Episode Nineteen

Modernizing eCommerce Logistics:

Phil Opamuratawongse of Shipper

18 May 2021


ALAN  0:12  
Welcome back to Season Two, Episode 19 of the Indo Tekno podcast. I'm Alan Hellawell, Founder of Gizmo Advisors and Venture Partner at Alpha JWC Ventures Selamat datang kembali semuanya! We've last examined the mission-critical role of logistics within Indonesia's broader commerce landscape with our maiden episode of Indo Tekno, exactly one year ago in our discussion with Arne Jeroschewski, Founder and CEO of Parcel Perform. What a difference a year makes! We are clearly long overdue for an update in this space. Today's guest, Phil Opamuratawongse, is founder of Shipper, one of the leaders in Indonesia's next generation of logistics solutions. Phil, great to have you join us today.

PHIL "OPA"  0:56  
Thank you for having me, Alan.

ALAN  0:57  
Now, Phil, I count no less than seven syllables in your last name. can you offer us a more convenient abbreviation of your last name?

PHIL "OPA"  1:05  
Yeah, you can go by "Opa", O.P.A. That's probably a lot easier than saying the full last name. 

ALAN  1:13  
Great. So you are quite the talk of the town at any Greek celebration. I think "opa" is a common refrain in Greek celebration. So you're clearly the centre of attention at any Big Fat Greek Wedding when they chant "opa" I guess. Now Phil, did you grew up in the States?

PHIL "OPA"  1:31  
I did grew up in the States. I also did grow up in Thailand. I spent most of my childhood in Thailand and most of my education in the States.

ALAN  1:40  
And how was it that you ended up conducting so much of education in the States. Did your family move there?

PHIL "OPA"  1:46  
Yeah, my mother picked up our bags and moved there to provide us an opportunity to get a stateside education. I can't be more grateful than that. I moved when I was in fifth grade or sixth grade.

ALAN  1:57  
Wow, and you truly took advantage of that opportunity. Which leads me to my next question: what are the origins of Shipper? A guy with math and ops degrees from Stanford and Columbia universities could have plopped down anywhere within the broad canvas of entrepreneurialism. Why did you choose warehousing and logistics?

PHIL "OPA"  2:16  
I think I'll start off by saying that the person who truly found the pain point and was trying to solve a personal pain point was actually my co-founder Budi Handoko. The origin was, he was an online seller selling across these multiple e-commerce platforms that were emerging and that were growing at that point in time. And he was having a very, very difficult time fulfilling his orders on a daily basis. He had to pick-and-pack a lot of orders per day, and he would have to walk down or drive down to the different delivery pickup or drop-off stations. And that just sucked up a lot of his time. And problem number one was: how do you solve that pain point? How do you make that experience really, really convenient? So that was the origin for Shipper itself. For me, why warehousing and logistics, and why I became passionate about this problem? I'll start off by saying that it started with the team. I was able to build a very strong trust level, and connect deeply on a values basis with my co-founder and team. And second is my personal background of growing up in a very math and technology-heavy environment in California. I went to undergrad at Stanford. And that is very much what warehousing logistics is. I was able to grasp the problem and see the multiple problems where technology, math and optimization could solve this big problem.

ALAN  3:28  
Fantastic. Now, Phil, can you first help us position Shipper within the broader logistics and fulfilment industry? It looks like we sit in the "first mile", basically managing and monitoring a merchant's inventory. Is that correct?

PHIL "OPA"  3:42  
That's correct. We are an e-commerce logistics solution. We provide two main services. One is a fulfilment solution for those who need help managing their inventory and managing that pick-and-pack experience. The second is a multi-carrier shipping solution for those who need a simple solution to integrate multiple couriers and have that data transparency in one place. So we offer those two services for two different customer segments in the e-commerce space.

ALAN  4:09  
Understood. So Phil, who are the incumbents in this space, or I guess, in these two spaces, and how do we compete against them?

