Indonesia’s trucking industry may be shaken, but it’s not shattered.
The sector, which was severely hit by the COVID-induced lockdowns earlier this year, will return to the lively growth levels witnessed in the past years, believes Andree Susanto, the CEO of Waresix—Indonesia’s most funded trucking company that has raised over $127 million over four funding rounds.
Leading this revival will be the tech-based players looking to modernise and digitalise the industry, said Susanto, who co-founded Waresix along with Edwin Wibowo in 2017.
“Supply (truckers) will still be attached to the [digital] platform, while more customers will start using the platforms because they may be cutting down on resources and looking for efficient options [of transportation],” he added.
Indonesia’s logistics sector saw volumes and revenues drop by 50 per cent during the initial days of the pandemic, according to the Indonesian Logistics Association. Nevertheless, Waresix, which reached profitability at a net income level last year, says it has managed to keep its business stable.
Investors, too, are optimistic about the company. Waresix closed its $100 million Series B in September, backed by SoftBank Ventures Asia, Emtek, Pavilion Capital, EV Growth, and Jungle Ventures.
The funding makes it only the second e-trucking player, besides Kargo Technologies, to have attracted significant investor interest this year — a clear sign of the gravity of the slump.
In contrast, 2019 saw as many as six e-trucking players bag funding from almost 20 local and overseas investors, who were confident of the sector’s potential. Trucking accounts for 80 per cent of logistics transport in Indonesia. Costs — equivalent to 24 per cent of Indonesia’s GDP for the sector as a whole — can be overwhelmingly high, putting the country at the bottom of the logistics performance chart in Southeast Asia.
These inefficiencies make the sector a prime target for modernisation — the raison d’etre for companies like Waresix.
More than a mere marketplace
Three-year-old Waresix competes in the space alongside Sequoia-backed Kargo Technologies, Golden Gate-backed Ritase, and Genesia Ventures-backed Logisly.
These startups are attempting to bring some method in the sector by connecting and matching supply (truckers and vendors) and demand (producers and principals), through a marketplace model. This can help improve efficiencies by eliminating middlemen, whose margins leave vendors and truckers with very little income.
Moreover, the marketplace model also solves the pain of low truck utilisation — i.e many trucks departing from their production centres fully loaded, but returning empty.
As for Waresix, it claims its platform is one step ahead of rivals as it facilitates “smart matching” as opposed to the usual passive matching. What sets it apart from competitors is its “holistic solution” to logistics, which was enabled by its early-value proposition around the warehousing sector.
Entering the sector as a warehouse provider, was a better entry point for Waresix compared to plunging directly into trucking, as it gave the company an exposure to the supply and demand in the sector, said Susanto.
“We started by aggregating warehouses to understand demand-supply and how the heatmap looks. We analysed that data because we wanted to become not only a matching service but also a demand generator for our transportation partners,” he added.
Waresix now claims to serve more than 250 clients and works with over 40,000 trucks and 375 warehouses in more than 100 cities and towns across Indonesia. Trucking has grown to become bigger than its warehousing business. The latter, though, is a crucial link in its business chain.
Having an ecosystem of warehouses can increase the utilisation of truckers, Susanto argues, by reducing a truck’s detention time, while also enabling transporters to carry out cross-docking. “For example, a factory may use big trucks to load the goods but when you want to deliver at the district level, you need a transit truck to transfer the load, and that transit needs to happen in a warehouse. They can transit in our warehouse so the truck can unload and go again. That improves the overall logistics operation,” he said.
This focus on end-to-end logistics, Susanto added, is the reason Waresix has booked positive unit economics in an industry notorious for low-profit margins.
The company, which makes money by taking a commission from transactions on its platform, says removing inefficiencies has translated to slightly lower prices per trip for customers and more income for truckers.
“This cannot be done by just doing price-based matching. We have to go one level deeper to understand the problems and address them. Indonesia, as an archipelago, is not as straight forward as US or China where there is a buzz around trucking marketplaces. In Indonesia, it can’t be just about that,” said Waresix co-founder Wibowo, who is also the company’s CFO.
The success of the warehousing model, has inspired a few other delivery players to try and emulate the success. Indonesia’s last-mile delivery giant SiCepat, for instance, has built its own warehouse solution startup called HaiStar, while Shipper took the inorganic route by acquiring the warehouse startup Pakde last year.
Loaded logistic players
Indonesian venture capital firm East Ventures, the first to bet on Waresix in 2018, said the company had always tried to maintain growth, while “enforcing financial discipline and ensuring that it is always at a profitable level”.
“We think that the logistics industry is already a fragmented market…The Waresix team has all the ingredients ready,” says Willson Cuaca, co-founder and managing partner of East Ventures, as well as EV Growth, a joint venture between East Ventures, SMDV, and Yahoo Japan, which backed Waresix’ Series B round.
The capital, which will be used to drive innovation, growth and investments, is huge relative to Series B rounds in other sectors. However, this could be a common theme among e-logistic players. Fellow e-trucking company Kargo Technologies has also raised almost $40 million in just two rounds of funding.
Susanto said that the “sizeable amount” was necessary to accelerate growth in a big market, especially during these uncertain times.
Chairman of Indonesian Logistic Association, Zaldy Ilham Masita, said it is no surprise that e-trucking companies have evinced large funding to grow their business. Other than building a solid transportation management system, considerable capital is also needed to provide financing to maintain the cash flows of its partner vendors, many of whom suffer from delayed payments from shippers, which has become the norm in the business.
The Indonesian government, too, has been investing in infrastructure. Between 2014 and 2019, it oversaw the development of 3,432 kilometres of conventional roads and 941 kilometres of toll roads.
Regardless, the big money invested in Waresix and its peers illustrates the opportunity in the market, which can only be seized by startups that bring real value to the players in the industry.
“Businesses that rely only on offering the cheapest price will not be sustainable. These startups need to come with a new business model for these land transportation players. They need to improve the quality and increase the income of these truck drivers, because they are the ones that have been suffering the most and at times neglected,” said Masita.