The current state of logistics in Southeast Asia is often bemoaned as one of the main challenges holding the region back from its full economic development.
Alibaba founder and chairman Jack Ma remarked that with Indonesia’s geographical state, a comprehensive logistics network is needed to stimulate growth.
His assessment is also applicable to other emerging markets across the region.
But these types of infrastructural projects in the Philippines, Thailand or Vietnam is not an easy, and certainly not, cheap feat. Here are a few examples of current plans in the works:
- World Bank estimates $500 billion is needed in Indonesia over the next five years to bridge the infrastructure gap
- President of the Philippines, Rodrigo Duterte, proposed a $161 billion six year plan to improve railways and ports to connect the archipelago’s islands
- Thailand’s government has also started 20 infrastructure projects worth $50.2 billion to improve the country’s current rail lines
This regional bottleneck has opened opportunities for startups to figure out the cheapest and quickest way to get a package from point A to point B.
Companies solving last-mile headaches for ecommerce companies have attracted a lot of investor money like Lalamove and NinjaVan with $100 million and $30 million funding rounds, respectively.
But a logistics technology company that recently raised $14.5 million is looking to tackle another problem.
“We’re interested in solving bigger, bulkier problems that sit further upstream from your last mile delivery challenges,” explained Tom Kim, Group CEO of Deliveree. “With marketplace technology, we want to fundamentally challenge the way companies approach first and mid-mile bulk logistics.”
ecommerceIQ speaks with Tom and the Group Head of New Product, Nattapak Atichartakarn, to discover how the logistics company found success in Southeast Asia by helping businesses reduce costs for first and “mid-mile” goods transport and what they plan to do with the recent Series A injection from Gobi Partners.
Logistics but focus is on technology
Through the Deliveree mobile app and web marketplace, customers have access to screened qualified drivers of commercial vehicles to move their merchandise and/or cargo.
The company’s new marketplace model houses 15,000 commercial vehicles consisting of cargo vans, pickups trucks, small-large box trucks, as well as economy vehicles such as MPVs and hatchbacks on its platform — covering three metro cities in Southeast Asia; Bangkok, Jakarta, and Manila (the company operates under “Transportify” due to a trademark issue in the Philippines).
Having started with serving end-customers, the company realized in order to grow its business, it had to focus on serving corporate clients.
“The bread and butter of our business is goods, merchandise, and cargo — bulk movement from outer provinces to warehouses in the cities, factories to distribution centers, and distribution centers to retail stores, or what we call modern trade,” explains Nat.
Now, nearing the end of its third year of operations, the company says it is close to financial break-even in its core markets. Nat credits this success to the quality of technology and drivers that Deliveree provides.
The company’s tech team of 30 developers in Vietnam is responsible for building, managing, expanding, and innovating the company’s marketplace tech capabilities and solutions that focuses on businesses needs:
- Batch booking toolsets for high volume customers
- Flexible booking scheduling from immediate to two weeks in advance
- Drop off package at multiple destinations up 10 locations
- Real-time tracking of driver and package location
- In-app chat between customers, drivers, and customer support
- Cash on Delivery and original document return services
- Contract logistics option for businesses that need dedicated resources
- Full commercial insurance
In addition to targeting SMEs, Deliveree also partners with transportation and logistics companies without their own technologies to connect them to new customers on its platform.
“People think these big logistics companies own their whole logistics network, when in fact, many don’t. A lot of them outsource ground transportation elements of the business and they use us as a provider of ground transportation for bulk goods and cargo so we address the gap and needs of the industry,” says Tom.
Capitalizing on quality
The company takes pride in the high quality of its drivers, achieved by imposing a high standardized screening process, something Tom doesn’t skimp on.
It’s easier to get into most colleges than to get into our driver pool.
“We only invite a third of the driver applicants to training — it’s less than the acceptance rate at the most universities,” says Tom.
Calling it the “best trained fleet on the market”, every single driver must endure six hours of in-class training, which includes customer etiquette, and pass a 50 question final exam with 80% score or higher.
The company also enforces additional training for drivers with low satisfaction scores and regularly do real-time quality checks with a mystery shopper.
While not the most scalable process, Nat says it’s a price the company’s willing to pay.
Growth without quality is more of a step backward for us.
With such high investment in human resources, is the company worried about “leakage” – the shift of user-driver relations moving off the platform?
“There will always be a case or two of customers trying to work with our partners directly, but most of them end up coming back to our platform. Why? Because one of the reasons they come to us in the first place is they don’t want to, or can’t, manage this specific part of the business,” said Tom.
“And with the added value we provide for them, I don’t see why businesses would want to even bother.”
Ride-hailing apps aren’t built for cargo
With the heated war between ride-hailing companies in the region, parcel delivery is one of the added value services that is being offered by Uber and Grab to capture a wider clientele.
But Deliveree isn’t worried.
“These ride-hailing companies have always been doing logistics but they haven’t been doing it right,” said Tom.
According to Deliveree, the services provided are not comparable as the requirements for logistics is radically different than the passenger business.
“If you’re looking at the value of delivery bookings in Uber and Grab, it’s probably not more than a few dollars. Our average booking value is more than 10 times the amount and at the same time, our resources and costs to support each booking are higher than what a passenger app would expend per booking,” said Tom.
Tom also pointed out the security risks highlighted by a recent ruling in the Philippines by the country’s Land Transportation Franchising and Regulatory Board (LTFRB) that banned any package delivery through ride-hailing apps accompanied without a passenger. The reason? Drug-trafficking concerns.
“Trust me, it won’t only be the Philippines that will apply this rule,” commented Tom.
Small ecommerce pie for Deliveree
With the current state of ecommerce in Southeast Asia where fashion still tops all categories in popularity and ordering large items like bicycles or washing machines is still uncommon, the pie for Deliveree’s business is not that big.
“Ecommerce is primarily a business comprised of small things, and we don’t move small things — we move big things,” says Tom.
But Tom believes the company will eventually grab their share of Southeast Asia’s ecommerce pie.
“Our company is not closely aligned with the ecommerce industry today because the items that people buy are still small parcels and it isn’t our specialty because of the challenging economic units,” said Tom. “Ordering anything and everything online is an evolution that will probably happen in the next over ten years or so.”
“This is when we (Deliveree) will likely play a much bigger role in the ecommerce value chain.”
Growing its current markets
With new funding from its Series A round, Deliveree is exploring some interesting growth plans.
The company hasn’t ruled out M&A to grow the business in key markets and although expansion to new cities and countries are in the cards, Nat said that Deliveree is more interested in growing the cities where it is currently operating at the moment.
“Imagine if Asus, Lenovo, and Acer compete with each other in the tablet market in Jakarta,” said Tom. “When the sales start, there’s a limit to how far the competitors can go because they have inflated costs the further the consumers. If we can bring down the cost base and give them more margin latitude, the competitive playing field will force some of those savings into discounts, sales, promos, even lower everyday pricing and ultimately the consumer wins.”
“These are the kind of big problems we love to be involved in solving,” concludes Nat.