PHIL "OPA"  4:17  
Broadly speaking, neither of these two offerings has been around in the market for a very long time to have a very strong incumbent. It's a function of the dynamic growth of e-commerce over the last few years. With that said, generally speaking, I would say our differentiator compared to our competitors is that we come with a genuine customer-centric approach to the problems, whether it is our operations team or our product and tech team. And that type of culture is really set from the beginning. It's not something that you can easily transition into, especially for some of these existing traditional businesses that are trying to step into this space. So this customer-centric approach is probably one of the hardest things for logistics companies to do at-scale. But going back to the competition space, in the fulfilment space there are a few traditional companies stepping in and pivoting their traditional B2B operations into an e-commerce operation. And then in the multi-carrier solution space, there have been a few start-up's that have popped up here and there over the last couple of years. But genuinely, we truly appreciate competitors. They help us to stay up and running at a high level of energy.

ALAN  5:16  
Understood. Now, Phil, I assume one of the most powerful parts of our value proposition to the seller can be measured in how many more orders they can fulfil a day. What is the uplift in orders that they can expect? And what problems are we solving in making this happen?

PHIL "OPA"  5:33  
On average, we have seen our customers grow nearly 15% to 20% month-over-month. And we're able to play a part in that by solving, I'll say, three broad problems for our sellers, so that they can continue to focus on what's most important to their business, which is creating and finding new products as well as selling those products. Going back to those three problems, number one is we help them free up time, so they don't have to worry about any of this fulfilment and logistics work. Our operation team brings a lot of experience day in and day out to make sure things are done properly. And when things are done properly, our merchants and sellers can prevent huge leakage and they can prevent "mis-fulfilment". Mis-fulfilment means either late fulfilment or even sending the wrong things. These are very common problems that our merchants face before they begin working with us. Second is that we also help them improve and increase the capacity of their operations without having to add any fixed overhead. Our prices are agreed upfront, and are very transparent to the customer. So they know exactly what to expect and how to forecast that going forward. We understand the capex nature to this business and as a service provider, because we run a shared operations, we can help limit that for them. And then lastly speaking, we help them to provide transparent data on their inventory, which we believe is very important to help them make better decisions as an online seller and become successful over time. These are three broad buckets, I would say, that are our value propositions to these merchants that we work with.

ALAN  6:56  
That's very useful. Thanks. Now, Phil, is there a "poster boy" or reference customer who's worked with us really typifies the best of what we offer? And how exactly are they using Shipper?

PHIL "OPA"  7:08  
We work with a lot of large customers, some publicly listed domestically and internationally. And that trust level that we've built has been amazing, given the history of our business, I'll say our largest customers work with us by trusting us to manage their whole entire supply chain, from primary warehouse and secondary warehouse to transportation and distribution to their end customers. And the value that they find in working with us goes back to the three points that I mentioned earlier. We are truly able to help them free up their time and truly able to help them build transparency over how much inventory they have at any given point in time. 

ALAN  7:42  
Gotcha Phil. We have over 200 warehouses across 35 cities. There's clearly a major investment component to our expansion and success. How should we think about Shipper's capex needs in the future?

PHIL "OPA"  7:55  
Yeah, that's a great question. Logistics as a whole is generally quite capex-intensive, especially in an emerging market like Indonesia, where 80% of the challenge is actually groundwork. Nonetheless, we mitigate the capex investment through a couple of ways. One is we work with a lot of partners. We truly believe in an ecosystem approach to this problem. For example, we work with a lot of different delivery partners. We leverage a lot of existing assets that are already in the market. And we can do this because we leverage technology that our product team continues to build and continues to make progress on. Second is; I'll have to give kudos to our supportive investors. They truly continue to believe in our mission in solving logistics the way we do, I say for those two reasons, I believe we will continue to be able to mitigate the capex investment and capex challenge going forward as we continue to grow.

ALAN  8:42  
So this leads me to another question which is: are we what you might call a "4PL" which is we sit on top of the third party logistics (3PL) companies and we are the layer between the merchant and those 3PL's? Or are we equal parts 3PL and 4PL or are we more of a 3PL? I don't know the language of the industry particularly well, but I believe that there is a bifurcation between third party logistics players and then the guys almost like "Cainiao" in China, what you might call a 4PL? How would you describe Shipper within that lexicon?

