Mon. Sep 28th, 2020

Shipping the future of Indonesian ecommerce logistics with Shipper CEO and co-founder Phil Opamuratawongse17 min read

“We think e-commerce will go from the eBay days to the Amazon days, you know, small seller centric to bigger seller centric over time.”

About the episode

For this episode, we rang up our good friend Phil Opumuratawongse, CEO and co-founder of Shipper. Yinglan and Phil talk about Phil’s journey from venture capital in Silicon Valley to becoming CEO of an Indonesian startup, the state of Indonesia’s e-commerce logistics market and where it’s headed, and how a bottom-up culture enabled them to grow 4-5x through this COVID period.

Timeline

00:14 Yinglan’s introduction of Phil;

1:29 Phil’s experiences as an analyst and VC in Silicon Valley;

3:59 Phil’s return to Southeast Asia to start Shipper;

6:05 State of Indonesian logistics market and Shipper’s entry point;

9:09 Where the Indonesian logistics market is headed;

10:11 Shipper’s agent network of couriers and fulfillment hubs;

11:19 Creating an “asset-light and flexible” shipping experience for small sellers;

12:51 Growing 4-5x in COVID with a bottom-up approach;

14:40 Building culture as a first-time CEO;

16:13 Things Phil wish he knew before starting Shipper;

17:10 Phil’s favorite books, tv shows, music, and more;

Transcript

Yinglan: So, as I mentioned earlier prior to Shipper you were in the Bay Area, first at McKinsey and then at Floodgate. What was your biggest takeaway from working in the heart of Silicon Valley and being involved in the tech scene there and how was the transition to Southeast Asia?

Phil: Yeah I spent a significant time in the Bay Area. I grew up in Thailand but moved to the Bay Area pretty early in my childhood. I finished my undergrad there at Stanford, moved on and through all the way to working at Floodgate. It was transformative in many ways. My biggest takeaway, there was simply anything’s possible. And to give you a little light on the Bay Area and my time there, it’s an environment where it really promotes entrepreneurship and crazy ideas.

There aren’t many places in the world where college dropouts and fresh grads can raise millions of dollars, right, to try new things. They’re also not many places in the world where you talk about technology 24/7 because that’s where the majority of the workforce works. So being submerged in that environment did help a lot, but I think the inspiration and confidence really came from my time at Floodgate and investing in crazy entrepreneurs.

We were investing seed, pre-seed very similar to you actually Yinglan where you invest in entrepreneurs before anyone else believes. I think even in Southeast Asia, they are not many like that. And I think Insignia is one of the true ones who do that. Being at Floodgate and doing that multiple times, investing in entrepreneurs before anyone believed, it helped me see many different types of entrepreneurs walk through the doors, from young to old, very diverse race, every type of idea you can think of. So having that repetition and having that experience really did help. On the flip side, especially towards my second year at Floodgate. I had my teammates at Floodgate pushing me out of the door to try something myself. I mean, that also was very inspirational and positive. 

Compared to Southeast Asia, which was a second question, I do see some similarities. I think it’s a smaller ecosystem, a growing ecosystem of entrepreneurs, of really impressive entrepreneurs in Southeast Asia trying to do really cool things. The problems that we face in Southeast Asia are local so there does need to be a local community. You rarely see companies coming from international technology scenes coming into Southeast Asia and being successful because the problems are very local. However, I think the drawback is it’s still relatively small compared to other countries. I think, you know, as that community grows, as there’s more support from folks like Insignia and more support for people to dream big, I think we’ll get there.

Yinglan: Fantastic. Thanks for the kind words. And I think you have a fascinating journey, even though we are no strangers to VC professionals becoming founders, and going to the other side of the equation. But why did you eventually decide to return to Southeast Asia and specifically, Indonesia to ran Shipper?

