Posts

January is generally a slow month for retail as people are tightening belts after splurging during the holiday season. End of year campaigns are also allocated large marketing spend to drive more traffic to Southeast Asia’s November 11/11 sales period and the 12/12 “Online Revolution” driven by Lazada, the region’s largest marketplace.

Looking at SimilarWeb web traffic – a sum of all (non unique) visits both on desktop and mobile –  for Indonesia’s most popular B2C marketplaces shows a decline of around 3 to 20% from December to January. Lazada Indonesia experienced a 3% drop in the number of monthly visitors.

But it was MatahariMall,  the country’s biggest department store chain, who noted the largest staggering drop of 62% in visitors to its online marketplace.

The two-year old online venture, MatahariMall.com, raised $100 million in October last year to bolster its share of Indonesia’s ecommerce market. A look at the company’s online traffic shows a buoyant performance in terms of its visitors – spikes in traffic from roughly 7M to 24M shows the difference in organic traffic and the effects of a marketing push.

A more stable performance this year might provide a better indication if it will manage to live up to its ambitions to become the “Alibaba of Indonesia”.

Two players that continuously capture a steady audience are Lazada and Blibli.com, a six year old e-marketplace owned by Djarum Group and BCA, one of the largest banks in Indonesia.

Not surprisingly, the best performing ecommerce sites are the best-funded, making it harder for smaller players to compete unless targeting a niche audience.

Meanwhile, most C2C marketplaces saw site visitors in January increase by 3 to 8%. Jualo, an online marketplace for secondhand goods, saw the biggest lift in web traffic with 8% growth.

Web traffic, of course, doesn’t automatically equate conversions, it’s only one metric in tracking an online company’s traction. The data, however, is useful for marketers, advertisers, merchants, etc. to understand which marketplaces can provide an opportunity to tap into a large pool of existing customers.

eIQ will be updating the numbers every month. Find out the statistics for Indonesia | Thailand | Malaysia | Vietnam | Philippines

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.

Fashion is one of the first things that comes to mind when thinking about online shopping and nowadays, there are plenty of brands and retailers to choose from.

Yet, did you know around 60% of all Southeast Asia’s fashion and lifestyle retail is attributed to small vendors who sell at places like Bangkok’s Jatujak market, Platinum outlet mall, or Singapore’s Haji Lane?

In Indonesia, it’s even more – 85% of retail is thanks to small shops and resellers and what’s even more surprising is that most of these sellers are not taking advantage of the internet revolution.

This is exactly what Ankiti Bose realized on a trip to Bangkok a few years back and together with Dhruv Kapoor, the duo built Zilingo in 2015. The company is a fashion and lifestyle marketplace focused on helping small sellers in Thailand, Singapore, Malaysia and most recently, Indonesia, expand their customer reach.

Bose shares with ecommerceIQ how her marketplace competes in an already saturated online fashion market in Southeast Asia and what her newest B2B venture is all about. 

“Businesses first”

While most companies create a product for the end user, Zilingo was specifically built with the sellers in mind in order to help them create virtual storefronts and overcome the difficulty of managing large order volumes and fulfillment.

“I realized all these sellers had smartphones and probably a few had Instagram, Facebook shops or Shopee accounts. While it is a great way to be discovered, there’s a lot of noise and complexities to running a business on these platforms. We knew that writing some Magento code wouldn’t solve this problem; we needed to educate them,” says Ankiti.

Part of the reason why current ecommerce platforms such as Shopify don’t tempt small sellers to open online shops is simply because they’re in English.

Understanding that English proficiency levels vary widely across Southeast Asia, Bose aimed to build a localized backend system that allowed sellers to easily track analytics, manage inventory and schedule order pick-ups. The mobile-first site was good to go within five months.

When a buyer purchases a product on the site, the seller is notified on his app to confirm the order and provide a slot for a product pick up. Zilingo’s logistics partners, integrated in the system, then go to the seller’s shop to pick up the item and deliver it to the buyer. The company doesn’t hold any inventory itself.

Zilingo marketplace was built with the sellers in mind to make it easier for them to create an online store and help them track analytics, manage inventory and schedule order pick-ups.

For these services, the e-marketplace charges sellers 15-20% commission on their products plus a per-order fulfillment fee. According to Bose, businesses don’t mind paying the commission if they get more orders as Zilingo helps them to be discovered by buyers.

“Our seller churn is less than 7% annually meaning sellers don’t drop off once they see the value of the platform,” says Bose.

The less than two year old marketplace has managed to secure 2,700 sellers all trying to capture the attention of 1.1 million users, of which 2% are active buyers. All of this could be the reason why Zilingo managed to secure a $8 million Series A in September 2016.

