eFulfilment Supports eCommerce Growth in Asia

Presentor: Coy Zhang Director, Global Business Development Coy.Zhang@arvato.com Phone: +86 136 0043 9718

1.arvato overview

2.Challenges & Approaches

3.Reference Cases

4.Summary

Agenda

arvato – a global supply chain and BPO service provider

Warehouse space

>11.8m sqft

Global locations

110+

Call Centers

45+

Revenue

4.4 € millions

Employees

66,410

arvato China: Shanghai

20 000 sqm Footprint

86 Employees Headcount

Customers

References – Consumer Goods

1.arvato overview

2.Challenges & Approaches:

3.Reference Cases

4.Summary

Agenda

Global Brands are going local, Local Brands are going global

Major topics

eFulfilment in domestic China

Cross-border eFulfilment

eFulfilment in Southeast Asia

Market status

• Coastal areas (14% in size) have 41% of the populations and 60% of the GDP • 3 hours circle by air can cover 2/3 of China

• Concept of Tier 1-6 cities

• Fragmented logistics market

eFulfilment in domestic China

Challenge – 1

Hard for forecast new market? new channel? high volume (SKU) mixing low inventory

eFulfilment in domestic China

Different ways to try

Leverage the experience of suppliers

Put together the B2B warehouse and B2C warehouse Reduce inventory level Easy for replenishment Improve the in-stock availability

eFulfilment in domestic China

Challenge – 2

Poor logistics performance

eFulfilment in domestic China

Customer Satisfaction is Our Goal?!

Challenge – 2

Poor logistics performance

• Key is in delivery • Face-to-face contact with consumers • COD process • Return process

eFulfilment in domestic China

Transportation suppliers

FedEx/SF Yuan Tong ZJS EMS

Delivery time 1-3 days 1-5 days 1-5 days 1-7 days

Cost High Low Low High

Delivery area Tier 1-3 cities Tier 1-4 cities Tier 1-4 cities National

COD settlement High service level

POS service /

Available but not many

POS devices

Available but with bad

debt

Flexibility Standard Service Medium High Low

Advantages High quality Higher service level in

SH/JS/ZJ

Provide customized

service

Wide range of delivery

areas

Disadvantages Coverage limited No COD service Coverage limited Service quality

Long lead time

eFulfilment in domestic China

Challenge – 3

Emerging markets

eFulfilment in domestic China

60 and above

50-59

40-49

30-39

20-29

10-19

Below 10

Countryside Urban

eCom market in China country side: CNY180 billion (EUR225 billion) in 2014 CNY460 billion (EUR575 billion) in 2016

Trend: • JD.com is pushing for new delivery standard

• Hi-speed train helps for distribution network

• Ri Ri Shun (Goodaymart) – country wise network

• SF Express, JD.com are expanding to country side

eFulfilment in domestic China

Cross-border eCommerce (Export)

Postal Service Fulfilled

from China Courier Service

Fulfilled from China Special Lane Service Fulfilled from China

Fulfilled from Overseas Warehouse

Delivery Time Long (15-30 days) Short (3-7 days) Moderate (10-15 days) Short (3-7 days)

Delivery Cost Low High Moderate Moderate

Inventory Risk Low Low Low High

East for Customs More difficult Difficult Moderate Easy

Tax Registration No need No need No need Tax registration is needed

Applicable Low value goods High value goods;

impatient customers Moderate Big volume

Cross-border eCommerce (import)

Major challenges • Customs process

• CIQ process

• Duty & Tax

Free Trade Zone is still an immature solution, but worth a try.

Key figures of the Malaysian market

Total Online Sales in €bn

Internet users (2014) 68%

(Ø T5= 79%)

Online buyers (2014) 18m

(Ø T5= 38m)

Online spend per customer p.a. (2014)

305€ (Ø T5= 1,099€)

Sources: Internetlivestats, VATlive, ADMA, ITU, Webcertain, Coface A1 (best), A2, A3, A4, B, C, D (worst)

0.7 0.9

1.1

1.3

1.6

1.8

2.0 2.3

2.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2012 2013 2014e 2015e 2016e 2017e 2018e 2019e 2020e

17% CAGR

eCom of total retail (2014) 4.4% (Ø T5= 6%)

Mobile subscriptions, share of population (2013)

145% (Ø T5= 121%)

Mobile share of total internet traffic (2013)

