The allure of ecommerce is the opportunity to sell to a huge online audience – to grow your business far more quickly using the power of the internet. But this promise overlooks the practical difficulties of ecommerce: in particular, the need to fulfill the orders made by all those new customers, and to do so on time and cheaply, or risk jeopardising your relationship with them before it has even got going.
Enter the logistics platform Locad, which is today unveiling an £11 million Series A funding round as it seeks to grow its cloud-based logistics software platform in Asia. Locad takes the daunting task of fulfillment off ecommerce businesses’ hands, explains CEO and co-founder Constantin Robertz.
“We describe ourselves as offering a logistics engine for the modern consumer brand in ecommerce,” Robertz says. “It’s a one stop shop for the infrastructure at the back end of your business.”
Locad has leased warehousing space in five countries across the Asia Pacific region – Singapore, the Philippines, Thailand, Hong Kong, and Australia – and built relationships with a broad range of logistics companies such as shipping partners and last-mile fulfillment agents. Ecommerce brands can store their inventory in Locad’s warehousing facilities; then, when one of their customers places an order, Locad will pack up the goods and arrange shipping through one of its partners. Very often, the goods can be delivered the next day.
Robertz and his co-founders launched Locad after long careers working for several ecommerce businesses. “We saw the same problem over and again,” he recalls. “Managing logistics sucked up so much time and money, stopping us concentrating on building the brand and selling more products.” What if a third party was able to take that frustration away, they wondered. The concept of Locad took shape from there, developing into an end-to-end solution: merchants simply plug their sales engines into the platform and it can handle logistics automatically.
Locad’s customers have certainly embraced the idea. Last year, the firm worked with 200 brands and shipped more than 2 million orders on their behalf. Customers include big-name global retailers building their ecommerce presence in Asia – examples include Havaianas, Reckitt Benckiser and Emma Sleep – as well as many much smaller businesses, including ecommerce start-ups.
Using Locad, rather than developing a logistics infrastructure of their own, has three main advantages for ecommerce brands, Robertz argues.
First, the arrangement gives brands instant access to an easily scalable and highly flexible logistics supply chain – as their sales expand, they simply book more warehouse space with Locad. “Your infrastructure grows up and down with your business,” Robertz says.
Second, Locad makes it easier for brands to better serve their customers. They can pick the warehouse – or warehouses – that are closest to their customers, ensuring speedier delivery. And they can choose delivery agents on the basis of speed, price or another factor of their choice. Alternatively, they can leave those decisions to Locad, whose software will advise customers on the best way to organise their stock, based on their recent sales, and on the best options for shipping.
Third, Robertz points out that Locad is an open platform. Customers can link it to any of the sales channels through which they sell online, including their own. “That’s particularly important in Asia, where the average ecommerce merchant sells through four different channels,” Robertz adds. “If you have to manage fulfillment separately for each of those channels, things can get very complicated.”
The potential downside to this arrangement, on the other hand, is loss of control. Merchants are handing over responsibility for fulfillment to a third party – if Locad lets them down, customers will blame the ecommerce brand they bought through, not the infrastructure provider they know little about.
To reassure on this front, Locad points to the transparency its software offers, with merchants able to track what’s going on with their customers’ orders in real time. It also commits to service level agreements promising better fulfillment performance than most brands would be able to target in-house.
The company’s business model is partly based on the software-as-a-service concept, with ecommerce merchants paying a monthly subscription fee for access to the Locad platform. But most of the cost is variable, with merchants paying fees per item stored in the warehouse, and per order fulfilled.
Today’s fundraising will help Locad develop further, Robertz expects. Some of the cash is earmarked for expanding the company’s infrastructure. It wants to open additional warehousing capacity in more countries in Asia, as well as in the countries where it already has a presence – that will enable it to offer next-day delivery to a much larger number of merchants’ customers. Cash will also go into product development and to support hiring.
The funding round is led by Reefknot Investments, a fund anchored by the Singaporean sovereign wealth fund Temasek and logistics powerhouse 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 localising warehouses into the cities ensures that inventory is kept close to the customers, thereby enabling significant cost and time savings for both brand and consumer,” says Ervin Lim, Vice President of Reefknot Investments.