Bangkok’s internationally recognized ‘foodie culture’ has given rise to a steady rotation of up and coming international eateries, attracting lines of customers and naturally, the birth of food ecommerce startups vying for their attention.

Hungry Hub is one of them.

The company started as a restaurant reservation app in 2014 after anticipating a boom in restaurant bookings in Bangkok as the city was experiencing a surge in demand for eateries and dine out venues. Founder Surasit Sachdev wanted the app to be the “OpenTable” of Bangkok.

Fast forward two years later, traction for the app never picked up because customers weren’t incentivized to book through the app and the restaurants were never fully booked to need a reservation. The result left Surasit with two choices: pivot or shut down completely.

Hungry Hub lived on, but first needed to become lean. 15 employees were cut down to a team of five and the company decided there was a future in bookings for larger parties like corporate dinners, anniversary celebrations or other social functions.

The realization came to Surasit when he took his team out for meals and there was no way to balance price point and allowing his employees to order freely. How could he come up with a way for price sensitive companies like startups to enjoy corporate meals without breaking the bank?

The “all you can eat” package

Many mid-tier restaurants in Bangkok require a customer to spend an average of 300-500 THB per meal, usually comprising of an appetizer and a main dish; this excludes drinks and a service charge.

With Hungry Hub’s ‘all you can eat’ package, each customer would be charged a fixed fee of 599 THB to eat a variety of mains, appetizers, drinks and desserts from the menu depending on sets curated by the restaurant.

Hungry Hub focuses on mid-tier restaurants like Audrey Café and popular Japanese ramen chain Ippudo who have already partnered with Hungry Hub to offer the ‘all you can eat’ package. There are currently 33 restaurants signed onto the platform.

To get these offers, reservations need to be made at least 30 minutes in advance, and about a week for corporate gatherings.

Since the shift to B2B, Hungry Hub has seen 30-40% growth in revenue.

“Several large corporates have recently approached us and asked if we could find them a restaurant that could fit 300+ people,” says Surasit. “That’s when we realized there’s a demand.”

Unlike other businesses, the company is growing its business based on profits, rather than spending upfront to achieve sustainable growth. Currently, Hungry Hub has not raised funding for its business till date, but plan to do so in the near future for expansion.

The demand for more B2B services

Although Bangkok’s restaurant booking landscape is filled with active, high profile ‘food’ players such as restaurant reservation platform Eatigo and Thai restaurant directory and delivery platform Wongnai, Hungry Hub is developing a niche of its own by establishing the company as the go-to platform for B2B dining and catering to large groups of friends and families.

“The good thing about the food industry is that it’s an everyday thing. Users do not have to exclusively stick to using Hungry Hub or Eatigo,” says Surasit. ‘Their dine-out needs are always changing.”

“We want to become the name companies think of when they need to find a restaurant for a company party or dinner for 10-100 people,” continues Surasit. “We’ve built a large restaurant database that can accommodate these needs that no one else is doing.”

Hungry Hub is focusing on the development of its website over its mobile app because the company finds conversions are better on desktop. Companies browsing for suitable bookings are most likely doing so on computers than on a mobile phone.

What’s in the future for Hungry Hub?

Hungry Hub will spend the next six months solidifying its B2B play by adding more user benefits on top of the current 20 THB credit back with every booking – cashback can be requested after a minimum of five reservations.

Future benefits to look forward to include two for one booking and loyalty rewards.

When asked about the future of Bangkok’s restaurant landscape, Surasit expresses his concern for the oversupply of restaurants.

“There seems to be a new restaurant opening every week, and people try it once or twice then never return. The lack of loyalty has caused many places in the city to go out of business.”

So how is Hungry Hub trying to help these restaurants?

By cutting out discounts and providing restaurants a more reliable solution through group bookings.

“We want to bring sustainable offers to independent restaurants rather than cutting their heads off with half-price deals,” says Surasit. “The future of food ecommerce is not in massive discounts.”

 

 

When talking about the potential of ecommerce, the real opportunity isn’t in the saturated B2C sector, but it’s almost hidden in B2B.

