Jakarta’s Soekarno-Hatta International airport is the preferred entry port for ecommerce. Why?

In the scenario where majority of the parcels bound for Indonesia are for consumers in Jakarta and across Java Island, going via Jakarta reduces the cost incurred for last-mile shipping. Especially so if most inbound shipments is for the JABODETABEK area. (JABODETABEK area consists of Jakarta, Bogor, Depok, Tangerang, and Bekasi.)

There are reasons beyond proximity to destination that make Jakarta the preferred entry port.

Volume matters

Jakarta’s huge amount of international flights makes it naturally attractive. With over 400,000 flights and more than 60 million passengers going through Jakarta’s airport, it is comparable to Sydney and Tokyo Haneda. The abundance of international flights makes Jakarta the most accessible port for cross-border shipments. Singapore Airlines alone, makes 70 flights back and forth the Singapore-Jakarta sector on a weekly basis.

Domestic air freight is very expensive. Shipping by air from Jakarta to Singapore is often cheaper than air freight rates for an equivalent distance across islands in Indonesia. On average, domestic rates are 10-35% more expensive than that of an international route such as Jakarta-Singapore/Kuala Lumpur. As such, many couriers would opt to truck a large majority of their parcels in order to save on less time-critical parcels.

The above makes the most sense if you have majority of your volumes to Jakarta and Java Island. But what if you have customers beyond Jakarta and Java island? 

Beyond Jakarta and Java Island

What if your customer base is mainly outside of Java island? Perhaps in Sumatra, Sulawesi, or the smaller islands to the east, what are your options?

Large scale ecommerce marketplaces are already splitting their volumes. Denpasar and Bandung and some of the choices. Lazada moves 30% of their monthly volumes through Denpasar. Shopee moves 20% via Bandung. For them, at hundreds of tonnes of cargo per month, any cost savings is amplified. 

There are a few other popular ports. For example, Medan, Surabaya and even Denpasar. So how do these ports compare to Jakarta?

For one, importing into ports outside of Jakarta can be hit or miss. Establishing operations and roots in these ports is not an easy feat. Allocation of operations space and forming good working relationships with the people on the ground is a crucial part that is very time-consuming.

Furthermore, with the introduction of an online declaration and import system by the Customs Authorities, the port of choice needs to have the system fully rolled out. This takes time in Indonesia. Bali has not allowed ecommerce clearance until later in 2018 following successful system implementation.

In addition to the above, lead-time is of relevance, especially for platforms to stay competitive. Some ports are able to clear goods only after 3-4 working days and clearance cost vary from port to port. Port infrastructure for reverse logistics (warehousing, returns management, etc.) is also crucial for ecommerce players. Changing port is a complex task that requires through and careful analysis.

Let’s run some numbers

Jacob wants to ship 400 parcels, weighing 265kg from Shenzhen. All of his customers are in Denpasar. These are some of the routes and scenarios he can consider:

*Option A*- Shenzhen to Denpasar via Jakarta. 

Total Cost: USD 3,258, Last-mile cost: ~USD 2.25, Lead Time: 3-4 working days

*Option B* – Shenzhen to Denpasar Direct

Total Cost: USD 2,645, Last-mile cost: ~USD 0.65, Lead Time: 2-3 working days

In the above scenario, it makes more sense for Jacob to send parcels directly due to the high last-mile cost domestically. However, if Jacob has parcels spread equally across Indonesia, Jakarta is preferred for its efficiency and facilities. 

Does it make sense to utilise other ports?

Absolutely! If you have large volumes moving to the eastern islands or Sulawesi, you should absolutely consider Denpasar for your eastern port of entry. This is because apart from Jakarta, Denpasar is the next most connected airport in Indonesia. However it is mostly for transshipment to Australia and the rest of the world. It serves a great port of entry for Indonesia for the following reasons:

  • Developed airport with facilities to handle small and large aircrafts
  • One of the cheapest transshipment charges in all of Indonesia
  • Good domestic flights network
  • Ecommerce ready airport

To serve the western side of Indonesia, Medan would ideal as it has the most developed and well connected airport in Sumatra.  

Indonesia is a big market for ecommerce players. However, local knowledge is very important to be able to make the right decisions on how best to move into Indonesia. Depending on your customer geographical spread and where your business is exporting from, the decisions to either move through Jakarta like everybody else, or to use a separate port, is crucial to success. After all, a few cents of savings here and there can be significant at scale. 

You’re always welcome to reach out to us, we will find the most efficient way of moving your ecommerce goods!

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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