stability and sufficient capacity of logistics services are essential. Thus, overseas warehouses, as a powerful tool to enhance logistics efficiency, have become a strategic battleground for cross-border merchants. Li Xia, a cross-border merchant, began opening stores in Southeast Asia earlier this year, sharing with Xiaguangshe, “Only overseas warehouses can offer Thai consumers both affordability and speed.” However, high-quality overseas warehouses are scarce resources. According to an analysis by an overseas warehouse enterprise in 2023, the Southeast Asian e-commerce market is booming, and there will be a shortfall of approximately 20 million square meters of storage space in the next 3-5 years. Finding a safe and reliable overseas warehouse requires some “luck” due to market uncertainty.

From a supply perspective, according to the “2023 Overseas Warehouse Blue Paper,” issues such as varying quality, price wars, irregular overseas warehouse processes, false advertising, and lack of qualifications are prevalent. Merchants must navigate these pitfalls to find safe and reliable overseas warehouses and build trust. This process is fraught with uncertainties and a major concern for early explorers. To address this challenge, e-commerce platforms have taken significant steps to provide merchants with more trustworthy certified warehouses. For instance, TikTok Shop offers cross-border merchants certified and reliable overseas warehouses. Since July 30, 2024, TikTok Shop has fully opened its overseas warehouse program for Southeast Asian cross-border merchants, indicating pre-screening of safe and reliable warehouses. TikTok Shop's overseas warehouse no longer imposes entry barriers on cross-border merchants, significantly simplifying the review process. This effectively addresses merchants' concerns about slow shipping times and low order conversion rates, successfully bridging a crucial gap in entering the Southeast Asian market. A new solution is emerging for Southeast Asian logistics challenges.

Li Xia decided to expand overseas after learning about merchant plans for this year's 618 shopping festival.

As the domestic e-commerce market matures, customer acquisition costs are rising. Merchants in this competitive environment must explore new development paths, focusing on pricing and innovation in the existing market. This means merchants must exert more effort to achieve the same returns.

Facing cost pressures in the domestic e-commerce environment, Li Xia realized that “go global or go out of business” is more than just a slogan. Rather than stagnating in the current situation, she chose to boldly explore overseas markets for new development opportunities.

Many overseas merchants choose Southeast Asia as their first destination due to its rapid growth and young population, coupled with its proximity. However, Li Xia is not alone in targeting this market. “After going global, we face a different market, but many of our competitors are still Chinese merchants,” says Li Xia. In fact, China's 30 years of rapid internet development have given Chinese merchants a comparative advantage in e-commerce. With a strong manufacturing base, complete industrial chain, and vast domestic C-end demand, Chinese cross-border e-commerce has emerged as a disruptor in global markets. However, experienced Chinese merchants know that e-commerce trends do not wait. E-commerce businesses must contend with two variables: cyclical fluctuations and promotional events like the annual 618 shopping festival, where most merchants begin preparations five months in advance. In the ever-changing Southeast Asian market, logistics, as the foundation, directly impacts merchants' fulfillment capabilities. Only well-equipped merchants can seize business opportunities. Therefore, the demand for overseas warehouses among Southeast Asian cross-border merchants is persistent. However, navigating an unfamiliar market requires collaboration beyond individual private enterprises. The combined efforts of platforms, merchants, and overseas warehouse enterprises can yield greater impact.

Since July 30, 2024, TikTok Shop's Southeast Asian cross-border e-commerce platform has removed entry barriers for cross-border merchants, enabling them to capitalize on incremental opportunities across categories. For cross-border merchants, overseas warehouses are fundamental to localized operations. Without addressing infrastructure issues, market vitality remains untapped. For the fast-changing e-commerce industry, the key to vitality is decisive action. TikTok Shop's overseas warehouse layout saves time and costs for merchants, equipping them with everything they need to seize business opportunities as they arise.

Wu Xiaobo once said in “Business Warfare: The E-commerce Era,” “Whoever controls logistics controls the world.” In the speed race of logistics, like the price war in e-commerce, pure speed and price competition are unsustainable. The ultimate value lies in user experience. For e-commerce, logistics' importance is undeniable, directly shaping user experience. Logistics companies can be likened to water utilities, requiring reservoirs, pipelines, and faucets. Each link is capital-intensive but contributes to enhancing user experience.