The sector is pegged to grow more than twice as much as B2C globally by 2020 and expected to generate $6.7 trillion of revenue but in most Southeast Asian markets, it doesn’t nearly get as much as attention.

The ECOMScape series shows only a few players have dabbled in B2B and in Indonesia, one of them is Ralali, the country’s first B2B ecommerce marketplace, founded in 2013 by current CEO, Joseph Aditya.

The company’s beginning

Launched at a time when most existing websites were catalogs, Ralali generated IDR 10 billion or $750,000 in revenue during its first six months selling industrial supplies to manufacturers, contractors, and automotive businesses.

Ralali B2

The company’s early robust growth attracted the attention of investors and in May 2014, Ralali bagged an undisclosed amount of seed funding from East Ventures and raised another $2.5 million from Beenos Plaza and Cyber Agent Ventures a year later in June 2015.

With financial backing in hand, Ralali was set to expand its business further but the company, once specialised in MRO (Maintenance, Repair, and Operational) products and office supplies, soon found that the current business model was not scalable.

“There is simply not enough reason for big companies to completely shift their procurement process online. And the problem with having big companies as a main source source of revenue is that it’s a huge risk if one decides to go elsewhere,” explains Aditya.

Ralali decided to change its strategy to be able to scale up at the rate they wanted to.

Reaching an untapped source

While assessing the pool of potential customers, they found a glaring source of untapped potential in Indonesia — small and medium enterprises (SMEs).

In Indonesia, the latest data shows that out of all the country’s registered businesses, big enterprises only make up less than 1%. The rest – or almost 58 million companies – are SMEs and they contribute 58.92% of total GDP.

The government has also expressed its support through digitalization.

The problem, however, was and is that most of these businesses are still stuck offline – only 9% have dabbled in ecommerce and only 37% have basic online capabilities.

But this wasn’t the only reason Aditya shifted his focus to SMEs, he also wanted to help even out the playing field.

“As a tech company, we are working to make life simpler and to empower more people to become efficient. Targeting the big corporations with their already vast and readily available resources, is not gonna make much impact to their business. It’s unlike the impact we could make with SMEs,” says Aditya.

With this in mind, Ralali shifted its focus to cater to SMEs and began making the adjustments needed to achieve this goal.

Business starts here

To attract more SMEs, Ralali began introducing new features like the RFQ (Request for Quotation) and included more categories on their website by expanding its SKUs. As of today, there are more than 200,000 SKUs listed under 61 sub-categories in 12 categories available on Ralali, from Machinery & Industrial Parts to Food & Beverage.

“When you’re a big company, vendors are practically queueing outside your office to get your business and you have the pick of the lot. SMEs rarely have any bargaining power,” commented Aditya.

The RFQ feature allows SMEs to select from a variety of offers made from vendors on the Ralali platform so they can find the best option for their business needs. It also helps Ralali determine what customers want in order to optimize its product selection.

Facilitating SMEs to further their business

To become the supplier choice for SMEs, Ralali changed its model to a wholesale marketplace allowing other suppliers to offer bulk purchases on its platform with tier pricing.

Ralali B2B SMEs

Right now, there are more than 3,200 suppliers registered on the platform. The company is continually scouting for sellers through offline activities with various business associations and communities geared towards educating SMEs about the benefits of digitizing.

Ralali facilitated annual transactions are worth more than $150 million or IDR 200 billion, with a basket size per transaction ranging around $1,500-2,000.

Despite focusing on SMEs, big corporations make up for 3-5% of customers for the marketplace.

Empowering the SMEs ecosystem

Not only is the company selling to small, medium sized businesses, it is also providing the skills and knowledge needed to take the first steps online.

The company recently signed a partnership with the Jakarta Cooperatives, Micro, Small, and Medium Enterprise and Trade Agency to help its members expand their businesses online.

Under the partnership, Ralali will provide training and assistance to the SMEs for one full year. Aditya says a team of Ralali consultants are going to share insights on the workings of an online marketplace and how to set up a business on the platform.

“By doing this training, we hope to help these smaller businesses increase their transactions online. Ralali wants to be the platform that connects businesses from Indonesia to all over the world,” shared Aditya.

