BEFORE the pandemic, the e-commerce sector was already set on a growth trajectory. Logistics players, eager to capitalise on the growth, had drawn up expansion plans and set aside investment allocations for a longer term.
Covid-19 has, obviously, scrambled many of these plans.
The past year has accelerated trends in the digital space and propelled e-commerce to new heights, benefitting the parcel delivery segment.
However, the growth has also brought about multiple challenges for players in the logistics industry as they try to cope with the unprecedented rise in demand amidst a challenging operating environment. The rapid development in the Internet and online spaces required service providers to move fast to meet this surge in demand for delivery services despite the insufficient infrastructure and tight margins.
Clarence Leong, chief executive officer of shipping solutions provider EasyParcel, notes that speed and adaptation are necessary elements for service providers to remain relevant to customers in current times. This will further enable players to make the most of the opportunities present in this upmarket.
“Our growth plans have been brought forward from the third quarter to the first quarter because of this boom in e-commerce, ” he says.
This means building and pushing out products and services earlier and ensuring that the company has the resources to support this acceleration.
EasyParcel has been aggressively acquiring more courier service providers since the start of the movement control order (MCO) last year to expand its capacity while also working hand-in-hand with its existing courier service partners to ensure that it remains their first level of support to customers.
“At EasyParcel, we ensure ‘delivery made easy’, therefore we cannot neglect the need to have a sufficient amount of service partners and services to maintain convenience for our customers.”
During the first MCO, EasyParcel had quickly expanded the coverage of its Pgeon Express and introduced new services like Pgeon Paperless to cater to their customers who did not have printers at home and were unable to access a printing shop due to the MCO.
The company also launched its online grocery marketplace PgeonMart and the PgeonFlex programme to onboard freelance drivers as orders increased.
Although there was a 40% drop in volume in the first three weeks of the first MCO, the fourth week saw a rapid increase in parcel volume as sellers moved their businesses into the e-commerce space.
“From that, we have been reaching our set targets each month and have even broken records. We definitely see that growth will continue in 2021 and even post-Covid as the behaviour of online selling and buying has already been embedded into our daily lives, ” says Leong.
Leong also credits its investor Malaysia Venture Capital Management Berhad (MAVCAP) *via the Axiata Digital Innovation Fund* for their support not just to the team but also to its courier service partners which were impacted by the sudden surge in volume as a factor that helped the group over the past year.
While the group has been enjoying strong growth, Leong notes that one of its key challenges during the pandemic is managing its regional expansion plans which have been affected by the travel restrictions imposed to curb Covid-19.
Nonetheless, with these plans on hold, there is also an opportunity for the group to focus on its current markets in Malaysia, Singapore, Thailand and Indonesia.
EasyParcel is looking to further improve its services for users while helping the ecosystem in the local market. This will be crucial for the company to maintain market share in the competitive logistics market.
Despite the growth opportunities, the local logistics sector is a crowded one and is notorious for its cut-throat competition that squeezes operators’ margins.
The barrier of entry into the sector is low and venture capitalists, wanting to jump on the e-commerce boom, have been funding new entrants. Additionally, service providers have been unable to pass on increases in cost to consumers.
Last October, the Malaysian Communication and Multimedia Commission (MCMC) announced a two-year moratorium on the issuance of courier service licences, effective Sept 14 2020 to Sept 15,2022.
During the enforcement period, the MCMC will not accept any new licence application for all categories of courier services and will look into a wider action plan for the industry’s strategic development.
The freeze was seen as a constructive initial step towards ensuring the sustainability of the domestic courier industry.
As of last October, it was estimated that there were 109 licence holders.
According to Leong, EasyParcel’s Malaysia and Singapore markets are already profitable while Indonesia and Thailand are still at the investment stage.
He believes that to enhance profitability in the industry and for the industry to move forward, it is crucial for players to introduce new services that create higher value to increase the basic price.
He points to the Singapore market which is more focused on service level rather than pure pricing. These additional offerings may include same day deliveries, pick and pack services and insurance.
“These services can be offered by leveraging existing resources and optimising further operational flow, such as building more service points to reduce travelling time and offer loose parcel pick-up in multiple locations, ” he says.
Indonesia, on the other hand, sees a majority of couriers offering pick and pack services for customers and consumers can drop-off their parcels almost anywhere within a range of 500m to 1km.
Another opportunity that the company saw during the pandemic was to offer content as a way of engaging more potential customers.
“The pandemic was creating more home-based micro-entrepreneurs, which meant that consumer needs included the needs of entrepreneurs who were customers of other businesses. As they wanted to learn about how e-commerce works, the EasyParcel team curated ‘How To” content and conducted more than 100 sessions of live-streaming events to educate these new entrepreneurs, ” he shares.
EasyParcel has raised US$12.6mil (RM52.08mil) to-date.
Leong says it did not aggressively fundraise as the company has been cash flow positive since its early days. It is, however, open for strategic investment opportunities to further level up the playing field.
EasyParcel also invested in e-fulfillment service company iStore iSend in January to expand last-mile deliveries, warehousing and pick-and-pack services offerings.
IStore iSend raised US$5.5mil (RM22.73mil) in January in a round co-led by regional venture capital firm Gobi Partners and EasyParcel. The funds will be used to scale existing markets and to expand to new countries.
Leong says there are more merger and acquisition and corporate activities in the pipeline as the group looks forward to growth.
Industry observers opine that consolidation in the sector will eventually be inevitable given the increasing pressures on pricing and low margins. While the logistics industry in Malaysia is established and mature, it lacks innovation or the use of digital technology which can be a critical enabler to achieve cost efficiency.
This is certainly where tech-enabled players will be able to lead the competition.