New ventures

Thailand is Zilingo’s biggest market in terms of sellers and buyers; Singapore follows very closely. While around 80% of the company’s gross merchandise value comes from these two countries, Zilingo is also present in Malaysia and launched in Indonesia in the first week of February. The company also ships to other markets such as Hong Kong, Australia and United States.

“Customers from Korea, Hong Kong, Australia or the US have become an unexpectedly fast-growing part of our business,” says Ankiti. “Probably because the only supplies that were available to these buyers were typically from China and while prices were cheap, the product would arrive completely different from what was expected.”

According to Bose, Thailand is an exceptional market to find a great price versus quality and relevance balance. “If there is something on a catwalk in Milan, it will take three seasons to become available in Indonesia, but it would probably be on hangers in Bangkok the next week,” says Ankiti.

Not only are individuals exploring the Thai fashion scene, Zilingo is also seeing increased interest from businesses – wholesalers and resellers from far-flung areas who are trying to buy in bulk.

“We have many requests to buy 10, 20 or maybe 100 items so we decided to create a separate platform called Zilingo for Business where they can get a better rate from the seller,” says Ankiti. “This also keeps our cohort analysis clean.”

Marketing to millennials

Zilingo is a mobile-first platform. Bose shares that while the marketplace is available on desktop, 98% of its users are on mobile and 83% of users are millennials. Being a millennial herself, Ankiti figured early on she needed new ways to get the attention of buyers.

Zilingo is a mobile-first platform and 83% of users are millennials.

“Other marketplaces are trying to sell to me in a way that I don’t naturally consume media anymore. Majority of my phone time is spent on Instagram Stories or Snapchat and sometimes Facebook. We decided to go big on video and build a Snapchat presence and give sellers an opportunity to position themselves on these channels,” explains Ankiti.

She calls this approach “content on steroids”.

The way it works is that users see products in a video that they can click on to go to the product discovery page. From there, it’s only a few clicks to purchase.

The marketplace does allocate a large budget for digital marketing, but Ankiti ensures it’s spent efficiently thanks to her past experience at Sequoia and Mckinsey.

“Facebook is our most optimized marketing channel and although we’re spending, we recover it back within nine months. For international orders from US or Australia, the cost is covered on the second transaction,” reveals Ankiti. “VC money is quite valuable to us.”

Behind the scenes tech

Besides marketing, technology is the other big expense on Zilingo’s budget. Of around 70 employees across four countries, 25 are engineers based in Bangalore and Singapore. Their efforts are focused on applying machine learning to product discovery and image recognition technology to improve the company’s online shopping experience.

While running operations in several countries, Zilingo is keeping it light. The company has around 70 employees across four countries, 25 of them are engineers.

The Zilingo app lets a customer snap a picture of a blouse or dress and browse through similar items available on the platform. The company recently featured an article on the top 15 looks from the Golden Globes Awards and the video resulted in an 80% higher click-through-rate than any other content on the site.

The development of product discovery technology is even more important for markets such as Indonesia.

“I think people often underestimate the importance of technology required to do very relevant targeting when you have a market that wants both Western and Muslim wear. Either you have to separate the products or you have to have great machine learning that tailors content to somebody who wants to buy only hijabs and not bikinis,” says Ankiti.

The challenges faced by everyone

Zilingo is not an exception to the pain points logistics and payments poise to ecommerce in Southeast Asia. In Zilingo’s case, they might be even more profound as the company does not have its own warehouse and items must be picked up from 2,700 sellers.

“There was a time when one of our sellers from Taiwan would ship to Thailand and deliver the product sooner than an upcountry seller shipping to Bangkok. At that point we understood we had to do something,” says Ankiti.

The marketplace is open to working with logistics companies both large and small and is constantly on the lookout for new partners. It has managed to reduce delivery time in Thailand from 5 days to 2-2.5 days, yet its priority is to get it down to 1-2 days.

Payments are the second problem as cash-on-delivery and money transfers through bank branches, ATMs and payment kiosks are the preferred payment methods.

“The problem with these payment methods is converting orders to real transactions. Cancellations are common when people have to go to ATM or a branch to pay for the items,” says Ankiti.

“Marketplaces run on fintech and logistics companies. At the end of the day it doesn’t matter how great the product discovery is if the delivery experience sucks. You will hate the marketplace. It’s no wonder why so many of the successful internet companies in this region are C2C marketplaces – the problem is between the buyer and the seller,” says Ankiti.

We hear you Ankiti.

The showroom is quiet.

Fanie Fikri, Head of Marketing at Fabelio, one of Indonesia’s up and coming startups, isn’t worried, the usual mall traffic is out to lunch.