Ralali B2B SMEs

founder Joseph Aditya (second from right) with the representative from the Jakarta Cooperatives, Micro, Small, and Medium Enterprise and Trade Agency

Thailand’s COL, a subsidiary under Central Group held a shareholders meeting Wednesday and made significant announcements regarding the future of its online business. The group is planning to sell its B2C online businesses to its parent company to focus on growing online B2B operations.

COL has three key businesses:

  1. B2S books and stationery stores
  2. OfficeMate stationery stores
  3. Online platforms Central.co.th, Robinson.co.th and Zalora.co.th.

According to an attendee of COL shareholder meeting, originally posted on LongTunMan blog, the following took place:

The most significant moment of the meeting came after a reflection of last year’s performance. Management explained why they were “taking a step back from online business”. The main reasons being:

  • Market leader and new competition within the ecommerce landscape
  • Unlikely to be profitable in the near future (subsidies too high)
  • The online business requires more monetary investments at a large scale

Source: COL business plan presentation at the Annual shareholders meeting

“Currently, ecommerce in Thailand is a cash-burning race. The top performing player, LAZADA, is losing billions of baht. Central is not ready to experience losses of that scale in order to participate in the online race. All B2C online businesses under COL will be sold to Central Group, which has significantly more resources to fight the competitors,” wrote the attendee of the meeting.

COL business plan* shows that in 2016 the net loss of its digital & online business was 330 million THB (9.5 million USD).

That is almost double the net loss of 185 million THB (5.3 million USD) in 2015. Stepping out of online business will significantly improve COL profits.

Source: COL business plan presentation at the Annual shareholders meeting

The attendee of the shareholder meeting noted that as soon as the management made their announcement, shares went up 22% to 39.5 baht. What do shareholders think about this?

“Some may be disappointed that COL is pulling out. However, shareholders prioritize a company’s profitability. If we were to study performance results from 2016, it becomes clear that by removing its online businesses, the company will gain 86% in profit,” says the LongTunMan post.

Next steps for COL

In its business plan, COL has defined that one of the key strategies to continue sustainable growth is to develop a new online B2B platform that matches vendors and potential customers in various industries.

By focusing on B2B operations, it will serve as a quicker win for COL. The company already has a strong consumer base in that area.

Source: COL business plan presentation at the Annual shareholders meeting

According to LongTunMan, “management has announced that COL will now be an abbreviation for “Central Omni Logistics”, as the company will shift its focus to B2B.

This is where the company’s expertise lies, and remains a market leader. COL currently claims 80% of market share for office supplies.

“This decision shows that in some cases, it is better to take a step back in order to move forward and focus on where your business’s strength lies. Simply put, it is not worth it for COL to put all of its resources into fighting with other players, who have more resources to burn,” says the LongTunMan’s blog post.

In addition to moving to B2B online operations, COL also wants to step up its logistics game and in the future sell third party logistics and fulfillment services to other market players.

Source: COL business plan presentation at the Annual shareholders meeting

These changes in COL are aimed to turn the company into “the region’s leading business solution center”. The company is moving away from loss making activities to focus its efforts in the B2B area in hopes of a more profitable business model and where it has significant strengths.

Source: COL business plan presentation at the Annual shareholders meeting

Find the COL business plan presentation from the annual shareholders meeting in English here.

The original version of COL shareholders meeting attendee was published in Thai, and can be found on LongTunMan’s blog here.

* NOTE: The original version of presentation from the COL shareholders meeting, accessed by ecommerceIQ on April 7, included the slide which detailed how big company’s net profit would be without its Digital & Online business. This slide, however, is missing from the latest version of its business plan’s presentation available on their website.

BY: NIKI CHATIKAVANIJ AND AIJA KRUTAINE

Mitch Bittermann, Regional Chief Logistics Officer at aCommerce recently sat down with The Postal Hub podcast to discuss a successful B2C ecommerce strategy, logistics in Southeast Asia, and what he thinks brands should prioritize when attempting cross-border. 