Thus, e-commerce's relentless pursuit of speed pushes the logistics industry towards “faster and faster,” with both express delivery giants and e-commerce titans accelerating their logistics layouts. In the long-term e-commerce battle, time is crucial, and logistics efficiency determines service quality. In cross-border e-commerce, 3PL (third-party logistics) or local fulfillment, creating flexible warehousing and local shipping solutions, enhances delivery efficiency. In Southeast Asia, only overseas warehouses can currently improve shipping timeliness.

Overseas warehouses offer cross-border merchants two key advantages: faster fulfillment (saving 3-7 days compared to cross-border direct shipping, though varying by Southeast Asian country) and lower fulfillment costs (reducing logistics costs by approximately 10%, according to TikTok Shop's Southeast Asian cross-border e-commerce data). For time-sensitive or seasonal products, superior logistics can swiftly deliver goods during peak seasons, enhancing consumer satisfaction, loyalty, and repeat purchases, thus boosting brand competitiveness by ensuring timely delivery that keeps merchants closer to consumers.

Achieving good service quality is the first step in operating a premium store, leading to stable and sustained order growth.

The advantages of overseas warehouses are crucial for order growth.

For example, Seasir, a leading brand in TikTok Shop's Southeast Asian fishing rod category, is based in Weihai, Shandong, China's fishing industry hub, producing products that meet about 60% of the world's fishing tackle demand. Geographically, Weihai is at the easternmost tip of the Shandong Peninsula, requiring at least 1-3 days to reach domestic transit warehouses in Yiwu or Shanghai before air and final-mile logistics, taking an average of 5-10 days. This long timeline hinders Seasir's product presentation to consumers. Therefore, upon the introduction of the overseas warehouse policy, Seasir promptly joined TikTok Shop's Local Fulfillment Pilot Program and chose overseas warehouse shipping.

This brought three benefits: 1) Faster fulfillment – orders take only 2-3 days from order to delivery, less than 30% of direct shipping times. 2) Lower costs – overall overseas warehouse fees are lower than direct shipping. For long cross-border logistics chains, direct shipping increases the price of Seasir's mid-to-high-end products due to complex logistics costs. With overseas warehouses, the shortened logistics chain simplifies billing, reducing logistics costs by about 10% and facilitating reverse logistics, saving on return costs and enabling faster product relisting, boosting Seasir's product competitiveness. With overseas warehouses, Seasir gained timeliness and cost advantages, enhancing consumer service experience and boosting order volume by 20%.

To date, Seasir's daily order volume has increased by 500% since joining TikTok Shop. From a branding perspective, with consumer loyalty and bestsellers, Seasir can expand its product range. “For heavy or long items, direct shipping is costly and restrictive. With overseas warehouses, we can sell longer fishing rods up to one meter,” said Allen, Seasir's responsible person. Post-overseas warehouse adoption, Seasir noticed improved conversion rates. Currently operating on multiple platforms, Seasir's TikTok Shop brand image drives sales across platforms, with local fulfillment solidifying its long-term brand strength and positioning it as a top-tier brand across networks.

Furthermore, TikTok Shop's Southeast Asian cross-border e-commerce overseas warehouse service expands merchants' category options, enabling food supplements, large-volume liquids, power banks, and other restricted cross-border direct shipping categories to find market potential, further invigorating the market. As an explorer in new markets, TikTok Shop's Southeast Asian cross-border e-commerce not only aids Chinese sellers in overseas expansion but also accompanies them in growth, offering incentives like traffic subsidies to boost conversion rates. Undoubtedly, in the overt trend of going global, connecting goods worldwide is a popular choice for many merchants. Navigating unfamiliar overseas markets is challenging, with issues like finding reliable overseas warehouse managers, local mistrust of Chinese bosses, unstable initial orders, and high overhead costs. Reliable platform support means leveraging past experiences to swiftly seize opportunities and gain a competitive edge for long-term success. The exploration of Southeast Asia and beyond starts now and continues step by step.