“Our experience centers contribute a healthy 15% of our total revenue.”

He’s referring to the number of customers who have “signed in” to any of the company’s two offline experience centers to view Fabelio’s line of Ikea-esque furniture before buying it online.

To promote a product such as furniture, it’s almost mandatory to have an offline presence and it must be working as the company has raised $3.5M in total funding and was a part of SPARK 40 2016 top individuals building the ecommerce ecosystem.

ecommerceIQ invited out Fanie for coffee to discuss how the company markets affordable coffee tables and artisanal items to the masses and the habit of purchasing furniture online.

What was buying furniture like?  

“A complete mess.”

Fanie explains that his father used to find a carpenter on the streets of Jakarta, attempt to describe his coffee table vision and haggle for an agreeable price. He would also need to return a few times in a week to check on its progress because very rarely would it be without blemishes or completed on time.

One could understand the frustrations with buying artisanal furniture in Indonesia and why it was such a big deal when Swedish furniture giant IKEA opened its first store in the archipelago three years back.

It also showed the shift in taste of Indonesians from traditional teak furniture to a more minimalistic and functional design.

Furniture is not dominated by one brand and Ikea only captures 18% market share in Indonesia so why not offer another option online?”  

Startups, do your research.

If a company expects potential visitors to spend at least $250 per order on its website, it would be wise to conduct extensive market research first. Furniture is one of those items that people prefer to have home delivered, but who is the audience?

Unlike IKEA, that focuses on younger people with higher education, medium income, and are not very status conscientious, Fabelio targets new Indonesian families who have the growing luxury of decorating as the average top income earners are 30-34 year olds (Euromonitor: Income and Expenditure Indonesia).

Consumer expenditure in Indonesia on household goods and services is also forecasted to rise in the next 13 years.

The company has held many focus groups comprised of young couples, with and without children, to understand what its consumers are looking for. Fanie, a local Indonesian himself, knows that many young professionals are living in “Koskosan” – temporary rooms that are already fully furnished – so they wouldn’t be Fabelio’s main customers.

The company deduced the following from marketing efforts:

    • Focus groups revealed that Indonesians prefer wooden furniture but the look cannot be too raw, it needs to be extremely well polished. Women typically decide on the household’s smaller purchases but males have the final say on larger purchases.
    • Paid search keywords in Bahasa – “furniture”, “buy furniture online”, “dining room table”, “chairs” – hold the highest marketing return
    • Showrooms “experience centers” are the company’s build trust and inspire, are able to capture names and emails in a visitor log book to track efficacy
    • Event sponsorships are important to reach the right audience, in Fabelio’s case, Indonesia housewives, who still have 78% influence over their spouse’s income. The company partnered with Femina Group, a popular magazine for women, to provide the furniture for its offline pop shop

 

Fabelio partnership with Femina Group’s fashionlink pop shop at Fabelio’s experience center in Senayan City, Jakarta.

What about the Swedish competition?

Although both companies offer minimalistic designs, Fabelio ensures competitive pricing and more room for customization.

Like IKEA, the company also offers “Fabelio Design & Build” that is a B2B interior decorating service. The offices of Go-Jek, Qraved and Singapore Airlines all contain a splash of Fabelio.

Home by Fabeliois the company’s newest venture that caters to customers with basket sizes of 20M IDR and up. If clients are purchasing multiple pieces of furniture, why not send in a professional interior designer for free to transform the entire space?

Although it’s been only 4 months since its launch, over 100 customers have currently signed up for the service.

Furniture may seem as a one-off type of buy but Fabelio sees 20-25% repeat purchases within six months. Fanie also shares other factors that attribute to the company’s success:

    • Extremely vigorous QC process that includes testing weights on the tables, balance of chair legs, polishing uneven colors and surfaces to reduce number of returns (only 10% of returns are due to quality issues)
    • More logistics control with its own dedicated fleet and free delivery and installments in West Java whereas IKEA charges for both. Fun fact: the Fabelio trucks have travelled 120,000km, equivalent to 3X around the globe’s circumference.
    • Having “Ready Stock” items delivered within 4-7 business days and “Made to Order” items delivered within 3 weeks

“We don’t see IKEA as an enemy, they are more of a mentor we can learn from. What we want to know is why our customers who’ve been at IKEA come to Fabelio,” comments Fanie.

Fabelio’s design for its own future

The company hopes to offer delivery to other parts of Indonesia beyond West Java, the country’s largest consumer market, and open more experience centers. The challenge is finding a sweet spot between high foot traffic and rental price.