The Postal Hub: From a retailer perspective, what are the challenges to get into ecommerce

Mitch: I would look into tech, customer service, warehousing and transportation. Retailers today are mainly working from a B2B perspective. This means bulky shipping and heavy-duty racking in the warehouses, which is only suitable when operating B2B. To do B2C, the requirements are completely different, because the consignments are smaller. From a transaction perspective, businesses would also need to think differently.

With transportation, it would either be light or FTL (full truck load), the size of packages are smaller with B2C, which means you have to work with parcel couriers to get the items shipped to your end customer. The biggest difference is also with customer service. If a company is running their own customer service, it usually requires them to talk to businesses, but with B2C, customer service means the end customer is contacting you through various channels, from calling to live chat, things that B2B businesses may not have.

The Postal Hub: If you are a retailer entering ecommerce, what are the key delivery considerations?

Mitch: I would go one step before that. I would think about what the location strategy is. Where is your supplier, brand, manufacturer and customer sitting? If it comes from a transportation perspective, today, you’re shipping a lot on freight. You’re shipping pallets, costs is definitely a consideration but from a cost perspective it is a lot smaller than if you have to send everything in small consignments. Someone has to pick up the bill.

Customers in Southeast Asia are more cost sensitive about shipping price so retailers will eventually need to consider setting up a hub somewhere to cut costs on shipping.

Postal Hub: Cash on delivery is popular in Southeast Asia. What are the other ways people are paying?

Mitch: Cash-on-delivery (COD) is the biggest enabler in ASEAN. This is the choice for most people, especially in tier 2-3 cities that are unbanked. If you look at Indonesia, in a place like Papua New Guinea, 90% is COD. Do we have another method? Yes, but one of the challenges is that we do not have Alipay. Banks offer platform but they are not default.

In Indonesia, a lot of banks are talking about an e-platform but nothing concrete is happening just yet. 

For now, we cannot live without COD in Southeast Asia. Potentially, a retailer could lose out 60-70% of revenue if they don’t offer COD as a payment method.

Postal Hub: What about buy vs. build? What should be outsourced?

Mitch: It really depends on retailer maturity. If a retailer is just starting, I would say do as much as possible by yourself. Pack and send off shipment by yourself, if your business scales, then look to outsource. When it reaches the stage of 100,000 orders a month, do you want to run it by yourself or outsource to a third party service provider?

With transportation, it is best to outsource. This is because Southeast Asia still has fairly weak infrastructure. There are a lot of options to choose from; DHL and Kerry are the big ones. Then we have smaller disruptors such as Ninja Van and Sendit. All the movements in the transportation industry also mean prices will be soon drop and the industry will become more commoditized.

Some of my clients run their own warehouses and some outsource. When I was working in B2B, companies were running their own warehouses and then the outsourcing trend happened. The trend is coming for B2C, but I don’t think it will take 5-10 years to take off, it will go faster.

Soon, the trend will go towards out-sourcing supply chain so that businesses can focus on growing and selling their products. 

Postal Hub: What about cross-border delivery?

Mitch: With delivery, some people request next day or same day. It’s more difficult to ship cross-border with these requirements. Companies need to consider regulations that are related to ecommerce shipment and study revenue transfer, especially if you don’t have your own entity in that country. Figure out how to get money back from country A to country B while also thinking about tax implications.

Businesses will also need to think about FDA licenses and certain regulations. For certain products, you would need a license to legally bring it into a country, including distribution and logistics licenses.

A client came to me, they wanted to ship stuff from Singapore to Indonesia, but it was taking 7-9 days and costing customers $7 per shipping order. Depending on the product, that is quite a high price point. Customers are also not happy to wait that long for a delivery.

The client wanted a local set-up and do COD shipment because they want to build up scale. The company never shipped more than 100 orders a month. When they signed on with aCommerce, we closed 1400 orders after 3 months. The only thing that changed is the country we did the shipping from.  

For businesses that are starting out in Asia, I would say for them to start their operations from either Hong Kong or Singapore. If it scales, then is the time to go local i.e. Jakarta, or hyper-local, such as tier 2 and tier 3 cities like Bandung or Surabaya for better reach. 

