Online marketplaces test delivery drones across rural Indonesia

As logistics remains a big issue in e-commerce expansion in Indonesia, online marketplaces are showing an interest in investing in unmanned aerial vehicles, also known as drones, to help reach rural areas across the country.

Under its global smart supply chain network, China’s second largest online retailer JD.com has tested drones in Indonesia following the government’s approval earlier this year as it wants to expand to overseas markets.

“We want to transfer our cutting-edge tech to the overseas market, especially Indonesia. That was the first time we exported the technology [from China],” the company’s director of corporate strategy and investment, Yao Xiao, said during a media roundtable session in Beijing recently.

Spending the past year building the network, the company now operates its drone delivery service in 100 villages in rural China. Over 90 per cent of the products it ships qualify for same-day or next-day shipping.

Xiao said the company was aware that drones were highly regulated everywhere, including in Indonesia, which had no regulation on commercial drone deliveries. However, it said it would work closely with the government to make the plan a reality.

“We are really committed to this market. When we think about how many islands there are in Indonesia, it’s pretty impressive and we are trying to apply the same technology that works in China,” she said.

Homegrown e-marketplace Bukalapak has also tested delivery drones. It recently held a trial in Tangerang, Banten, with a limited flying radius of under 5km.

Compared to ojek (motorcycle taxi) delivery services, which usually take 15 to 20 minutes to reach a customer’s house from the warehouse, drone delivery services take three to five minutes.

However, the services cannot be legally implemented without the introduction of regulations on the use of commercial drones.

“Our drone delivery services are still in need of further preparation in technical matters, including the certainty of regulation on drone flights for commercial use. We [would] support the government [should it] make a regulation on ensuring safety in the shipping process and customer convenience,” Bukalapak cofounder Fajrin Rasyid said.

A Fortune 500 business consultancy, Accenture, estimated that Indonesia’s e-commerce market would grow from $27 billion last year to $300 billion by 2025 if the country’s digital ecosystem develops into a fully integrated environment.

It pointed to China as a more concrete example of the well-integrated digital ecosystem that Indonesia needed to work toward to achieve growth in e-commerce, especially as poor infrastructure made for costly delivery, especially in remote areas outside of Java.

Shipping a gallon of water from Jayapura to Timika, for example, costs 40 per cent more – 456,000 rupiah ($32) – than shipping the same gallon from Jakarta to Surabaya, even though the distance between Jayapura and Timika is 450km, while Jakarta and Surabaya are separated by 660km.

‘No place too far away’

In China, meanwhile, drone delivery has become standard in the country’s logistics industry, in which JD.com subsidiary JD Logistics has the largest network. It operates unmanned sorting centres and uses drones that can carry 50kg payloads to deliver products purchased online to rural shoppers.

Suqian city of East China’s Jiangsu province was chosen as its first drone delivery hub. It has also built hundreds of air routes for drone delivery in many other provinces, including Shaanxi, Hainan and Qinghai, with hundreds of remote mountain villages included along the flight routes covering over 80,000km.

However, the company only sees delivery drones as a viable option for rural areas where poor transportation infrastructure inhibits efficient courier delivery and no obstacles exist that could hinder drone operations, unlike in megacities such as Shanghai or Beijing.

Read more...