Growth in e-commerce is forcing delivery service providers to act quickly to meet high demand

BEFORE the pandemic, the e-commerce sector was already on a growth path. Logistics players, keen to capitalize on growth, had drawn up expansion plans and reserved longer-term investment allocations.

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, benefiting the parcel delivery segment.

However, the growth has also brought multiple challenges for players in the logistics industry who are trying to cope with the unprecedented surge in demand in a difficult operating environment. The rapid development of the Internet and online spaces has forced service providers to act quickly to meet this surge in demand for delivery services despite insufficient infrastructure and tight margins.

Clarence Leong, managing director of shipping solutions provider EasyParcel, notes that speed and responsiveness are necessary for service providers to remain relevant to customers today. This will also allow players to make the most of the opportunities present in this top of the range.

“Our growth plans were postponed from the third quarter to the first quarter due to this e-commerce boom,” he says.

This means creating and delivering products and services earlier and ensuring the business has the resources to support this acceleration.

EasyParcel has actively acquired more courier service providers since the motion control order (MCO) began last year to expand its capacity while working hand-in-hand with its existing courier service partners for s ‘ensure that their first level of support remains. to customers.

“At EasyParcel, we guarantee ‘easy delivery’, which is why we cannot overlook the need to have a sufficient number of service and service partners to maintain convenience for our customers.”

During the first MCO, EasyParcel quickly expanded the coverage of its Pgeon Express and introduced new services like Pgeon Paperless to cater for their customers who did not have printers at home and could not access a print shop due to the AGC.

The company also launched its PgeonMart online grocery marketplace and the PgeonFlex program to integrate self-employed drivers as orders grew.

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 package volume as sellers moved their businesses to the retail space. electronic.

“From there, we hit our monthly goals and even broke records. We certainly see that growth will continue in 2021 and even after Covid, as online selling and buying behavior has already been integrated into our daily lives, ”says Leong.

Leong also thanks his investor Malaysia Venture Capital Management Berhad (MAVCAP) for his support not only to the team, but also to his courier partners who were affected by the sudden surge in volume as a factor that helped the group over the past year.

While the group has experienced strong growth, Leong notes that one of its main challenges during the pandemic is managing its regional expansion plans which have been affected by travel restrictions imposed to curb Covid-19.

However, with these plans on hold, the group also has the opportunity to focus on its current markets in Malaysia, Singapore, Thailand and Indonesia.

EasyParcel seeks to further improve its user services while helping the ecosystem in the local market. This will be crucial for the company to maintain its market share in the competitive logistics market.

Despite the growth opportunities, the local logistics industry is crowded and is known for its fierce competition which squeezes operator margins.

The barrier to entry into the sector is low and venture capitalists, wanting to jump on the e-commerce boom, have funded new entrants. In addition, service providers have not been able to pass the cost increases on to consumers.

Last October, the Malaysian Communications and Multimedia Commission (MCMC) announced a two-year moratorium on the licensing of courier services, from September 14, 2020 to September 15, 2022.

During the application period, the MCMC will not accept any new license applications for all categories of courier services and will consider a broader action plan for the strategic development of the industry.

The freeze was seen as a first constructive step towards the sustainability of the national courier industry.

As of last October, it was estimated that there were 109 license holders.

According to Leong, EasyParcel’s markets in Malaysia and Singapore are already profitable while Indonesia and Thailand are still in the investment stage.

He believes that in order to improve the profitability of the industry and for the industry to move forward, it is essential that players introduce new services that create higher value to increase the base price.

It highlights the Singapore market which is more focused on service level than pure pricing. These additional offers may include same day deliveries, pick and pack services and insurance.

“These services can be offered by leveraging existing resources and further optimizing operational flow, for example by building more service points to reduce travel time and offering bulk parcel pickup in multiple locations,” says -he.

Indonesia, on the other hand, sees a majority of couriers offering pick and pack services to customers and consumers can drop off their packages almost anywhere within a radius of 500m to 1km.

Another opportunity the company saw during the pandemic was to offer content to attract more potential customers.

“The pandemic was creating more micro-entrepreneurs at home, which meant that the needs of consumers included the needs of entrepreneurs who were clients of other businesses. Since they wanted to learn more about how e-commerce works, the EasyParcel team curated ‘How To’ content and held over 100 live event sessions to educate these new entrepreneurs, ”he explains. he.

EasyParcel has raised US $ 12.6 million (RM 52.08 million) to date.

Leong says she hasn’t aggressively fundraised because the company has seen positive cash flow since its inception. However, it is open to strategic investment opportunities to further improve the rules of the game.

EasyParcel also invested in electronic processing services company iStore iSend in January to expand its last mile delivery, warehousing and pick-and-pack service offerings.

IStore iSend raised US $ 5.5 million (RM22.73 million) in January in a round co-led by regional venture capital firm Gobi Partners and EasyParcel. The funds will be used to scale up existing markets and expand into new countries.

Leong says there are more mergers, acquisitions and corporate activities in the pipeline as the group looks forward to growth.

Industry observers believe industry consolidation will ultimately be inevitable given mounting pricing pressures and low margins. Although the logistics industry in Malaysia is established and mature, it lacks innovation or the use of digital technology which can be a critical catalyst for achieving profitability.

This is certainly where tech-savvy players will be able to lead the competition.

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