Postal Hub: What about parcel lockers? What are end consumers in Southeast Asia interested in?

Mitch: The interest is there, but it’s all about reach and coverage. In Singapore, the country is not that big and essentially a metropolitan location, which makes it easier to offer things like same day delivery. In Bangkok, we power SKYBOX, a pick-up station on sky-train stations that allows consumers to pick-up their parcels on the way to and from work.

In Jakarta, MatahariMall offers lockers but it is limited in terms of coverage. I would recommend looking at pick-up and return from convenient stores such as 7-Eleven, Family Mart and Alpha Mart. There is already a lot of offline coverage in Southeast Asian cities and retailers can collaborate with these stores to begin a wider distribution network. 

Listen to the full interview on eIQ’s podcast channel here.

The success of on-demand ride hailing app Uber in the recent years has facilitated the birth of the gig economy, where temporary, flexible jobs are common and businesses hire contractors to perform ad hoc tasks.

While companies used to hire more workers to get through peak periods, the gig economy model allows them to bring in additional temps when there is demand and cut costs.

That is what Helpster, a Thailand-based on-demand staffing platform, is doing – connecting companies with blue collar workers when they need extra hands. ecommerceIQ sat down with the startup’s CEO and co-founder Mathew Ward to talk about the ins and outs of his business.

Building a LinkedIn for blue collar workers

“There are still plenty of people looking for jobs and businesses who always need employees, but connectivity is the problem. If we talk with small business owners, finding and keeping staff is what keeps them up at night. People are always willing to pay for solutions to their pain points,” Mathew explains the business rationale behind Helpster.

Helpster was founded in October 2015 by Mathew and John Srivorakul, the CTO of the startup, as a platform that would connect customers with repair and cleaning service providers through its app.

It has now turned into a curated marketplace that matches blue collar workers seeking a job with businesses in industries with high demand for temporary staff such as restaurants, retail, and event management.

Helpster founders

Helpster started as a B2C platform for hiring handymen services, but soon realized this business model had low frequency. The company shifted focus to B2B market three months into operations.

“The problem we found with the on-demand home services market is that there is limited frequency. When was the last time you called a plumber? The acquisition costs for consumers are high, and it takes too long to get that investment back,” says Mathew.

Realizing this, Helpster started pitching their platform to businesses instead. In the new business-to-business (B2B) model the team saw that companies needed not just handymen, but also waiters and warehouse workers. The real challenge was access to labor – how could they quickly hire blue collar workers?

Filling in temp jobs typically have two options – job boards or agencies. Job boards comprise of applicants of which 95% are not relevant for the business and majority of blue collar workers don’t have a resume or an email. “They don’t use traditional job boards – they generally find jobs through word-of-mouth, making it difficult for businesses to find them quickly,” explains Mathew.

Agencies are good at providing quality staff, but at a high cost, slow pace and workers usually come with constrictive contracts. If a business wanted to hire the worker after his/her temporary stint, the company would be subject to an agency fee.

So where does Helpster fit? The platform enables workers to create a simple profile listing their skills and previous experience, what they would like to do and how much they would like to earn. In a way, blue collar workers create their resume on the Helpster platform.

In the meantime, companies looking for hires send Helpster jobs requests and a description of their needs. The platform then matches job opportunities to available workers with the right skill set, and assigns them to the job in minutes.

Same, same, but different

At first, Helpster’s business seems similar to startups such as ServisHero or Kaodim that connect consumers with different home service providers – electricians, plumbers, movers and others – but how often are their services really needed in a year?

Helpster differentiates itself by focusing on businesses that frequently need temp staff, for example, the food and hospitality industry. Caterers, waiters and kitchen staff are always in demand for year-round engagements such as weddings, birthday parties, pop-up markets, etc.

Besides job requests from food & beverage and hospitality companies, promotional consultants who help staff pop-up booths in shopping malls or hand out flyers are another popular category of vacancies. Helpster also staffs telephone sales and warehouse operations.

“When we need extra waiters for catering events, I use Helpster to find them. It’s the only company I know that offers such a service and we use them quite regularly,” says Una Plaude, partner at Luka café in Bangkok.