PHIL "OPA"  9:17  
Our general approach is a 4PL approach. Although we do realise that there are gaps in the market in Indonesia, where there is an opportunity for us to create a lot of value to customers as a 3PL as well. So as a general rule of thumb, we are 4PL That's correct. We're an integrated solution with a lot of different delivery partners with a lot of different logistics partners. But where we see gaps in the market where customers come to us and we are not able to help them find the right partner; we do play a more active role and play the role that 3PL

ALAN  9:46  
That's very helpful. Now Phil, with Indonesia being an archipelago of roughly 17,400 islands, how do you approach determining where to set up your next warehouse or point-of-presence?

PHIL "OPA"  9:59  
Today we're present In over 30 cities, and we're at a point where we don't as often get requests for new locations that we're not present in. Nonetheless, customer requests are probably the biggest data point for where we should open up a new point-of-presence. If a customer asked for location X, and we're not active in location X, and there becomes enough demand and location X, that's probably the best point of reference, although it is reactive. I would be the first to say that is quite reactive. But I would give a lot of credit to our procurement and operations team, who have codified the onboarding process for a warehouse, so that it can be done very, very quickly. They can open up a warehouse in one to two weeks. I've seen fast as even one week. But going back to how does our team act on a proactive measure? We analyse a lot of seller and buyer heat maps to understand where pockets of activities are happening. We also just go back to our objective and problem statement of trying to make next day delivery at 50% cost. And when we solve around this problem statement, it actually becomes quite clear where the opportunities are to set up presence. 

ALAN  10:58  
Understood. Thanks for that. Now, Phil, how does our business model work? Do we charge the seller a percentage of their GMV (gross merchandise value) for our services? And if so, how do we think about that "take rate" going forward?

PHIL "OPA"  11:13  
Honestly, pricing is one of those problems that, I would say, we continue to solve and figure out for scale. But generally speaking, we have two pricing models. We have a "per-activity" rate. So in the warehouse industry, at a high level, there are three activities. There's inbound, storage and outbound. And we charge rates for those three activities. There might be other activities beyond that which we charged for if customers have more customization or requirements. Second is we also do offer a pricing model of a percentage of GMV rate, like you mentioned earlier. So we do have those two pricing models. Going to your next question around how do we see these rates changing over time; I'll be the "Mr. Obvious" here and say, as competition grows, we'll likely begin to see these take rates become more compressed. And the way we protect our position against that is to continue to increase the rate of innovation and increase our presence across different categories and geographies. We have an awesome pricing team that monitors the prices across different categories, different customer sizes, different geography. It's a very, very large market with a lot of different pockets. So continuing to monitor these and continuing to find our opportunities is probably the best way for us to maintain our position.

ALAN  12:19  
That makes eminent sense. Now, Phil, I recall some of the big e-commerce players claiming that 2020 growth in terms of GMV for many of them doubled and in some cases tripled. What was Shipper's growth like in 2020? And how do you anticipate growth unfolding both this year and in 2022?

PHIL "OPA"  12:41  
In 2020, we saw 6x growth. It was extremely challenging, yet gratifying for us that year. Due to COVID, we had to execute on this growth. Working from home is particularly challenging when you're constantly hiring, adding new initiatives, and see the most challenging piece is doing operational groundwork during COVID. And even with that growth, today, we're still at a single digit penetration rate of the e-commerce market. We're not even at a percent penetration rate for the broader logistics market. So there's so much room for us to continue growing. And because of that, we expect to see similar growth patterns in 2021 and in 2022. Our team continues to be very passionate, pushing day in and day out. It really still feels like Day One, to be honest. 

ALAN  13:22  
Fantastic. Now, Phil, what will you never forget, as it relates to Shipper's experience during the COVID era?

PHIL "OPA"  13:29  
We're still going through the COVID era, I would say, although it's definitely dumbed down a little bit. But I would say probably the most memorable moments of COVID, were when both my co-founder and myself actually went through having COVID at two different points in time. So those are probably going to be the two stories that stick with me the rest of my life. I think those are two extremely memorable experiences for me, having to go through the ups-and-downs and the emotions of having COVID from a personal standpoint, but also from a company building standpoint. Probably one of the top moments of my life.

ALAN  14:00  
I can imagine. Now Phil, is nearly the entirety of our business driven by individual merchants? Is it most important to connect directly with them? Or is there need for deep integration and cooperation with the likes of platforms such as Shopee, Tokopedia, Lazada, and others?

