Why Ninja Van took off with the big boys in the backyard

Logistics industry is one of those that is dominated by major players. You have international players like DHL and the strong local players like Singpost. Or maybe Singpost is not that strong. (Read this article on Singpost we published last week). So how is it that Ninja Van managed to take them on and succeed?

Starting last mile before it became ubiquitous & blindsiding competition

Being at the right place at the right time helps a lot. When Ninja Van was founded in 2014, they benefited greatly from the tailwinds of e-commerce. Back then, Singapore was just starting to warm up to the concept of e-commerce.

The majority of the global logistics players were familiar with the concept of freight. Palletised, containerised cargo; involving long distance multi-leg shipments. Many failed to see how the rising Ecommerce trend, with the launch of platforms like Lazada will result in the need for a new type of service; last mile service. A service someone could use to send parcels reliably in a cost efficient and timely manner, while offering real-time visibility. Others were quick to dismiss Ninja Van as a small-time player who knew nothing about logistics.

Ninja Van saw this opportunity and started building capabilities in this space before anyone else; By doing so, they created a blue ocean for themselves.

Offer a better service as an alternative to postal services

The traditional logistics model that was the most similar to last mile was post. The only problem was, the postal services were not prepared to deal with parcels. Parcels are significantly bigger than mail in terms of volume per item. In addition, postal services did not have the necessary infrastructure to support real time track and trace. An essential feature for e-commerce customer base. Ninja Van recognised the unique requirements and prepared for them. This gave them a lead over their competitors at the beginning.

Find your niche market, stay focused & don’t succumb to old ways

Ninja Van focused on their target market. They knew that e-commerce was likely to their source of growth, and relentlessly invested in technology. Technology would enable them to lower cost, increasing competitiveness. Improved operations would allow them to reduce lead time. Integrating technology into their processes will boost reliability and let them offer unrivalled traceability. The business development teams focused on online retailers.

Ninja Van wasn’t interested in the courier business as growth was limited. Clerks don’t complain about slow couriers and generally aren’t keen on knowing the whereabouts of company documents. It was the e-commerce consumers that wanted instant gratification and were vocal about screw ups. A customer segment where their strengths would command a premium.

Despite the fact that no one on the team had logistics experience, they did not succumb to hiring industry veterans. This forced them to focus on what they were strong at. Technology and mathematics to setup and improve processes. This prevented the importing of old tricks from the veterans. That would have made them just another logistics company.

Implementing quickly as a single team

When I interviewed for a position with DHL e-commerce, the organisational structure portion was most interesting. They had multiple departments, offering the full suite of services. From cross border clearance, to vendor managed inventory, to last mile delivery. While impressive, I reckon they wasted a lot of time getting approval to set everything up. In the meantime, Ninja Van was undisturbed, focusing solely of last mile.

The other interesting thing was that separate business units within DHL were in charge of each portion. E.g Warehousing by DHL supply chain, cross border by DHL Express etc. It looked like plate of spaghetti at the end of the conversation. They were supposed to work with each other but there was no single balance sheet to put everyone on the same page. Forcing collaboration with affiliated business units, that may not have the best price or product offering, cumulatively can do great damage. This is actually a common reason why big players aren’t always a serious competitor.

Wasn’t vPost all about last mile?

You might wonder, why vPost, launched in 2003, an existing e-commerce product wasn’t exactly competitor to Ninja Van. vPost was designed to be an international cross border last-mile product. It served people who wanted to buy products sold by online retailers. This was in 2003. When many items were only available overseas. When long processing time and lack of tracing was acceptable due to technology limitations, and the fact that it was cross border. In 2014, online retailers have started to set up shop in Singapore. vPost failed to recognise that cross border last mile, will start to shift to the domestic scene quickly, and at the expense of it.

Expansion: Singapore is not exactly South East Asia 

The road ahead for Ninja Van is a tough one. Becoming a regional player will make the story they can sell to investors sexier, and hence it is understandable why they did so. However, Singapore, is not exactly South East Asia. The other countries have much greater distances and lower density. Crafting the exact scope of operation will be crucial and is something we’ll have to wait and see if they’ll do correctly.

What’s next for Ninja Van?

Ninja Van have conquered domestic last mile, but the big boys are starting to wake up. They will launch new products and have the capability to offer everything in the logistics vertical at scale. From bulk shipment to storage to last mile to huge logistics network. Once they fix their cost structure, there will be great pressure on prices.

The recent series C saw DPDgroup, a huge parcel delivery player in Europe invest 80+ million into Ninja Van. Makes you wonder how much this dilutes the founding team’s stake. (The low down has previous covered it here). Is it time to collect your winnings and go?

The market is certainly getting crowded and price pressure will follow. Perhaps it is time for some market consolidation. In the meantime, it’s good practice to continue convincing your competition not to worry about you; As Lai said in his interview with Today Online in May, they can “co-exist and challenge each other to improve” when it comes to Singpost.

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Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed in our blog, please drop us an email at hello@mworks.asia and let us know how we can help.