Helpster started its operations in Thailand where the unemployment rate in 2016 was around 1%, making it no surprise that hiring and retaining staff were impacting business growth. The company also recently expanded into Jakarta, Indonesia because both countries contained businesses with 20-30% staff turnover.

Blue collar workers, on the other hand, usually earn around $10 a day and live hand to mouth. This makes having quick access to suitable jobs important because majority of them don’t have savings. Helpster works to turn their problems into one another’s solution.

But the company won’t be alone in its quest for long. Rocket Internet’s Ushift, recently launched a similar service in the on-demand staffing market in Singapore with ambitions to expand to other countries.

“If you have a good idea, there will always be competitors. I actually would be worried if there were none because that would mean nobody else thinks it’s a decent business. It shows opportunity if a company like Rocket is willing to enter this space,” says Mathew.

The company at present is offering its service for free, but will soon be introducing a subscription model by charging a flat monthly fee for businesses to access its worker network. While the fee has not yet been set, Mathew said it will be below other traditional recruitment channels such as job boards to remain competitive.

Dealing with uncontrollable factors

A good business idea doesn’t mean challenges aren’t involved.

The company is not simply selling apples and oranges, they are selling a service – the promise that an employee will show up and do their job diligently.

And this reveals a cold, hard reality.

“Businesses can do all the screening possible but if a worker can’t be bothered to get out of the bed because of the rain or traffic, there’s nothing they can do,” says Mathew.

Helpster tries to solve this by giving temporary workers a rating that increases with the number of jobs they take and complete satisfactorily through the app.

To ensure that businesses are sent qualified staff, Helpster curates the workers by doing background checks on those who register on the platform. “When we first started, we made everyone come in for face-to-face interviews and criminal background checks. But that doesn’t always give insights into someone’s reliability. Performance ratings and engagement data is a much better indicator,” explains Mathew.

Helpster also learned that the location of the job is very important for blue collar workers. They’ll be happy to work down the street if they can earn 350 – 400 baht ($10 – $11) a day but less likely to travel, buy lunch to work a job across the city for the same amount.

So, how does Helpster acquire its network of workers?

“We try everything. We obviously have a digital strategy, but it’s critical for us to have a good ground game. Get out to the market and meet the people. A lot of our acquisition strategy revolves actively targeting workers around their places of work,” Mathew reveals.

Helpster recruits workers

Helpster goes on roadshows to universities, schools to attract young, tech savvy job seekers to their platform.

This strategy seems to be working. Over 80,000 workers and more than 3,000 companies have registered on the app so far and the company expects that number to grow considerably now they have launched in Jakarta.

Using data to make small changes for big impact

Helpster believes in using data to understand “what tweaks move the needle”. The company tracks which worker acquisition channels drive registration on the platform and if they lead to successful job applicants.

It was data that revealed that there can be such a thing as too many jobs on the platform.

Early on, Helpster was actively onboarding businesses to post their jobs on the platform, yet they noticed that a blue collar worker might take only 10 jobs a month even if he sees 100 job applications. They realized they needed to balance the supply of jobs with the actual demand from the workers to ensure a positive experience for businesses who needed temp staff quickly.

“Like any marketplace, balancing the levels of supply and demand are critical. Too much of one, and you will see high rates of churn. It can be a fine balance,” says Mathew.

Helpster can also forecast what parts of Bangkok on certain days will have high demand for a particular type of workers. For example, restaurants and bars in Sukhumvit road area look for extra hands during busy weekends.

Mathew says that 85% of the jobs are filled within 4 hours.

What’s next?

In November 2016, Helpster raised $2.1 million in Series A funding to expand across Southeast Asia. Now for three months, the startup has been present in Jakarta where 15,000 workers have signed up the platform. But the company is not planning to expand any more at the moment.

“Too many companies make the mistake of expanding too quickly. Blue collar worker wages in Southeast Asia make up around $200 billion per year, half of that is in sectors we’re focused on and 40% of workers are on informal employment contracts. Thailand and Indonesia are 60% of Southeast Asia so if we nail these two markets, we’re in a good position,” says Mathew.

