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Deliveree logistics marketplace

Deliveree’s Group CEO Tom Kim and Group Head of New Product Nat Atichartakarn at Deliveree’s Jakarta HQ

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.”

Deliveree logistics marketplace

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

Deliveree logistics marketplace

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.

Deliveree logistics marketplace

“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.”

Deliveree logistics marketplace

“These are the kind of big problems we love to be involved in solving,” concludes Nat.

Marilyn Monroe once sang, “diamonds are a girl’s best friend” and it seems to be ringing true as Indonesia’s fine jewelry sales grew 13% from 2015 to 2016 reaching $1.57 million, according to Euromonitor.

The country’s upper-middle class households are expected to more than double by 2030 and the current existing 1.5 million are creating demand for gold, silver and metal combinations growing annually 7.8% until 2021 making Indonesia the fastest-growing in the world for jewelry sales.

Indonesia Jewelry Market

Model showcasing products at Orori event in Indonesia.

“Jewelry is part of the culture during wedding and childbirth [celebrations] for people in eastern Indonesia,” said president director Sandra Sunarto in Bandung, West Java. “They are more interested in buying heavier [jewelry] made of higher carats.”

It’s not difficult then to understand why George Budi Sumantri, CEO and founder of Indonesian online jeweler Orori, shut down his family’s offline business to focus on ecommerce in 2012 after taking over in 2003.

ecommerceIQ conducted an email interview with the founder to discover why and how he decided to sell a high AOV product in a country that is still skeptical about shopping online.

Pioneering jewelry trading online

At the time Sumantri decided to close down his offline operations, 80% of the company’s revenue came from its stores spread across Jakarta’s shopping centers.

While an extremely risky move, he believed that moving operations online would save the company money previously spent on sitting inventory and rental costs.

Within a year, the company racked up $1.3 million in revenue and as of 2017, Orori claims to have 2 million consumers and processing thousand of transactions per month.

Global sales of personal accessories are growing at 2%, internet retailing is experiencing double-digit growth. – Euromonitor 2016

“Yes, there are still people who like to shop in a physical store, but when you look closely at the urban population; young couples who plan to get married and the young people who are looking for Mother’s Day gifts, [they] love the practicality and ease of access that ecommerce offers,” said Sumantri.

As newly middle class female Indonesian consumers become savvier about her shopping prowess, she cares about choice—not just price and promotions.

Leaving no space for distrust

A common question asked by many skeptics remains, how do you sell a product with a high average order volume to a market that only began going online?

A quick browse through the site shows that wedding rings can start at roughly $220 and reach $6,000 depending on the carat and diamond cut.

Orori made sure consumers had no reason to doubt its reliability by arming the platform with certain features to ease the minds of shoppers.

For example, all of Orori’s more than 35,000 diamonds are certified by the Gemological Institute of America (GIA) and each have a complete description along with product specifications.

The best way to merchandise premium categories to the discriminating Indonesian shopper is to visibly show price tags to aid comparison spending – Nielsen

For first time buyers, they can read the company’s blog OROREADS, to access online guides for buying jewelry, including how to select the right finger size, caring for fine jewelry and choosing a diamond size.

Still not convinced? The company offers a 100% money back guarantee and various payment options such as bank instalments, cashback, and a ‘buy now pay later’ programme that allows consumers to pay 30 days after they made the order.

For any stragglers with doubts, they can chat with an Orori agent, a feature that can increase conversions up to 6.3 times.

Indonesia Jewelry Market

Orori live chat offered on the website to answer questions regarding its high AOV products.

By providing all of these services, the company is hoping to encourage people to buy jewelry online as per the company’s tagline ‘Jewelry for Everyone’.

On its way to make the region sparkle 

Originally set to sell its own line of jewelry, Orori has since changed its business model to a marketplace to offer a variety of brands on its platform. Right now, the company has seven jewelers on its platform.

Sumantri targets Orori to reach $25 million of GMV in 2019 with annual transactions of 80,000.

The company also plans to move beyond the B2C sector and launch C2C and C2B (consumer-to-business) features by the end of the year. In addition to these aggressive targets, Orori has regional expansion plans starting with Singapore.

“The marketplace [model] will not only change consumer behavior about buying jewelry online, but will also help reputable brands in the industry extend their business beyond just brick-and-mortar,” said Sumantri.

Indonesia Jewelry Market

Orori CEO and founder George Budi Sumantri

Featured image credit: Leeviahan
ecommerceIQ is proud to wrap up the end of a successful year with “SPARK 40” – a compilation of the top ecommerce professionals who have contributed to shaping the industry in Southeast Asia.