Phil: There are a few reasons. I’ll name three specifically. The first reason is coming to Indonesia or Southeast Asia broadly, my family’s from Southeast Asia. They’re right around the corner in Bangkok. I spent significant time here during my childhood. So that was definitely a push for me. But speaking of family, I think, Budi Handoko, who is my partner on this journey to build Shipper. You know I consider him family and he was also a big push as well in that kind of family bucket. You see, I had the support from my family, including Budi as well, people who I trust, people who I can really trust in embarking this journey so that gave me the confidence in doing this. 

Second is I think it’s a world where a lot of impact can still be created. It’s still so early in the emerging markets. And there’s so much that technology can do, even for many technology companies in more mature markets, the next billion users are right here. They’re not in the mature markets anymore. If you go to these big technology companies and ask where’s your next source of revenue, it’s the next billion users, Indonesia being a big part of that. And it’s extremely difficult to crack. So I think it’s important to be in the region to try to solve those problems. 

The third piece is going back to the ecosystem and support and knowing that there was an ecosystem and there are folks like Insignia who supported entrepreneurs was a big draw for me, you know, I felt like there are always people who I can rely on and lean back and get support from if anything ever happened.

And they had the same mission and vision as us in terms of building technology ecosystems. So I think those were the three big reasons. Yeah. I mean, it’s been a great ride so far. 

Yinglan: Thank you for the kind words and it’s indeed been a very fast journey. And let’s zoom into logistics in Indonesia specifically, right, given that Shipper is a leader in the space?  It is a complex issue to target, with the size and inefficiencies in Indonesia. Can you walk us through the journey and the logistics industry when you were starting up Shipper and also why you decided to focus initially on small vendors. And then now you obviously have brought into other verticals, but I thought it was fascinating. What was the state of the logistics market when you  first decided to run Shipper?

Phil: Yeah. The mission of Shipper is at the moment to build the easiest way for e-commerce logistics, for sellers to sell online. The way we do that is we want to make e-commerce logistics extremely easy for anyone to use.

E-commerce as an industry is actually, believe it or not, still in its very early stages. You do see Tokopedia, Shopee, Lazada, and they’re doing great work, but honestly, it’s still extremely early. E-commerce logistics follows that trend. The big eCommerce players are the ones who are pushing the trend and the logistics providers are the kind of supporting background players.

And e-commerce logistics is very different from traditional logistics. So, you know, it’s also very difficult for traditional logistics peoples to kind of pivot into e-commerce very quickly because it’s a totally different set of flows, different operations. So it takes somebody who comes in with fresh eyes, fresh perspective to tackle e-commerce logistics.

And that’s kind of our thesis. Today, it’s all about small sellers still. If you look at the e-commerce landscape, you know, eBay started with eBay doing more consumer to consumer or small sellers to consumer then Amazon came in and they kind of catered to bigger and bigger sellers because they had the fulfilment piece as well.

I still think we’re still at the early stages where the dominant sellers are still small sellers, small, medium sellers. That’s still a significant market share. Maybe tomorrow it’s about the big sellers, but today it’s still about the small seller. So that’s the reason why Budi and I decided to tackle the e-commerce seller segment.

And for that particular segment my partner, Budi, he saw the pain point that these small sellers had. I mean, he was one himself. Basically the journey that these small sellers would have to go through every day is every morning they wake up, they have to drop off multiple packages to multiple delivery vendors, depending on which shipping company to use.

And the shipping companies are still very fragmented. There are still four or five major ones that people use. And then there’s still a long tail that still makes up the rest of the market. So he saw that pain point and basically he was like, what’s the easiest way for these small sellers to ship? It’s definitely not for a small seller to walk into four or five different shipping counters every day and wait in line. So that’s kind of where our first product and I guess first product-market fit came. We basically became an aggregator for these shipping companies, picked up parcels and, you know, just solve that particular problem.

What we’re seeing in logistics specifically, now that we’ve been in it for a few years before things consolidate things get really messy. And I think we’re still at the stage where e-commerce logistics is new. There are new players popping in on a very regular basis, and new delivery companies coming in every year or two backed by major capital, a lot of new Chinese players coming in on a regular basis.