20% (Ø T5= 10%) 10%

11%

12%

12%

13%

19%

20%

0% 5% 10% 15% 20% 25%

Film

Shoes

Gift for someone

Books

Healthcare

Clothes

Travel

What Malaysian Internet Buyers Buy Online, 2012 (multiple answers)

at least 10% below T5 on average at least 10% above T5

T5= average of Top 5 European countries (UK, DE, FR, IT, ES)

GDP per capita (2014) 7,813€ (Ø T5= 28,346€)

CoFace Rating (2013)

(creditworthiness)

A2

(Ø T5= A3)

VAT Sales/Service

Tax (5%-15%)

Population (2014) 30m (Ø T5= 64m)

Language Malaysian

Currency Malaysian Ringit

(MYR)

eFulfilment in Southeast Asia

Destination Country Origin

SG HK* SH** JP TH

SG SD/NBD 1 1 1 3

TH 1 1-2 1 2 SD / NBD

MY 1 1-2 1 2 2

ID 1 2-4 1 2 3

PH 1 1 1 2 2

VN 1 1-2 1 2 1

BN 1 4 3 2 5

AU 1 1-3 3 2 5

HK 1 SD/NBD 1 1 2

JP 1 1 1 1 - 2 2

KR 1 1 2 1 2

TW 1 1 1 1 2

IN 1 2-4 2 2 3

CN 2-3 1-2 1-4 2 5

* Custom clearance depends on actual clearance time and commodity type. ** Same day custom clearance for SH outbound if cut-off time of 11.00am is met.

eFulfilment in Southeast Asia

eFulfilment in Southeast Asia

Regional Hub Location: • Shanghai – China

• Hong Kong / Singapore - Southeast Asia

• Mumbai – India

1.arvato overview

2.Challenges & Approaches:

3.Reference Cases

4.Summary

Agenda

REQUIREMENTS • Manage multi-brand transactions for Luxury Beauty from a single

source.

• All orders from EC channels including official website, call center and other digital sales platform are handled by arvato

• Distribution to end users nationwide

ORDER PER DAY

2,000+

SKU ON STOCK

3,000+

• Integrated eCommerce solution

• Shop- and content-management

• Online Marketing

• Logistics fulfillment & nation-wide delivery management

• Online and mobile channel order processing

• Online payment and COD payment management

• Customer services

SOLUTION END-2-END

ECOMMERCE

INVENTORY ACCURACY

>99%

Reference Case – Multiple carrier strategy; integrated solution

REQUIREMENTS • T-mall platform setup

• T-mall online shop management

• Ecommerce operations

• 3rd Party e-commerce platform creative design

• Fulfillment and delivery management

Reference Case – Multiple warehousing strategy

ORDER PER DAY

200+

ORDER CUT-OFF TIME

4 PM

• Integrated ecommerce solution

• Shop- and content-management

• Online Marketing and online payment

• Logistics fulfillment

• Backend IT services

• Nationwide delivery management

SOLUTION END-2-END

ECOMMERCE

INVENTORY ACCURACY

>99%

REQUIREMENTS • Manage order related customer queries

via phone and email support

• Provide a reliable IT backend landscape with integration into webshop

• Enable client to benefit and leverage from proven infrastructure and solutions to increase net sales earnings

SHIP TO COUNTRIES:

SG, AU, MY, TH, VN, ID, BR, PH

ON-TIME DELIVERY

>99%

• Systematic country rollout across Asia Pacific to foster brand loyalty and increase net sales

• Customized fit-out for Garment-on-Hanger (GoH) inventory, high value accessories including “Gift-wrapping” packaging service” to suit fashion seasonality and complexity.

• Support the customer in their geographical expansion to meet the exponential growth of online ordering across Asia Pacific

• Setup fashion specific fashion warehouse including fitting and operation’s processes for distribution and returns management

• 24/7 TAPA compliance, temperature and humidity control environment, photography room

• Call Center Support – email, phone, OTSR

• SAP driven warehousing, distribution and return processes

• Results oriented partnership targeting cost reductions and revenue growth/ shop turnover

SOLUTION

Reference Case – eFulfilment Crossing Boarders in Asia

INSPECTION & PACKING

Packing Process

eCommerce is booming in whole Asia

Customers become more and more demanding (they won’t wait for too long)

Many different options in the market

Brands needs to find reliable partners who understands the whole value chain and the

detailed process.

Summary

Thank you for your attention!