Currently, there are two common approaches for brands laying out their Southeast Asian e-commerce strategies: cross-border direct mail (small parcels) and general trade.
Cross-border parcel model
Suitable for:
- Brands: White-label goods, unbranded products, or new brands testing the waters.
- Supply chain: Small batches and test orders, with the ability to handle fragmented orders through simple, low-cost customs-clearance processes.
- Merchants: General stores with diverse sources of goods and flexible procurement.
- Products: Small, lightweight, low-price items with high gross margins.
General trade model
Suitable for:
- Brands: Mature brands.
- Supply chain: A comprehensive supply-chain system.
- Merchants: Brand owners with long-term, stable channel planning and SKU systems.
- Products: No restrictions on volume, weight or price, making the model friendly to medium-to-large and heavy items.
The shift in the regulatory landscape
Southeast Asian countries have recently tightened import supervision of the cross-border parcel model. Some have even abolished the de minimis tax-exemption threshold for small parcels, imposing fixed customs duties instead. The historical advantage of under-declaring small-parcel values is disappearing.
We attribute this shift to four factors:
- Taxation and fairness: The cross-border parcel market was previously small, so tax exemptions had a negligible impact on revenue. Today, the market is growing rapidly and has reached substantial scale. Continuing tax breaks would cost governments significant revenue and create an uneven playing field for general-trade importers.
- Protecting local enterprises and employment: Cross-border parcels are mailed directly from overseas. Raw-material procurement, production, warehousing, logistics and service personnel are all based in the country of production, providing no benefit to the destination country and potentially undermining local manufacturing.
- Logistics and customer experience: Millions of small parcels each day place immense pressure on customs. Under-declared values and, in some cases, contraband smuggling have prolonged clearance cycles and reduced logistics efficiency.
- Protecting consumer interests: Some shipments involve misdeclared product names or counterfeit goods, infringing brand intellectual property and consumer rights.
Conclusion
The cross-border parcel model, which relies on low-cost direct mail, must now face a compliance reshuffle. By contrast, the general trade model—characterized by localized operations, compliant declaration and a balance of interests among all parties—is likely to become the mainstream route for long-term development in Southeast Asia.