This article first appeared in The Edge Malaysia Weekly on June 5, 2017 - June 11, 2017
THIRD-party logistics in Malaysia is fast becoming a crowded game as players — large and small, foreign and local — battle for market share, especially in the last-mile delivery space.
Despite the increased attention, industry players concede that Malaysia’s logistics industry is still very much a fragmented business. It is precisely these problems that have attracted the attention of at least two foreign logistics tech (logtech) start-ups to operate in Kuala Lumpur.
Singapore-based Ezyhaul has been operating in Kuala Lumpur since last October, while Lalamove, headquartered in Hong Kong, is intending to start business in Kuala Lumpur by third quarter of this year.
What they offer are technology platforms to help connect demand and supply for logistics services. But both start-ups are taking on very different parts of the supply chain. Lalamove is focused on the last- mile courier part of the game while Ezyhaul is looking at “every mile except the last” when it comes to moving goods around.
The Edge spoke to both players to see how they intend to carve out space for themselves in the local logistics landscape. And no, they do not see themselves as competitors to existing third-party logistics companies.
Ezyhaul plans to end the days of empty trucks
When Ezyhaul’s co-founders Raymond Gillon (left) and Mudasar Mohamed see trucks on the road, they are willing to bet that these trucks are half full or empty.
Based on their experience in logistics, they know that empty back haul has been a perennial problem for transport companies.
“If you look at any trucks on the road, chances are they’re probably not full. Worse still, they tend to come back completely empty. There’s no way for the truckers to fill that load other than hope someone calls them and says ‘Do you have space?’” says Mudasar, a trained engineer.
“How do you have a better match between demand and capacity? This is essentially the problem that Ezyhaul is trying to solve.”
This problem is certainly not unique to Malaysia. It is a worldwide issue but perhaps more acute in Southeast Asia, which is the market that the start-up is looking to cover.
Ezyhaul was established in Singapore last April and set up business in Malaysia, its first market, last October. It has raised S$1.2 million (RM3.7 million) in seed funding and is closing another round of investment to help fuel its expansion in Malaysia and Southeast Asia.
Ezyhaul is a business-to-business (B2B) start-up that helps companies, large and small, move commercial cargoes more efficiently. Ezyhaul, however, does not own its own fleet of vehicles but serves as a platform that connects shippers with transport companies with excess capacity.
A key point to note is that Ezyhaul has deliberately avoided the last-mile part of the business which it sees as too crowded.
Mudasar says so much attention has been paid on the last mile part of the logistics chain that people tend to forget about what happens before the final step.
“The classic line we use is that we do every mile except the last mile. We pick up goods from the ports, airports, warehouses, and then those goods are going to another warehouse or a factory or to a business outlet,” says Mudasar, Ezyhaul’s chief operating officer.
How it works, and it’s not like Uber
Ezyhaul’s platform enables businesses to make a booking and indicate the type of truck needed to transport the cargo. From there, Ezyhaul’s proprietary algorithm calculates the price for the trip.
Ezyhaul takes a small commission from each transaction and passes on the lion’s share to the transport company.
“Through our technology, we always know where these truckers are and when they are available and how much capacity they can carry. It’s up to the truckers to decide whether to accept or not,” says Gillon, Ezyhaul’s CEO.
According to Gillon, Ezyhaul’s prices are cheaper than market rates because it works with transport companies on unused capacity.
“For them, it’s almost pure profit [on an Ezyhaul trip] because the truckers would have already covered their costs on their initial shipment.”
The Ezyhaul platform can match a booking with a truck within two hours, which is the “on-demand” type model that gets a lot of hype. Nevertheless, the bulk of its business involves next-day shipment or over the course of the next two or three days.
An increasingly larger part of Ezyhaul’s business is in contract bookings, as opposed to spot business, where Ezyhaul enters into contractual arrangements with clients to guarantee them capacity and volumes at pre-agreed rates.
“It has become a much bigger part of our revenue stream where we see a shift from spot business to contracted business. The volumes are definitely a lot higher. The contract business market is much bigger than the spot market,” Gillon says.
This is probably why the comparison to Uber does not accurately describe what Ezyhaul does.
“A lot of people use the term ‘Uber for trucking’. I personally hate it. It gives the impression that it is just someone making a booking and someone accepting it. In logistics, you cannot do that all the time because there are standard operating procedures and specific requirements,” Mudasar says.
Growing traction
In its first eight months of operation, Ezyhaul has seen growth in traction on both the demand and supply side.
According to Gillon, the logistics tech start-up has been gaining traction and currently does about 1,000 transactions a month.
On the demand side, Ezyhaul serves around 200 to 250 clients. Its clients fall into three segments: small and medium enterprises, multi-national corporations and third-party logistics companies.
