The appeal of e-commerce is the opportunity to sell to a huge online audience – to grow your business much faster using the power of the internet. But this promise ignores the practical difficulties of e-commerce: especially the need to fulfill the orders of all those new customers, both on time and cheaply, or risk jeopardizing your relationship with them before it even gets off the ground.
Enter logistics platform Locad, which today announced an £11m Series A funding round as it looks to grow its cloud-based logistics software platform in Asia. Locad takes the daunting task of fulfillment off the hands of e-commerce companies, explains CEO and co-founder Constantin Robertz.
“We describe ourselves as providing the logistics engine for the modern consumer brand in e-commerce,” says Robertz. “It’s a one-stop shop for the infrastructure behind your business.”
Locad has leased warehouse space in five countries across the Asia-Pacific region – Singapore, the Philippines, Thailand, Hong Kong and Australia – and has built relationships with a wide range of logistics companies such as shipping partners and last-mile agents. E-commerce brands can store their inventory in Locado’s warehouse facilities; then, when one of their customers places an order, Locad will package the goods and arrange shipping through one of their partners. Very often the goods can be delivered the next day.
Robertz and his co-founders started Locad after a long career working for several e-commerce companies. “We saw the same problem over and over again,” he recalls. “Managing logistics took up so much time and money, preventing us from concentrating on building the brand and selling more products.” What if a third party managed to remove that frustration, they wondered. The Locada concept took shape from there, developing into an end-to-end solution: merchants simply connect their sales mechanisms to the platform and it automatically manages logistics.
Locad’s customers certainly embraced the idea. Last year, the company worked with 200 brands and shipped more than 2 million orders on their behalf. Customers include big-name global retailers building their e-commerce presence in Asia – examples include Havaianas, Reckitt Benckiser and Emma Sleep – as well as many much smaller companies, including e-commerce start-ups.
Using Locado, rather than developing their own logistics infrastructure, has three main advantages for e-commerce brands, Robertz claims.
First, the arrangement gives brands immediate access to an easily scalable and highly flexible logistics supply chain – as their sales expand, they simply reserve more warehouse space with Locada. “Your infrastructure grows up and down with your business,” says Robertz.
Second, Locad makes it easier for brands to better serve their customers. They can choose the warehouse – or warehouses – that are closest to their customers, ensuring faster delivery. They can choose couriers based on speed, price or other factors of their choice. Alternatively, they can leave those decisions to Locado, whose software will advise customers on the best way to organize inventory, based on their recent sales, and on the best shipping options.
Third, Robertz points out that Locad is an open platform. Customers can connect it to any of the sales channels they sell through online, including their own. “This is especially important in Asia, where the average e-commerce retailer sells through four different channels,” adds Robertz. “If you have to manage fulfillment for each of those channels separately, things can get very complicated.”
Locado founders Shrey Jain, Constantin Robertz and Jannis Dargel
A potential disadvantage of this arrangement, on the other hand, is the loss of control. Merchants shift responsibility for fulfillment to a third party – if Locad lets them down, customers will blame the e-commerce brand they bought through, not an infrastructure provider they know little about.
To make sure on this front, Locad highlights the transparency its software offers, with traders able to track what’s happening with their customers’ orders in real time. It also commits to service level agreements that promise better fulfillment performance than most brands could target in-house.
The company’s business model is based in part on a software-as-a-service concept, with e-commerce merchants paying a monthly subscription to access the Locad platform. But most costs are variable, with merchants paying fees per item stored in the warehouse and per order filled.
Today’s fundraising will help Locado in its further development, Robertz expects. Part of the money is intended for expanding the company’s infrastructure. It wants to open additional warehouse capacity in more countries in Asia, as well as in countries where it already has a presence – which will allow it to offer next-day delivery to many more retailer customers. The money will also go to product development and to support employment.
The financing round is led by Reefknot Investments, a fund headquartered in Singapore’s sovereign wealth fund Temasek and logistics company Kuehne & Nagel. Previous investors Sequoia India and Southeast Asia’s Surge, Febe Venture and Antler also participated, along with new investors Access Ventures, JG Summit and WTI. “Locad’s unique operating model of localizing warehouses in cities ensures that inventory is kept close to customers, enabling significant cost and time savings for both the brand and the customer,” says Ervin Lim, Vice President of Reefknot Investments.