Global brands venturing into overseas markets often face a multitude of challenges. This is particularly true in Southeast Asia – with its unique complexities, nuances, and diversity. At the same time, the region’s e-commerce landscape is experiencing unprecedented growth.
In fact, according to Google, Temasek, Bain & Company’s e-Conomy SEA report 2022, the region’s digital economy is expected to reach US$330 billion by 2025, and its digital consumer population is expected to grow to 402 million by 2027 — equivalent to 88 per cent of the region’s total population of 15-year-olds and above. Therefore, businesses would need to prioritise providing seamless customer journeys to remain competitive.
As the region’s digital economy continues to grow, Southeast Asian consumers increasingly want faster delivery speeds, reliability, visibility, and ease of returns. But at the same time, sourcing, manufacturing, and production have all been impacted by the external economic climate. Demand is showing signs of a slowdown as a result, and this creates a situation where there is a bottleneck in production.
So the Regional Fulfilment Centre in Malaysia recently underwent a 50 per cent expansion, which increased its capacity to hold a new total of seven million items (4.7 million before expansion) and bolstered ZALORA’S capability to host a larger portfolio of global brands that Southeast Asia’s 8.3 million customers may not previously have had access to.
The technological upgrades of its facilities as part of the expansion have also helped to strengthen our centralised stock management, boost seamless local and cross-border deliveries, and streamline our return management system. This positions us to better help our brand partners gain a foothold in the region with our 1SS “Fulfillment-as-a-service” solution to address their operational needs.
But more orders can also mean more packaging, more energy, and more miles. So in an exclusive interview with the Head of Sustainability at ZALORA, Arvind Devadasan, we sat down to explore the cost of this expansion on the environment and how ZALORA plans to align its expansion strategy with its sustainability goals.
Investing in state-of-the-art sustainable infrastructure
Recognising the urgency of environmental challenges, ZALORA has identified three key Sustainability Pillars: climate action, circularity and conscious consumption, and fair and ethical sourcing. It has implemented various initiatives to minimise its environmental footprint and mitigate the impacts of climate change.
The company has reevaluated its product and brand design, incorporating lower-impact materials in its own-brand products. Sustainable collections now feature eco-friendly fabrics like Tencel, Lenzing, Ecovero, organic cotton, recycled polyester, and linen.
It also emphasises low or zero-carbon last-mile delivery options, such as bicycle and walking deliveries, reducing emissions associated with outbound logistics. Additionally, the company is actively working towards sourcing 100 per cent renewable electricity for its fulfilment centres and offices by 2030.
Devadasan said they have incorporated advanced technologies and sustainable features into the facility to minimise our environmental impact like the use of energy-efficient lighting systems and equipment, as well as waste management practices that prioritise recycling and responsible disposal.
Efficient logistics to reduce carbon footprint
ZALORA’s expansion not only increases its logistics capacity but also focuses on optimising operations for maximum efficiency and reduced environmental impact. Devdasan said, “By streamlining our processes and enhancing our logistics system, we can minimise energy consumption and carbon emissions.” This emphasis on efficiency enables ZALORA to fulfil customer orders promptly while minimising the ecological footprint associated with transportation and storage.
In Hong Kong, they have partnered with delivery services to introduce walking deliveries for parcels within a 10-minute radius of their stations, reducing reliance on motor vehicles and resulting in over 164,000 foot-delivered parcels in 2022.
In Jakarta, where traffic congestion is a challenge, ZALORA has embraced bicycles for last-mile deliveries, successfully transporting more than 20,000 customer parcels to the city centre. These initiatives showcase ZALORA’s commitment to reducing emissions and driving sustainability in the fashion e-commerce industry through inventive and eco-friendly logistics solutions.
Their warehouse spaces are fitted with efficient LED lighting, air conditioning inverters, and motion sensors, and by 2030, they aim to have 100 per cent of electricity sourced for their fulfilment centres and offices to be renewable. As they lay the foundation to shift to these more direct sources of renewable energy, in 2022, they purchased Renewable Energy Certificates (“RECs”) recognised by the iREC Standard to cover our electricity consumption across all our warehouses, as was the case in the past years.
Circular fashion is gaining popularity
They focus on incorporating circular design throughout their product life cycle, aiming to minimise waste. ZALORA has introduced sustainable packaging options, including carton boxes made from recycled cardboard and delivery flyers with recycled plastic content.
To extend the lifespan of products, it launched its Pre-Loved category, offering second-hand luxury fashion items. This initiative has gained traction, with a growing number of customers engaging in circular fashion practices. And their Earth Edit category showcases a curated selection of sustainable products, providing customers with easy access to conscious shopping choices.
The Earth Edit category has gained popularity, accounting for 13 per cent of total sales and attracting 32 per cent of active customers. ZALORA’s collaborations with NGOs and organisations like World Cleanup Day Indonesia and Save Philippine Seas have empowered employees to engage in sustainability initiatives and community engagement activities.
One other area is packaging which generates tons of waste. In 2022, 91 per cent of our directly-procured packaging was made of more sustainable materials. All of our carton boxes are now made of recycled cardboard certified either by the Forest Stewardship Council (FSC) or the Programme for the Endorsement of Forest Certification (PEFC). We also expanded the use of delivery flyers containing 80 per cent recycled plastic certified by the Recycled Claim Standard (RCS) to all our markets, as well as polybags (clear sleeves used to protect products in warehouses and transit) with 100 per cent recycled plastic content in some markets.
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“We are committed to actively contributing to climate action by significantly reducing the carbon footprint generated by our business operations. In 2022, ZALORA managed to slash our overall carbon footprint by one-third (33 per cent) relative to our 2019 baseline,” said Devdasan.
Upcoming initiatives They plan to expand the last-mile bicycle delivery service to the whole of Jakarta, and we are also exploring similar last-mile delivery options in other markets, which includes the use of electric vehicles.
“Furthermore, we aspire to launch a collaboration with organisations to offer our customers a take-back solution for their used items to divert them from landfill. The partner organisations will provide support with item collection, sorting, reselling, and recycling so that our customers can give a second life to their used items,” said Devdasan.
In conclusion
By investing in state-of-the-art infrastructure, optimising logistics efficiency, and promoting conscious consumption, ZALORA is transforming the fashion e-commerce industry in Southeast Asia. Through partnerships, customer education, and supplier engagement, it aims to lead by example and inspire other fashion e-commerce companies to prioritise sustainability.
With their sustainable expansion and ongoing efforts, ZALORA is shaping a more responsible and eco-conscious future for fashion in Southeast Asia. As Devdasan concluded, “We believe that sustainability is not just a trend but an essential aspect of doing business responsibly.”
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