And because there are so many players coming in on a regular basis, what that creates is, it creates a lot of fragmentation. And so that’s kind of the problem that we’re trying to solve, we’re trying to solve the fragmentation of the market. 

Yinglan: Got it. That’s fascinating. And you know, you gave a very good summary and overview of logistics in Indonesia when you first started. Can you give the audience a sense of how do you foresee the evolution of e-commerce moving forward and how will it impact your business? 

Phil: Yeah, I mentioned it a little bit earlier, but basically, in a nutshell, we think e-commerce would go from the eBay days to the Amazon days, you know, small seller centric to bigger seller centric over time. We’re still in the small seller centric world.

So that’s a trend that we believe. In terms of logistics that support big eCommerce players, we see that it’ll go from a very fragmented logistics market to a more consolidated market as the marketplaces consolidate as well. So, you know, it takes some time to get there, but today it’s still a very fragmented network and it takes time to build these logistics networks.

So it’s not something you can force. So those are the kind of two big trends that we believe in. 

Yinglan: Got it, fantastic. And Shipper has built a very impressive module of proprietary technology. Apart from the proprietary technology modules, another crucial part of that ecosystem of solutions has been the couriers and the microfulfillment hubs that you work with right. Can you describe for us how that works on the ground and how these offline aspects of the business contribute to increasing efficiency in shipping? 

Phil: Yeah. So to give you some context to everyone there, we have an agent network who can walk in and drop off packages or our agents will also pick up parcels if the seller requests for pickup.

The reason why we built this network of agents is that that’s how the small sellers deliver parcels today. And that’s how you cater to the very large and fragmented network of small sellers. You know, you need to go pick up from their doorstep or they need to be able to drop off packages somewhere.

So the way we build this is we partnered with logistics companies, some of them already have their agent networks. So we’ve partnered directly with the logistics companies to empower their agencies to do more. We work with a lot of other agent network businesses. And we also look for agents ourselves in the gaps here and there, but we have this agent network. You know, working with them is fascinating because all these agents are basically micro-entrepreneurs and we slowly become their main source of income. So it’s been extremely interesting to see how we’re able to empower these agents to make more revenue for themselves. 

Yinglan: Fantastic. And what we really like about Shipper is that it is an asset-light and it’s flexible, and it’s modular right. Can you share with us about the asset-light and flexible experience and how it reflects in the fulfillment experience of your users?

Phil: Yeah, for small sellers, the way they work with us is they drop off a package on one of our agents and from our agents, we’ll consolidate all the packages and then give it to 3PLs and we make a commission from our delivery partners to make that happen. The whole entire value chain there is for us what we call asset-light because the agents are monetized on a revenue share basis.

The more work they do, the more they get paid, the less they do, the less that they get paid. Same thing with the consolidation piece and the sorting hub. Those are also agents. Those are our top agent performers. They upgrade their day-to-day work with us and do more and more. So that’s also operated from our standpoint, asset-light model because we’re paying them on a revenue share basis. And then, of course, the way we make money is also on a commission basis, which is per parcel. 

So everything that we do across the value chain, it’s a per parcel basis. And that’s extremely important in e-commerce. I think when we built this infrastructure, we were really of the mindset that, “Look, e-commerce fluctuates up and down. It can fluctuate up to four times or five times a volume month over month during peak seasons.” And you know, one thing that we really wanted to make sure was, we can flex up and flex down with e-commerce.

Yinglan: Great. And I think, you know, now that it’s in the climate of COVID-19 and we are very impressed with how Shipper has reacted and been agile to respond to this. We noticed that the demand for e-commerce has risen but the supply end has been strained with the lockdown. Now take us through the journey of how Shipper sort of weathered the crisis so far taking into account, the fact that you have offline operations as well.