PHIL "OPA"  14:19  
Yeah, that's a great question. It's a really complex ecosystem today. Today, we serve the individual merchants, but their business is done across multiple platforms, and about 60% of their business plus-or-minus comes from the likes of Shopee, Tokopedia and Lazada. So it is important for us to engage across the entire ecosystem and cooperate with those stakeholders, particularly Shopee, Tokopedia and Lazada, but also the broader ecosystem of e-commerce. Not only those guys, but also the e-commerce delivery partners, social selling platforms, etc. So we do spend a lot of time to engage with the different stakeholders across that ecosystem.

ALAN  14:55  
So Phil, you mentioned that your main customer right now is the actual merchant. What have you found to be the most powerful channel for new customer onboarding?

PHIL "OPA"  15:05  
I would say the channel that has been most effective for us is word-of-mouth. Word-of-mouth, meaning that our merchants that work with us today, enjoy working with us and refer friends to us. That's been the best and the most gratifying channel for us. From a continued growth standpoint, we have an awesome head of Sales, who runs a very large outbound sales team, telesales, and foot-on-the-ground sales. And I'd say that continues to be the strongest force for growth for us. Logistics is not a simple sales cycle. It's quite complex, especially when you're adding fulfilment to the piece. And she's done an awesome job of continuing to manage this large sales team and continue to support our growth.

ALAN  15:45  
Now, Phil, if I'm a Shipper customer, what new innovations, features and functions should I be looking forward to over the next year?

PHIL "OPA"  15:53  
We're constantly innovating. And it's hard to give you precise answers to that because our product team continues to talk to clients or talk to customers and learn more about their pain points. It's a very iterative process. I'll say most recently, we just released an awesome mobile app for social sellers to manage their shipping, it's been well received. Adoption is very strong. We're super excited to continue to build features and roll out that product. There are the things that are coming out soon. We're also in the midst of rolling out the next iteration of our warehouse manager system, which will allow us to scale with our merchants even more, by up to 6X to 10X growth on the fulfilment side. So that technology stack will help us support that growth over the coming year. There are also a lot of things in the pipeline that we're trying to do to provide value added services to our merchants, including partnerships with financial partners to alleviate some of the financial burdens our merchants go through, partnerships with packaging material businesses that help us to alleviate the problem of procuring packaging material for our merchants. There are just so many problems in this space. And it feels like there's so many things to do with so little time.

ALAN  16:54  
I can imagine. Phil, broadly speaking, what are your largest countries in terms of revenues?

PHIL "OPA"  17:00  
Today, we're 100% in Indonesia. We don't have any near term plans of expanding outside of Indonesia at the moment. We see the problem of e-commerce in Indonesia. The problems that our merchants are facing in Indonesia are very, very large problems. And our focus remains within Indonesia.

ALAN  17:18  
Phil, if you had a magic wand, what bottleneck or challenges would you want to successfully solve in the industry over the next say, two years?

PHIL "OPA"  17:27  
There are so many. We see so many opportunities. I'll answer that question by listing out some of the opportunities that pop into my mind. First is that we see an opportunity to save our merchants up to another 15% to 20% on their logistics. We really want to execute well on that. We see an opportunity to really connect the supply chain and remove redundancies between our customers and our ecosystem, broadly speaking. We really want to do that. We see an opportunity to really structure and create a strong infrastructure around educating ground workers, and improve the overall industry. And we really want to do that. I can list out so many. These are the first three that pop into my mind.

ALAN  18:01  
Well, that clearly translates into a pretty busy roadmap going forward for the business, which sounds exciting. Clearly never a dull moment in your business, Phil. May the tailwinds of growth continue to blow mightily for Shipper going forward. I want to thank you for joining us again today. Phil,

PHIL "OPA"  18:18  
Thank you so much for having me, Alan. I really appreciate it.

ALAN  18:21  
We hope our listeners have enjoyed today's episode. As always, please consider sharing any feedback that you have about the Indo Tekno podcast with us. Terima kasih telah mendengarkan.  Sampai jumpa lagi! 

Transcribed by https://otter.ai