Helpster team

He is not worried about the current downfall of certain on-demand startups seen globally since last year.

“I don’t think there is anything wrong with the idea to access things on demand. We’re focused on solving problems for businesses and for which they are willing to pay a premium,” says Mathew.

 

By Aija Krutaine

When successful, established businesses tell their story, it usually sounds all very straightforward. The founders get an idea, work hard to execute it, and miraculously, it all works smoothly from the very beginning to result in millions of dollars earned.

The reality of start-ups in today’s economy is different – the initial idea is only the starting point that almost always evolves at any point of time. The founders of TheLorry, Malaysia’s on-demand logistics start-up, experienced this firsthand and have been on the tips of their toes since deciding they would capture the market’s overlooked opportunities.

TheLorry is a technology-enabled platform that matches lorry owners and drivers with private and corporate customers who need help moving house, office and/or general cargo.

Founded late 2014 by ex-colleagues Nadhir Ashafiq and Chee Hau Goh, TheLorry was initially intended to be the “Expedia for logistics”, but then became the “Uber for lorries” to focus on the business-to-consumer (B2C) market and then later switched focus to the business-to-business (B2B) market.

Ex-colleagues Chee Hau Goh (on the left) and Nadhir Ashafiq (on the right) have reinvented TheLorry three times within two years, showing how startups can adapt to unexpected factors.

It may sound like there was a lack of vision, but this is the reality of businesses in dynamic markets, especially developing ones. The growth of any company involves adapting to unexpected factors such as new competitors, new technologies or customer demands.

ecommerceIQ sits down with TheLorry co-founder and executive director Nadhir Ashafiq to find out how his company carved out a niche in Malaysia’s competitive logistics landscape and why they decided to pivot.

The Business Model Evolution of TheLorry

2014 – early 2015: Expedia for Logistics

At first, TheLorry built a website that allowed customers to access instant lorry rental price quotes online after sharing some common variables: the type and size of the lorry needed, the start and end points of the journey, etc.

The whole business was a two-man team at that time. While Chee Hau was pumping up marketing and sales, Nadhir was running around Kuala Lumpur and Selangor meeting lorry drivers and giving them Excel sheets to fill in their prices, which would afterwards be uploaded on TheLorry website.

TheLorry initially wanted to be “Expedia for Logistics” where users could choose lorry rental on the startup’s platform from selected service providers based on ratings and prices

Right away, there were several downsides to this model, the most pressing being the scalability of the model. It was a time consuming and tedious process to acquire the price quotes from service providers that sometimes involved over 900 price points.

The other reason was that TheLorry could not prevent customers from going directly to the service provider instead of booking through the website. There were several cases when TheLorry got to know that people were searching for their providers online either by customers’ own admissions or comments from the providers.

“Therefore, around the mid-2015 we moved to an Uber-like model where we would be setting the prices ourselves,” explains Nadhir.

Early-2015: Uber for Lorries

The switch meant TheLorry would need to match providers with jobs. At first, it was done manually until the company built an app in-house and the minimum viable product (MVP) within two months. The drivers could accept the job on the app, and thus the process became automated.

TheLorry built an app for drivers in-house within two months. It automated the process of matching lorry drivers with the jobs available.

As TheLorry had attracted funding at the beginning of 2015 from pre-accelerator program WatchTower and Friends and Singapore’s venture capital KK Fund, the company started scaling up by hiring people for their team. Their obsession became to grow bookings through their website and increase their fleet size.

The need for a second major pivot came when the company realised that lorry rental aimed at individuals was mostly a one-off event as people did not often move homes or offices. And apart from customer referrals, the company would find a difficult time sourcing new clients.

Mid-2015 – present: Lorries for B2B  

This is when TheLorry decided to push for B2B sales targeting commercial cargo market – manufacturers, distributors and freight forwarders with urgent trucking needs. Now business customers make around 60% of the company’s sales when it was only expected to make up around 30% of the entire business.

But every business model, no matter how successful, has its own set of challenges.

