Southeast Asian delivery player Ninja Van may be on the less glamorous end of e-commerce, but it’s tracked the same pandemic-induced spikes in online shopping’s trajectory.
The increased demand for delivery wasn’t all roses, Chang Wen Lai, CEO at Ninja Van, told DealStreetAsia, noting it also brought higher costs and struggles to maintain social distancing for workers, as well as shifts in consumer patterns.
The volume increases varied by market, with some countries imposing stricter lockdowns than others, Ninja Van said, adding Singapore volumes surged around 80 per cent in April, during the “circuit breaker” period, and are still around 20 per cent higher on-year.
While the volume spike has tapered off, “it’s higher than what was before this, which is why I think there are real structural changes in the e-commerce landscape,” Chang said.
Even before the pandemic erupted this year, the e-commerce sector in the region was growing fast.
Southeast Asia’s internet economy crossed the $100 billion market in 2019, up by around 40 per cent on-year in gross merchandise value (GMV) across the online travel, e-commerce, online media and ride-hailing sectors, according to a 2019 report from tech behemoth Google, Singapore state-owned investment company Temasek and consultancy Bain & Co.
The region’s internet economy is expected to hit $300 billion by 2025, the report said.
E-commerce in the region topped $38 billion in 2019, beating previous projections, and was on track to climb over $150 billion by 2025, the report said.
In what may be a sign of e-commerce’s growing importance in the region, Ninja Van raised $279 million in April in a Series D round led by Geopost and Brunei’s sovereign wealth fund Zamrud, according to Crunchbase data. Bangkok Bank, Carmenta Capital, B Capital Group, Intouch Holdings, Golden Gate and Grab also participated in the round, the data show.
In addition, ride-hailing giant Grab made an undisclosed investment in Ninja Van in April 2019. The move was set to expand GrabExpress’s delivery services from on-demand, same-day parcel, and courier delivery service to include more options such as nationwide deliveries.
Edited excerpts of the interview:
Due to the pandemic, e-commerce quickly became a necessity instead of a luxury. Did that cause a lot of teething pains?
When volume spiked during COVID, it was a double whammy: On one hand, volumes went up; on the other hand, there were a lot of restrictions on the physical operations, distancing and a lot of shutdowns when there are suspected COVID cases; we are very strict about it and we test everyone around them. That’s definitely problematic.
But we are quite accustomed to big spikes every year – 11-11, 12-12, year-end peaks. Volumes go up two times normal. Although it was definitely more painful because of the distancing measures, the ability to scale up quickly and flex our capacity is something we are used to after operating for six years.
Have particular e-commerce players seen more of a boost than others?
If you look at the generic platforms which sell all categories, those definitely improved. When you look at the niche e-commerce players, the fashion e-commerce players are seeing quite a big drop in volumes. If you don’t go out much anywhere, you’re not going to buy clothes just to dress up and go home early. We’re definitely seeing a big drop there.
But what’s interesting is for niche players in say hobbies, crafts, exercise, wellness, health and beauty, those categories can see a big increase in volumes. In electronics, I think it slowed down a bit, but now it’s back to normal.
For the generic platforms, have some benefitted more than others?
With Shopee and Lazada, we’ve seen them grow quite evenly. I think they are competing quite fairly with each other. In some markets, one is bigger than the other, but we’re not seeing Lazada or Shopee having a clear leap over the other due to COVID.
What about Tokopedia and Bukalapak?
In Indonesia, Tokopedia and Bukalapak generally are quite a bit smaller than Lazada and Shopee. [Their sales] have increased as well. But I do think that during these periods, that’s when you see the bigger players start to consolidate market share even further.
What about other logistics and delivery players? Are some of them not doing as well?
I think what COVID has done is although volumes have gone up, the cost of operating has definitely gone up as well. It is these periods when you see greater consolidation because this could push companies into the red. The question then is do you have sufficient balance sheet to ride through this period?
It’s challenging for players which are primarily cross-border focused. The cross-border has definitely dropped; there’s insufficient air cargo space because there are no more passenger planes flying. Borders were closed for a while from China. All these are quite big shocks to the cross-border systems.
Are you looking at any M&A opportunities right now?
Not really. I think we have a presence across all of Southeast Asia, in our own space and express logistics. We think we are sizable enough that there’s no need to conduct M&A.
M&A in verticals that are not in the express logistics space are areas we are always considering. But I think at this moment, we would like to focus more on our core business.
How has the tie-up with Grab been going?
The business there has been improving even during COVID because more consumers are unable to step out of their house; they need to send things to friends and family in different cities. It’s been improving quite a fair bit and I’m quite pleased. It’s always a long burn to bring that business segment to a large-enough scale which is closer to our core express logistics scale or even bring it close to Grab’s core transport scale.
Has the Brunei expansion been put on hold?
We’re expanding to Brunei. We are servicing a lot of our clients in Malaysia and what we have heard is that the Bruneian market may not be big, but they have quite a strong spending power. And they are actually buying a lot from Kuala Lumpur, or Malaysian e-commerce sellers. So, it’s just an extension of our service to our existing clients in Malaysia to service the Brunei market as well.
We are building up operations. We were meant to open in September, which is this month, but the inability to travel has slowed down our plans; it’s a bit trickier to open up a business that requires thousands of people on the ground when you cannot fly in. We are taking a wait-and-see approach when borders reopen again.
With the pandemic, have the small sellers been hit? Many of them are in the fashion segment.
It’s not necessarily fashion. It’s a good mix. A lot of them sell, for example, a lot of hobbyist stuff, so we’re seeing some gardening tools. We’re seeing people selling model cars.
Those segments are improving because when you’re stuck at home and you’re really bored, you will start to find things to do.
A lot of these demand patterns are driven by content pieces, which is why the small sellers are doing quite well. You’re going through social media, you’re seeing someone, maybe an influencer, talk about his new hobbies, what’s he’s doing, then you get interested in it, and you buy the thing, which is why that whole discovery process is quite interesting.
Personally, I started gardening as well, even though I never thought I would be a gardening type of guy.
Have you noticed other changes in consumer patterns?
I think it’s more acceleration than change because the writing was already on the wall in terms of e-commerce adoption. It’s just an acceleration of existing patterns. The promotion of e-commerce used to be predicated on big discounts, subsidies, heavy marketing and whatnot. But the moment you cannot go out and retail shops are closed, we have no other option. That’s probably one of the strongest accelerations in the trend I’ve seen.
Have you noticed if the e-commerce players are cutting their discounts?
I think they will. They were thinking of 2022 for turning profitable. I think they are shifting the timeline six to 12 months earlier because the need to drive a certain level of adoption in the market has decreased because of the acceleration of behaviours.
Is there anything that keeps you up at night?
The whole business is progressing quite well, but I’ve never been a fan of virtual, never a fan of teleconferencing.
Things are working well now because we are living on borrowed time: The trust, the relationships we have built over the last six years among the team members — this level of trust is what sustains us. But if this continues, the inability to meet, the inability to mingle, to have good social interactions, to start re-filling the tank of trust, I think will lead to more problems down the road.
I think there’s a reason why a workplace exists, there’s a reason why dinners after meetings, social interactions exist because it’s not just about KPIs or objectives or things to be done. I think in any successful organization, there also exists a high level of trust. And that trust tank, in my opinion, is being depleted on a daily basis. And we need to find ways to keep topping it up. And unfortunately, I cannot think of a better way to do it than meeting in person and flying down and having dinner, drinks, rebuilding that trust again, and unfortunately, I don’t see that happening anytime soon.