Enabling e-commerce through logistics
E-commerce exploded amid the pandemic, not only because quarantine restrictions confined people to their homes but also because it enabled enterprising Filipinos earn extra income.
The thriving sector, however, cannot happen without the support from the logistics sector.
One of the new players on the block is Locad, a startup logistics firm that promises to offer an innovative cloud logistics solution that brings warehousing, packing and shipping into one platform for e-commerce businesses.
Here, Constantin Robertz, CEO and cofounder of Locad, the first Philippine startup backed by American venture capital firm Sequoia, talks about the Philippines logistics sector and the need to support a rapidly growing digital consumer market.
Question: Can you describe for me the typical journey of an e-commerce product that makes it expensive for an entrepreneur? The journey that Locad wants to help change?
Answer: The most common problems encountered by e-commerce entrepreneurs are usually difficulty running multiple online stores and marketplaces, inaccurate management of multiple inventories and struggling to pick, pack and ship out orders on their own.
Francis Ramos, owner of Shave Manila, came to us wanting a solution for these three problems. He was a one-man team managing sales, customer services, marketing and fulfillment for his business that sells imported and premium shaving kits which meant he barely had any time left for himself. He even recalled a time where he spent the entire day preparing kits for shipment alone.
Since we’ve started providing end-to-end fulfillment for his business, he’s been able to focus on his marketing and customer service with full trust that orders are being delivered to his customers on-time. Question: How then will Locad address this for MSMEs (micro, small and medium enterprises)? Does this mean, for example, that I will just concentrate on getting orders then will just leave everything else to you? To the point where the customer gets the actual product? Answer: Essentially, Locad simplifies fulfillment and the day-to-day tasks of running an e-commerce business. From the moment a customer places an order, we take care of the rest and start picking, packing and dispatching the package to the customer. Our tailored solutions include on-demand warehousing, access to a wide range of last-mile delivery options at affordable rates and an integrated tech platform that helps entrepreneurs run and manage their business more accurately and efficiently because it serves as a single source of data on all their online stores and marketplaces. Question: How much will this service cost me? Is it cheaper than let’s say going to the many other delivery options?
Answer: Locad has a variable, pay-as-you-go pricing, so there is no upfront investment. Growing MSMEs are better off investing in inventory and marketing than in warehouses.
You also have to take into account the cost of time of the business owner. If you spend your time doing tasks that could be outsourced more efficiently at a low price (starting at P20 per order), is your time not better spend on growing the business?
An example would be our Davao-based client KJMCosmetics—when they first came to us, they shared that what they hoped to get out of their fulfillment partner was a way to deliver orders to the majority of their customers which were located in Metro Manila in a faster and more cost-effective manner. They attributed their lower conversion rates to the expensive shipping fees from Davao to Metro Manila, which often caused customers to abandon their carts. Within two months of enlisting fulfillment by Locad, KJMCosmetics director of operations Janine Muñez shared that they were able to save as much as 69 percent in shipping costs since.
This also applies the other way round, brands can increase sales by offering localized fulfillment in Cebu or Davao, or other key markets where they have a strong customer base.
Question: What kind of an entrepreneur does Locad hope to service? What types of industries? Answer: Locad serves brands and retailers in their direct-to-consumer business, with a focus on e-commerce and omnichannel retail. We cater to consumer brands of all sizes, from international brands and large retailers to SME’s and startups. The core of our mission is to level the playing field of e-commerce and to democratize infrastructure by giving small and medium-sized enterprises access to the same cutting-edge logistics services available to the large retailers and consumer brands.Because Locad provides variable and scalable fulfillment capacity, brands can start small with us (say with 15 orders a day) and scale up to hundreds or thousands of orders per day without ever changing their logistics infrastructure.
Question: What makes the Philippines an ideal location for Locad?
Answer: The pandemic enabled the rapid growth of e-commerce in the Philippines. Not only does this growth represent the increasing number of online shoppers, but also of the increasing number of entrepreneurs who put up an online business as a way to make a living. With contactless shopping slowly becoming the norm in the country:
• Locad aims to level the playing field by providing Filipino entrepreneurs and small and medium sized enterprises with the same logistical resources and infrastructure that could help them keep up with larger enterprises and scale faster. • Consumers who have moved a lot of their shopping online now expect faster and consistently reliable delivery.
We also have a big part of our team in the Philippines—and are expanding from here across the region. I think Manila has a great potential as an emerging startup hub for the Southeast Asia (SEA) region because of our attractive home market and a strong and English-speaking talent pool. Manila has the potential to become a jumping pad and major office for a lot more tech companies in the region if we support the ecosystem.
Question: Did the pandemic help or hinder your business?
Answer: Beyond the idea of an obstacle or an enabler, the pandemic serves as a starting point for Locad. With the tremendous growth of e-commerce in the country, we identified the opportunity for a technology that could aid and support the logistics network in the Philippines by connecting entrepreneurs to the resources they need to grow and scale.
While Locad has been founded during the pandemic because we saw an increasing need to provide brands, SMEs and entrepreneurs with a platform to scale their direct-to-consumer business, we strongly believe in the long-term mission of enabling D2C commerce, levelling the playing field for e-commerce entrepreneurs, and providing the infrastructure for faster shipping and better customer experience—this will persist long after the pandemic subsides from our daily life. In the end, the pandemic has served as an accelerator of existing trends and transformations that were already in place.
Question: What are your goals for this year and the next?
Answer: We currently have a presence of four fulfillment centers in the Philippines spread across Luzon, Visayas and Mindanao. We believe in creating a distributed logistics network with warehouses in key metro centers to serve customers faster by keeping stock closer to consumers.
This has enabled next day/2-day delivery in mature e-commerce markets (think of Amazon Prime in the United States)—and is the future of e-commerce logistics in PH and Southeast Asia as well. On a regional scale, we are working on further expanding the network to cover more countries in the region and to make it easier for brands, retailers and ambitious entrepreneurs to grow their business across borders in SEA—by taking the friction and complexity out of fulfillment and shipping.
We’ll also continue to grow our team, here in Manila and in our regional hubs Bangalore and Singapore. INQ
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