With e-commerce gross merchandise value in Southeast Asia projected to hit US$359 billion by 2030, the industry remains firmly on track for accelerated growth. Much of this momentum will come from the region’s small and medium-sized enterprises (SMEs), which make up 97 percent of the economy. Yet, this trajectory could slow if a critical – often overlooked – challenge is not addressed: delivery speed and experience.
According to a recent report by VML, nearly half of shoppers will avoid retailers who don’t offer next-day or scheduled delivery options. This underscores the growing importance of the last-mile experience – but unlike functions such as customer relationship management, marketing or even product development, this is not a challenge SMEs can tackle alone. Research by McKinsey suggests a gap of around US$60 billion between existing or announced transport and logistics infrastructure investment and what could be needed to meet future trade flows.
Given the complex and interconnected nature of the logistics industry, closing this gap will require coordinated and concerted action across logistics players, infrastructure and equipment providers, governments, and more.
Against this backdrop, a key question emerges: How can we as an industry help SMEs solve for the last-mile and fully capture the region’s e-commerce opportunity?
The practical path forward for SMEs
When it comes to the last-mile experience, SMEs generally have two options: investing in and building their own logistics network or partnering with a third-party logistics provider (3PL).
Having an in-house logistics network provides end-to-end visibility. This is valuable as every parcel, route, and customer interaction is fully traceable, offering retailers both tighter control over service and comprehensive insights into customer preferences across the customer journey. However, this level of control comes with a heavy price tag. Research shows that the last mile is often the most cost-intensive stage of the delivery chain, making up 53 percent of total shipping costs for businesses in 2023 – up from 41 percent just five years ago. As it stands, this is an investment many SMEs simply cannot afford.
Partnering with a 3PL could offer a more practical start, by tapping into a logistics provider’s mature networks, established infrastructure, and operational expertise. According to a global study by NTT, 66 percent of shippers say 3PLs contribute to reducing overall logistics costs, a key area of savings for SMEs who are more cost-conscious.
Naturally, there will be trade-offs for every option – SMEs need to make the call that best aligns with their current and future business model. For example, a small family-run store selling fresh produce is unlikely to build its own cold-chain logistics network, which is inherently more complex than general logistics. Outsourcing to a specialized 3PL with the required infrastructure already in place can deliver reliable service at a far lower capital cost.
Ensuring infrastructure keeps up with the e-commerce growth
Making the right decision between building in-house or relying on a 3PL can help SMEs identify the path of least resistance, but it does not eliminate the structural barriers that constrain both approaches.
Last-mile challenges in Southeast Asia stem largely from the region’s uneven logistics infrastructure, shaped by its diverse landscapes and varying stages of development. In some rural parts of Indonesia, for instance, unpaved village paths could be so narrow that only two-wheelers can pass. In other cases, traditional mapping approaches cannot keep up with the speed at which Southeast Asia is developing, which impacts the accuracy of real-time address data and mapping. These inconsistencies make scaling extremely difficult for SMEs, as each market – or even city and district – could demand different resources and delivery methods, even when working with a 3PL. As SMEs scale, this patchwork of requirements compounds operational complexity.
Yet, upgrading logistics infrastructure demands substantial investment and commitment from governments and private-sector players. A recent report by Multilateral Cooperation Centre for Development Finance found that international financial institutions have actively promoted Public–Private Partnership (PPP) models to support cross-border connectivity infrastructure in Southeast Asia; closer to home, Singapore’s Infocomm Media Development Agency has launched a Federated Locker and Collection Points Programme that consolidates stations across various operators into a single network. This enables greater delivery coverage and cost savings – with the goal of easing last-mile fulfilment challenges for retailers and logistics operators alike.
These efforts illustrate how shared infrastructure development can deliver tangible benefits for SMEs. Strengthening this operational backbone is essential to enabling their long-term growth and competitiveness, as they capture opportunities amid the e-commerce boom.
Bridging the digital gap for SMEs
Similarly, SMEs cannot be left behind as e-commerce becomes increasingly digital-first. Today, 86 percent of Southeast Asian consumers shop actively in online malls. This signals a key shift in consumer behaviour that SMEs must keep pace with in order to reach Southeast Asia’s growing base of shoppers.
Digitalization is now happening across the entire backend of retail – from inventory management and accounting, to marketing, fulfilment, and last-mile delivery. The rise of one-stop cloud-based platforms, such as super apps in Southeast Asia, offers an easy entry point for SMEs to adopt digital tools with access to advanced capabilities specific to the last-mile. These include built-in capabilities like real-time parcel tracking, automated delivery notifications, and unified dashboards for monitoring inventory, without any heavy upfront investment.
Aside from platforms, many 3PLs in the region have also begun integrating advanced technologies at scale across their operations. This gives SMEs access to time and cost-saving benefits from technology like automated sorting machines and AI-powered routing systems for real-time traffic mapping – that would otherwise be far too costly or complex for SMEs to build independently. This way, SMEs are able to “plug into” cutting-edge logistics systems, helping them better compete with larger retailers.
The last mile is emerging as a defining challenge for SMEs, as they compete to meet rising delivery expectations and an increasingly digital Southeast Asian consumer base. But these pressures also present an opportunity to keep millions of small businesses active in the digital economy. Strengthening the last mile through collective industry action isn’t just about supporting SMEs – it’s about reinforcing Southeast Asia’s long-term economic resilience.
Tracy Liu is Sales and Marketing Director, J&T Express.
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