On the supply side, Ezyhaul has grown to almost 1,000 trucks registered on its platform. Gillon says it should hit about 2,500 to 3,000 trucks by year end.
Apart from serving domestic clients, the start-up also does cross-border shipments, such as between Penang and Singapore or Johor Baru and Singapore.
“We do the Singapore-Malaysia market for now but we do plan to expand to Thailand and eventually link up to China in due course. That will be quite a profitable and high-margin transaction for us,” Mudasar says.
Apart from regional expansion over the longer term, Ezyhaul is already laying the foundation for the future.
According to Mudasar, the startup is currently testing Internet of Things-type solutions by fitting some trucks with sensors to collect data. Gillon adds that Ezyhaul’s ultimate aim is to be a transport platform and not merely an electronic freight forwarding company.
Over the longer term, Ezyhaul could add sea or air freight capabilities to its platform if it makes commercial sense to do so.
But for now, the start-up intends to hunker down and try to eliminate inefficiencies in road freight across Southeast Asia.
Lalamove’s aggressive growth strategy
Logistics start-up Lalamove is planning to roll out in Kuala Lumpur in the coming months as part of its Southeast Asia expansion. The Hong Kong-based start-up operates on-demand deliveries in two key markets — China and Southeast Asia. It has a presence in 75 Chinese cities and in six other Asian cities.
According to Lalamove’s managing director of international, Blake Larson (picture), the target is to be in 100 to 120 cities before the year is over.
Lalamove expanded in China at high speed, launching 6 to 12 cities a month there, Larson says. He adds that the cost to launch Lalamove in a new city is relatively low at about US$20,000 (RM85,626) to US$30,000 for starters. This excludes subsequent investments to grow Lalamove’s presence in each city.
“We found a way to do it in an efficient manner. We can launch in cities without having any people there now. We do a lot of work online and after we hit a certain volume, we put a team on the ground. It’s very process-driven at this point in China.”
Southeast Asia, on the other hand, is a lot more diverse and complex. “Logistics , at least our kind of logistics, is a very local business. We need to understand the dynamics of how things move in each city.”
Larson, who used to work for German online start-up, Rocket Internet, is familiar with Southeast Asia’s diverse terrain. He spearheads Lalamove’s growth in this region while founder Chow Shing Yuk focuses on China.
“All the Chinese companies are figuring out how to do Southeast Asia right now. They see saturation in their own market but they don’t know how to do Southeast Asia. It’s hard. But by breaking it separately, we found a way to do both without creating dependencies on either.”
Larson sees Kuala Lumpur as a natural extension for Lalamove, which is present in Singapore, Bangkok (Thailand) and Manila (the Philippines).
“We didn’t come earlier because Kuala Lumpur is not a huge city like Manila or Jakarta. However, I think the demand for our services is there,” he says.
Larson sees opportunity in Southeast Asia where the local delivery business is booming, but it is still very fragmented and inefficient. What is more, small businesses — which are Lalamove’s core customer base — tend not to have the resources or capabilities to invest in their own delivery vehicles or fleet.
He admits that Lalamove may not offer the cheapest price, but it is hoping to provide efficient service and speed. The average delivery time — from pick up to drop off — is about 37 minutes.
Like other similar platforms, Lalamove does not own its own fleet of vehicles but merely connects people who have something to deliver with someone willing to do it for a fee.
Most of the deliveries that Lalamove facilitates tend to be on-demand or same-day. For example, its business in Hong Kong is 85% same-day delivery, while in Singapore, it is 65%. But Larson adds that Lalamove also offers clients flexibility, based on the capacity they need for any given day.
“Do you need one truck today? Great. Do you need 100 trucks today? No problem. Because business is cyclical, we can adjust. A lot of the traditional guys, especially the smaller ones, try to get contracts,” he says.
The start-up also partners a lot of logistics and transport companies.
“I would have thought they’d be our core competitors, but actually, they are not. They can’t do what we do and we can’t do what they do. As far as warehousing and sorting is concerned, that’s not what we do. So, we can actually work with them in a way that helps their business and helps us.
“Their fleet is fixed and it’s very inefficient because half the time, their fleet is doing nothing and half the time, they don’t have enough fleet,” Larson says.
Lalamove focuses on cities and does not do inter-city or cross-border deliveries — two areas which conventional logistics players cover well enough. “Last mile is hard so we add value … our core competency is speed and network size,” he says.
The start-up has raised a total of US$60 million in seed funding. Larson says there is no urgency to raise more capital.
“We’re financially stable even though we’re opening in all these new cities because our old cities are becoming profitable and they’re covering the cost of our expansion,” he says.
For this year, Lalamove plans to open in the larger Southeast Asian cities like Jakarta, Ho Chi Minh and Hanoi. It intends to roll out in Kuala Lumpur by the third quarter. Larson also plans to test out some second-tier cities in the region.
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