“There are a few drawbacks for B2B. First, the onboarding process of each client is longer and sales managers have to be hired to pitch our services and build a long-lasting relationship. Then, we also have to give corporate clients a credit meaning at least 30 or 60 days to pay for the services. But chances of repeat business are high and generated revenue is healthy,” says Nadhir.

Servicing Different Customers: B2C versus B2B

Targeting B2C and B2B segments obviously require different approaches. TheLorry adopted online marketing strategy to acquire more individual customers and invested in Google adwords, Facebook ads and content marketing to drive as much traffic to website as possible.

This tactic, however, did not really work for targeting corporations where it is more effective when sales managers knock on client office doors for a face-to-face meeting – especially in the Southeast Asia business world.

“Online marketing gave us visibility, but to seal the deal, we needed a salesperson on the ground and account managers to meet customers to clearly explain our solutions. B2B sales is all about creating and maintaining relationships,” says Nadhir.

Once onboarded, corporate clients can use TheLorry app to hire drivers directly or in the case of any special needs they can turn to an account manager, assigned to each business. Through the TheLorry platform, clients can view all the past and present bookings and invoices as well as track drivers who are on the job.

As TheLorry is a technology-enabled platform, around two thirds of its business is automated. Compared to other start-ups, Nadhir says the company wants to be fully transparent with its clients and does not promise full automation because of the difficulty it entails.

“There needs to be a bit more scrutiny and a bit more manual intervention in order to get the business to run properly,” explains the entrepreneur.

As quality of service is important to any type of customer, TheLorry interviews all drivers and puts them through 2-3 test drives where their skills and professional manners are assessed. If clients give them 1-star rating after these test jobs, they don’t get the opportunity to join TheLorry driver family.

TheLorry team interviews all their drivers face-to-face and gives them test jobs before accepting them to TheLorry driver family to ensure quality of the service.

What’s in The Cards for TheLorry?

TheLorry still has plenty of room to grow. The B2B lorry rental market in Malaysia is estimated at $3.9 billion. There are no solid figures for the B2C market, but the company estimates that this segment is worth around $22.5 to 45 million based on property sales data.

TheLorry wants to become profitable in 2017 and expand to Thailand in addition to its existing services in Malaysia and Singapore.

Jumping on new and unexplored opportunities to raise revenues is one way to grow. Yet, one piece of advice Nadhir hopes other entrepreneurs remain mindful of is that potential top line revenue always carries costs.

Lured by potential revenue growth last year TheLorry took a business opportunity, which Nadhir did not want to disclose, in a field they had no experience and no clear plan to make unit economics profitable.

“In the end, we ended up in a situation where we were selling our service for 1 ringgit and our cost was 2 ringgits. And there was no way for us to increase the price to 3 ringgits,” said Nadhir, adding they decided to quit the business opportunity later that year.

On the bright side, there also have been surprising successes. In 2016, TheLorry introduced a new product – 4 wheel drive car rental, which turned out to be a hit for small and medium mom-and-pop shops who use them on a more regular basis.

As for 2017, the company’s end goal is to grow revenue by a certain multiple, not disclosed, to become profitable. In the second half of the year, TheLorry hopes to expand to Thailand in addition to its existing services in Malaysia and Singapore.

After raising $1.5 million in Series A funding early last year, TheLorry is still in touch with many investors but has no plans for fundraising as yet.

You can read more about TheLorry in SPARK40 here.

Nadhir Ashafiq’s Tips for Aspiring Entrepreneurs

  1. Validate your business idea – test the product, see whether you will have a market before spending money on it. Prior to TheLorry I spent RM 200,000 ($USD 45,000) on a thing which did not work. Don’t spend so much money for nothing!
  2. Read The Lean Startup by Eric Ries, create minimum viable product and get as many people to review your product and launch as fast as possible at the lowest cost possible.
  3. Learn about online marketing, things such as how to drive traffic, conversion rates, upsell and do email marketing, if you will be working in ecommerce space. Good resources for this are kissmetrics.com, backlinko.com, quicksprout.com, neilpatel.com.  

 

By Aija Krutaine based on an interview with Nadhir Ashafiq