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 $1.5 million in Series A funding early last year, TheLorry is still in touch with many investors but has no plans for fundraising as yet.
You can read more about TheLorry in SPARK40 here.
Nadhir Ashafiq’s Tips for Aspiring Entrepreneurs
- Validate your business idea – test the product, see whether you will have a market before spending money on it. Prior to TheLorry I spent RM 200,000 ($USD 45,000) on a thing which did not work. Don’t spend so much money for nothing!
- 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.
- 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