Courier service remains prospective despite reduced market

JAKARTA (JP): Indonesia's courier service remains prospective with sharper competition despite a reduced market and steady growth rates, executives of the industry have said.

The current situation, in which the economy is recovering from a prolonged economic crisis, forced the players in this sector to introduce innovative services to maintain or attract customers.

TNT Director Colin Moran admitted that competition was very tough as players were pushing for market share growth in a reduced market size.

He said that TNT forced itself to be different from the rest.

"This is why we are really focusing on the value-added areas such as high tech, where we have state-of-the-art solutions for customers to manage their parts distribution throughout Indonesia. We have also launched a domestic overnight service which links all our branches with a next-day service that also carries a full money back guarantee," he said, adding that the service enjoyed strong growth.

He said that growth had been steady, with major advancement in the five years leading up to the crisis, which hit in late 1997.

"Today, the industry is showing signs that the volume is recovering, however, there is severe pressure on prices, and the recent global fuel crisis is placing extreme pressure on costs."

He said that the other area of growth had been in the express import area, where, with its global network, TNT could pick up a product anywhere in the world and import it to Indonesia with express customs clearance and bill the customer here for the service. "This gives them greater control over their costs."

TNT, a Dutch courier service which commenced operations in Indonesia in 1979, now operates 21 offices and employs 400 personnel in its express division and another 300 in its logistics division, which probably makes the company the largest in the country among the major multinational companies in the industry.

TNT estimates that the growth rate in this sector will remain low over the next couple of years.

"We believe the generic growth of the industry is still quite low, maybe 5 percent to 10 percent. However, we are targeting growth in excess of this mainly due to product innovation and value-added services," said Moran.

Another leading company, PT Birotika Semesta/DHL, has also set strategies to expand its operations by operating more offices throughout the country. It has invested millions of dollars to increase its services by establishing more infrastructure in Indonesia.

DHL senior technical advisor Mike Fitzpatrick said: "There is nothing else we can do but improve services in this situation, with an economy still suffering from the impact of a financial crisis. We see recent growth rates of 5 percent to 10 percent annually."

Meanwhile, UPS Indonesia technical advisor for marketing, Nell R. Bond, said that his company expected to see a double-digit compound growth, both into and out of Indonesia over the next three years.

Challenge

Most businesspeople will agree that the country's economy now greatly depends on its political stability, as seen by Bond.

He said that the main challenge being faced by the Indonesian market was a fluctuating currency and political instability.

Soraya shared the opinion, saying that the challenge for this industry in Indonesia was economic recovery, which is happening at a very slow pace.

PT Titipan Kilat (Tiki) Director Ahmad Yuniarto agreed. He said that courier service prospects in Indonesia would depend on the domestic economic growth.

"This sector will always be prospective, in accordance with the economic recovery. However, the challenges between domestic and overseas players are slightly different, depending on the investments for new branches, human resources and information technology," he said, adding that market segment was also significant in this sector.

He said that since most of the players aimed to get corporate customers, other players like Tiki could penetrate and focus on the retail market.

He added that overseas players concentrated more on services out of Indonesia, so local players would be able to dominate services within Indonesia.

"In terms of service quality, both local and overseas players are dealing with fair rivalry. Both local and overseas players are offering guarantees in delivery time as well as packaging insurance," he said.

Guarantee of delivery is the main challenge for courier service players, which is why a strategic alliance is also important for them.

Yuniarto said that players in this industry include the postal service firms, freight forwarders, telecommunications as well as transportation operators and travel agencies. Some of the companies have set alliances to improve service quality. By setting up an alliance -- instead of competing -- they can also expand their market shares.

The best example in alliance is the state-owned postal service provider PT Pos Indonesia (Posindo), which has set up collaborations with DHL and TNT.

Moran said that such alliances would improve Posindo's global service levels and strengthen its international image as a service provider.

"TNT also intends to accelerate coverage throughout Indonesia through branch openings or agency-type arrangements. We are also planning to position our company with great strength in the high- tech areas of industries," he said.

Internet

As a matter of fact, the Internet, which offers ease to people in sending documents virtually, has not much affected the courier business.

Moran said that the Internet had been a tool expanding TNT's business, making it an a efficient medium to conduct business.

"Via the Internet, TNT customers can place a pick up booking within Indonesia or any country overseas on our website, track the whereabouts of their package, check the rates and reorder supplies."

Bond said that the Internet had also been a major medium of trading, therefore, courier companies could be well-positioned to align themselves with the e-commerce market.

"UPS has been selected as the 'Company of the Year' by Forbes, which described it as providing the missing link in Internet retailing," he said.

Nonetheless, e-commerce will always need manual, physical actions to delivery products from point A to point B, said Soraya, therefore, an effective logistic and distribution system would remain as a great role in the era of e-commerce.

Regulation

According to Moran, the industry is still restricted in terms of foreign investment and as such reduces the cash flow into the industry.

"This obviously reduces employment growth opportunities within this industry and slows the introduction of more high-tech enhancements for the industry."

He said that TNT was working with the government to develop new customs procedures that would allow faster more efficient clearance of imported products through the airport. "This is a slow process and needs to be a prime focus to improve the service to Indonesian importers."

Yuniarto, who is also vice chairman of domestic chapter of the Indonesia Association of Courier Service (Asperindo) said that the association had proposed the government to amend the Postal Law No. 6/ 1984.

"Asperindo also proposes to the government to group the business of postal services, courier an cargo under one single, integrated regulation, covering the sector of post and telecommunications, as well as land, air and sea transportation," he said.

He said that such a regulation was needed as the courier business was operated by many players, therefore, there were no significant differences between couriers and cargo handlers.

He added that global competition, which does not recognize monopolies, would require flexibility with international standards.