Fanie shares that although Fabelio plans to expand to new markets, namely Singapore and Malaysia being the most mature and ready for furniture ecommerce, the company wants to cater to Indonesians properly first.

There is already one piece of Fabelio furniture in all 267 neighbourhoods of Jakarta, minus Thousand Islands Regency. Maybe the next coffee table for your new home won’t have to be from Ikea but Fabelio.

The Fabelio team

AUTHOR: CYNTHIA LUO

Vietnam’s investment potential is attracting attention, especially in industries such as real estate and technology. In January this year alone, 9,000 new companies were registered.

Despite its authoritarian government, investors in Vietnam have the option of side-stepping the country’s state owned companies to focus on smaller, private businesses that are poised for growth. Low valuations and a rising foreign cash flow mean there is a lot of potential to drive economic progress forwards but many companies still have doubt.

A lot of marketers, retailers and manufacturers are not sure about what to think of ecommerce: is it another buzz word or the future of modern trade in Vietnam? – Kantar World Panel

The current online landscape and its future

Vietnam is home to a handful of ecommerce marketplaces, notably Tiki, Sendo and The Gioi di dong, where site visits are comparable to the likes of Lazada, the biggest e-player that currently claims 30% of Vietnam’s online retail market.

Source: ecommerceIQ Vietnam data

Vietnam has also seen its fair share of newcomers and exits in ecommerce but C2C and B2C models are the most popular in the country. Garena’s Shopee has been steadily gaining traction after almost two years in the country and the Shopee app has been downloaded two million times and processes 10,000 orders per day.

2017 will be a year of intense competition for Vietnam’s ecommerce players especially as traditional retailers pursue an online presence. An example would be Korean cosmetics giant, Lotte.vn, that has an online and offline presence in the country. In January alone, Lotte gained 1.7 million visits on its website. Another threat to online players would be retail chain Aeon Shop that opened its online store AeonEshop.

vietnam, aeonVietnamese consumers shop FMCG 

According to Kantar World Panel research, the internet and online commerce is becoming more accessible to shoppers in Vietnam thanks to mobile phone usage at 80% penetration in the country’s four key urban cities. These are the other findings:

  • 69% of Vietnam’s households have working women who welcome convenience
  • Nearly 6% of urban households have shopped online for (fast moving consumer goods) FMCG at least once in 2016 and when they do, spend 3-4 X more than they would on an average shopping trip to avoid carrying bulky products on their motorbikes
  • The value share of FMCG ecommerce is 0.2% in Vietnam meaning there are plenty of opportunities for consumer good players to serve the demand and rack up sizable market share

 

Help from the government 

The Vietnamese government is set on implementing measures to improve the business and investment landscape to boost economic growth in the country. These include supporting SMEs and in particular, Resolution 35, which aims to create one million private enterprises in 2020 from 515,000 at present, and increasing the private sector share of national GDP from 43% to 49%.

The country was classified a “lower-middle income” country in 2009 – causes of the middle-income trap can include a lack of basic and advanced infrastructure, adequate financing, skilled human capital and innovative enterprise.

“Vietnam’s vision is to reach the upper-middle income category and be well on its way to a high-income economy by 2035” – Daryn Govender, opinion article on Interest.co.nz

 

Roadblocks to Vietnam’s growth

Analysts have said that many companies in Vietnam are looking to increase exports this year, hoping to leverage upcoming free trade agreements going into effect this year.

According to the Ministry of Trade and Industry, Vietnam will have to implement all commitments under the ASEAN Free Trade Agreement with China and other ASEAN member countries, the ASEAN Economic Community (AEC), World Trade Organisation (WTO) to create highly favorable conditions for the country’s economic development.

There are other challenges from overseas and domestic markets that may hinder the growth potential of many Vietnamese enterprises, especially for exports.

Domestic challenges

  • Macroeconomic instability
  • Lack of adequate development infrastructure
  • Growth quality of the Vietnamese economy

Overseas challenges

  • President Donald Trump’s “protectionism” rhetoric could potentially stunt export growth for Vietnam
  • When official, the consequences of Brexit could also impact as Vietnam was emerging as one of the EU’s most active trading partners

The major economies’ shift from trade liberalisation to protectionism could very well change the structure of global commodity supply and demand and directly impact the global trade market. To analysts, this means that Vietnamese companies should focus on building in its domestic market to contribute to economic growth and development.

For those poised to enter Vietnam, does your business differentiate from what’s already available, more FMCG offerings perhaps? Are you able to benefit from government initiatives such as Resolution 35? For investors, are you willing to take a gamble on a still very much developing country such as Vietnam?

With all this in mind, we look forward to witnessing Vietnam’s growth.

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