By 2050, the Asian Development Bank (ADB) have forecast that seven out of the 249 countries (2.8%) in the world will hold 45% of global GDP and they are all located in Asia: China, India, Indonesia, Japan, South Korea, Malaysia and Thailand.1 Of course this is if the political, institutional, economic, governance and leadership requirements all fall into alignment and can rise up to the challenges that comes with growth heading towards advanced economy status.
Asian cities will become centres of higher education, innovation and technological development from massive urbanisation fueled by a population increase from 1.6 billion to 3.1 billion which will be truly staggering. These cities already account for 80% of economic output and the anticipated three billion additional Asians will put tremendous pressures on - and create - intense competition for Earth’s finite natural resources.2
In the last several months, Chinese tech giants have all released information on their expansion plans across the region, particularly South East Asia. They, too, have been keeping a watchful eye on the growth numbers and potential business opportunities that will come from Asia’s massive urbanisation and raise in incomes.
What is not clear is if they are heeding the warning signs that this will not be the Asian century unless the drain and competition for natural resources is addressed. Nor is it clear that they could, through the power of their logistical operations, precisely reverse logistic, ensure much of these secondary raw materials are returned for reprocessing.
To recap some of the highlights of 2018:
1. Alibaba stated it would double its investment into the Singapore-headquartered regional e-commerce company Lazada to a total of US $4 billion.3
2. Tencent Holdings invested into Singapore-based Sea which operates the e-commerce site Shopee, Garena gaming and esports platforms.4
3. JD.com has completed a joint venture with Central Group in Thailand.5
In a statement issued in May 2018, Lucy Peng, co-founder of Alibaba, stated “With a young population, high mobile penetration and just 3% of the region’s retail sales currently conducted online, we feel very confident to double down on Southeast Asia. We are excited about the incredible opportunities for supercharged growth.”6
Money does not seem to be much of an issue either as financing for Southeast Asia’s technology sector totalled US$6.3 billion across 422 deals in 2017, up from about US$300,000 for 100 deals in 2012, according to data from venture capital research service CB Insights. And logistics, both forward and reverse, will be the enabler to make all this economic activity as seamless an experience as possible.
While there are a variety of different logistic models currently around Alibaba is already into the 2nd phase of its logistic hub in Malaysia and sweetening its investments by developing technologies, such as traffic management solutions via big data analytics, and building skills capabilities of Malaysian entrepreneurs.
However none of these activities offer any insight into the returns management and reverse logistics required to coordinate the millions of dollars of growth that must come to turn these investments into profits. According to Inside Retail Asia “ Retailers who may have innocently thought that offering another channel, Click & Collect, and a wider choice for customers was just another box to tick-off have been caught out by the fact that the omni-channel reality has meant a change in customer mindset, which means they have to deal with the complexity of more returns. Reverse logistics has become an increasing challenge.”7
Yusen Logistics, a Japanese logistics company, has a dedicated page on their website especially for Reverse Logistics “Yusen Logistics has developed a Reverse Logistics program that manages your product returns and allows you to generate revenue from them while limiting your environmental impact. We provide a complete end-to-end service that offers you a system for managing product returns, including a zero-landfill solution.”8
Yusen does not specifically state if their reverse logistics operations is in every market they service, as a zero-landfill solution claim may be hard to live up to given the weaknesses in many local markets in Asia of a robust remanufacturing, refurbishing and recycling industry.
The last words come from the Singapore government’s Economic Development Board “How e-commerce companies are changing the logistics business”. While their article focuses on forward logistics solutions, there are three sentences devoted to reverse logistics “Equally important is improving customer experience to stay competitive by investing in initiatives such as reverse logistics and improving last-mile access for the customer. UPS Access Point is one such example of an efficient delivery and a returns management model. The model allows consumers to pick up parcels – or return a parcel – from a retail outlet such as a newsagent or grocery store.”9
Over the last several months Circular Economy Asia has been watching this space carefully. Asian online shoppers are no different to western online shoppers. They want a fast delivery service and a convenient returns experience. The infrastructure to manage the growth of returns, a viable secondary market and outlets, plus the skills and business acumen to remanufacture, refurbish and reprocess products does not exist yet.
If Alibaba’s market modus operandi is to use its might to also educate and inspire the next generation of Asian entrepreneurs it may well be advised to consider the huge opportunity that will come from the returns market. Here is where circular systems will thrive and have its place.
1 ‘Asia 2050: Realising the Asian Century’, Asian Development Bank, 2011
Ms Adrienna Zsakay is the Founder of Circular Economy Asia Inc., an Australian NGO working on implementing Circular Systems across the Asia Pacific region with its Asian office in Malaysia. Ms Zsakay has invested a large portion of her adult life in Asia and holds an Asian studies degree from the University of Western Australia.