It’s not only about funding. These businesses are solving long-term problems and hoping to be the ‘spark’ needed to clear roadblocks that restrict ecommerce growth – whether that be serving the unbanked, evolving their business models to cater to customer demands or being the first to tackle a new sector, we want to celebrate their success. Investment is only a supplementary criterion.

And while the industry benefit from their milestones, they continue to remind us that there is still a lot to do. Here is ecommerceIQ’s 2016 #SPARK40 list: Download here. Read more

A new breed of startups are trying to tackle rural ecommerce in Southeast Asia, reports Tech In Asia.

Kudo agents source products from a number of ecommerce stores. The agents typically sit in mom and pop stores in rural Indonesia and install the app to sell a wider variety of goods without having to stock them.

The agents will help customers to pick items from the app’s product channels, place an order, and take cash in return.

From countries such as Cambodia to the Philippines, this is a common problem for ecommerce companies; most people are not familiar with the tools that would help them shop online.

Most  importantly, people need a bank account to make payments. In Indonesia, more than half of the population over the age of 15 do not have one. As a result of this, less than 1% of Indonesians actually shop online.

The untapped window of missed opportunities is large, especially for people living in remote areas. Agung Nugroho wants to solve that problem by working with small town shopkeepers and turning them into ‘agents’ that help others make online purchases. This is how his new startup, Kudo, was born.

Kudo’s network of agents grew from just hundreds in May last year to over 100,000 currently. 50% of agents are in Java, while the remaining 50% are spread out across other provinces, to Aceh to Papua.

Maybe you don’t trust the online seller, but you would definitely trust the owner of the small shop next to your house, who happens to be a Kudo agent. – Agung Nugroho.

The startup also plays a role in last mile delivery. Trusted shopkeepers who are familiar with the neighborhoods can fill that gap.

One of the best selling items is gold. People buy gold from certified merchants on ecommerce marketplace Bukalapak, which is one of the shops connected with Kudo’s app. It is considered a safe way to invest for the future.

Kudo’s next goal is to have one million agents spread across the country. Agung hints that the startup is making several million US dollars in monthly transactions.

A version of this appeared in Tech in Asia on August 10. Read the full version here

7-Eleven Inc. and a tech startup called Flirtey have beaten Amazon to the punch in making the first drone delivery to a customer’s home in the US, reports TechCrunch.

Rather than adapting existing unmanned aerial vehicles, Flirtey builds its own, develops the software to run them, and creates proprietary packaging and containers to keep items secure during delivery, according to CEO Matt Sweeney.

The 7-Eleven delivery took place in Reno, Nevada on July 10th, Flirtey successfully transported: Slurpees, a chicken sandwich, donuts, hot coffee and candy to the home of the family who placed the order.

According to 7-Eleven EVP and Chief Merchandising Officer Jesus H. Delgado-Jenkins, “delivery by drone is something 7-Eleven intends to offer widely in the future.”

Drone delivery could prove especially useful to families with children who cannot easily leave the house when they have an urgent need for items like over the counter medicines or milk.

To find customers willing to have their order handled by a flying robot, the companies surveyed households within a one-mile radius of the store from which they planned to deliver.

Most already know 7-Eleven, the convenience store retail chain that boasts about 10,800 stores in North America and 59,500 in total around the world. If already successful in the US, it wouldn’t be long until they are delivering in Southeast Asia.

A version of this appeared in TechCrunch on July 22. Read the full version here.

Unilever, the $130 billion dollar multinational consumer goods company is speculated to be paying $1 billion, in cash for Dollar Shave Club (DSC), reports Fortune.

DSC is a full male grooming business on track to exceed $200 million in turnover in 2016.

This transaction thus also would represent the largest multiple for a ecommerce startup in history.

DSC has grown to become a dominate player in the male grooming business since its founding in 2012. Its revenue last year was $153 million and the company’s 3.2 million members will be a valuable addition to Unilever and increase the company’s exposure to a growing demographic.

DSC funding history

Dollar Shave Club had raised over $160 million in venture capital funding, most recently last November at a $539 million valuation. Its seed round of funding was led by Forerunner Ventures, its Series A and Series B rounds were led by Venrock, while Technology Crossover Ventures led its two subsequent rounds.

The company’s founder and CEO Michael Dubin will continue to run the company, which will operate its direct-to-consumer razor business as an independent entity.

What does this mean for Southeast Asia?

DSC generated a mass volume of orders from a small range of products, namely $1 razors. Many businesses in Southeast Asia can adopt their practices. The secret? A subscription model.

Low-priced items do not make the investment into brand.com worth it unless coupled with other strategies such as order bundling, subscription models or charging delivery fees.

A version of this article can be found in Fortune and TechCrunch on July 20. The deal was released July 20 in Business Wire. Find the full press release here.