Phil: Yeah, I think in the early days of COVID-19, I mean, number one thing that we had to worry about was how are our team and our network partners impacted. So the first thing we did was we implemented everything we can think of to make sure our team and the network partners are safe. Everything from medical equipment to, you know, changing working hours to changing manpower planning, everything there, we implemented.

And then next we started thinking about how would this impact the business? So we, of course, did everything we could to make sure that the company had enough runway. I think that’s the number one thing for a business to sustain is to have runaway, which fortunately we were able to create for ourselves. And then the second piece was how do you continue to grow?

So for how do you continue to grow part, you have to be open to trying new things. A lot of the trial and error has to come from the team. You know, it can come top-down, but it has to be bottom-up. So I think we’ve been fortunate to create a culture where trial-and-error comes from bottom-up and we were able to come up with a few amazing ideas that have helped sustain the growth of the company.

I mean, through COVID, we grew probably about 4-5x and you know, a lot of that is a result of new ideas and new revenue, new business opportunities, all within our infrastructure though. Of course, we don’t want to build new infrastructure or build new technology. So we weathered it well and still a long period for us to kind of weather through. So we’re still on the ground remaining,  hustling and listening to our customers. 

Yinglan: Fantastic. I like to also detour a little bit to the culture and you know, sort of, your first foray as a CEO. Tell us a little bit about how you have a built-up the culture, you know, and I’ve seen the many changes, positive changes, that you have made as a CEO, love to understand a little bit more about how you are building up team culture and also building up the team? 

Phil: You’re right. It is my first time. And I continue to learn and build the experience required to continue to do the job well. Because it’s my first time, there are a few things that had to happen to make sure we continue to execute and build the company. 

Well, I mean, number one is going back to the bottom-up approach. You know you have to find good people who are mission-driven and passionate about solving similar problems, you know, and they’re able to kind of think independently and brainstorm and be innovative themselves. And if you can rely on your team to do that, you’re able to create a lot of new ideas and now your job just becomes prioritizing. So that’s a great position to be in. If all the kind of new ideas creation and all the way through prioritization is top-down, I don’t know if I’d still be able to wake up and do this everyday cause that’s like a lot of energy sucked each day. 

Having a bottom-up approach and having the team to really be open to trial-and-error has been extremely helpful. That’s the most important thing and then number two is through the recruiting process and everything, just make sure we bring in mission-driven people because if you bring in folks who are more transactional, and not driven towards hitting a mission, you end up having to spoonfeed or direct them, versus if you have people who are mission-driven and have the same values as you, they’re able to anchor around those values and mission and make decisions on the ground.

Yinglan: Great. These are great learnings. And for the audience among whom many are entrepreneurs, what are some of the learnings that you had that you wish you knew a year and a half ago before you started on this journey? I think these will be useful lessons for our entrepreneurs in the audience? 

Phil: I think number one is I wish we did everything earlier. I wish I embarked on this journey earlier. I wish I met Insignia earlier. Everything. So if you have the itch to try something, you know, don’t wait the extra month, the same thing for anything, even like today, now that I’ve embarked on this journey, we still have a lot of new opportunities to tap. Always quickly try, quickly learn, quickly fail. Don’t be too academic about it. That’s definitely number one. 

Number two is, you know, people are the most important. Pay more for better people if you need to. Invest your time in people who are genuine, invest in your resources and time and people who will create more value and are driven towards the same mission, don’t try to cut corners on people. I think people are extremely important. People can really dictate the tempo and the speed and direction of the company. 

Favorite Book on Entrepreneurship: Zero to One by Peter Thiel, The Hard Thing about Hard Things by Ben Horowitz

Favorite TV show for entrepreneurs: Silicon Valley

Favorite music to get energized: Spotify’s Recommended Music

Favorite app or tool to use right now: Slack

Favorite place to go to in Southeast Asia: Bangkok

Fellow founder he would want to hear on the show: Hendra Kwik, Payfazz

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