Lalamove co-founder on the lessons from expanding overseas

March 23, 2018 15:51
When entering new markets, it is important to choose local partners very carefully, says Gary Hui, co-founder of Lalamove. Photos: Lalamove, HKEJ

Founded in 2013 as EasyVan in Hong Kong, Lalamove has become a leading same-day delivery and logistics services provider with its business expanding to Mainland China and Southeast Asia. The Hong Kong Economic Journal recently sat down with Gary Hui, the firm's co-founder and director, to learn about the firm's experience as it entered and managed new markets.

Excerpts from an interview: 

HKEJ: Let's start with the origin of Lalamove. How did the company come about?

A: We founded the company back in late 2013. At that time, the market was dominated by on-call service, with nearly 150 call stations for delivery vans available in the city. Yet, the service was hardly satisfactory and people found it very difficult to find a ride.

On-demand, app-based cargo van services had emerged in overseas markets. And one of our co-founders, Chow Shing-yuk, came up with the idea to introduce such service to Hong Kong.

Q: How did the startup build its team?

A: When I met Shing, I was working in an online group-buying service company. I remember he called me, saying he had a new project and asked if I would like to get in. We talked for an hour about that on a Thursday, and then I quit my job the next Monday to join the team.

I must say we didn't have a clear idea before we started the business. We were about to start an app-based service business, but we didn’t have a technological background, and none of us knew how to code. We thought coding is an easy task which can be finished by developers in two to three days. We rented a flat in Sai Wan, Hong Kong Island, for app developers. Eventually, they spent seven weeks developing the app.

Q: How did you know it was the right time to leave your job for starting up?

A: Founders, in general, are more associated with positive, optimistic personality, and they feel their product has a market. To me, I believe startup success depends more on personality than intelligence, it depends on how focused you are, and how much effort you put in.

In Hong Kong, there was a saying, “If you don’t study hard in school, you will be working hard in a van as a delivery guy." Delivery logistics has never been a promising and preferred sector for people in Hong Kong, that’s why the sector remained unchanged for the past two decades. It was a well-served opportunity for us to disrupt the traditional business model in the industry with technology.

Q: Starting from Hong Kong, Lalamove now offers intra-city delivery service in more than 90 cities across Asia. What challenges did you face when the business was first taken overseas?

A: We knew that this business can go beyond the Hong Kong market once we started it. Initially, every co-founder was required to bring in capital when he or she joins the team, and pick a foreign city to expand the business; that was our original plan, which eventually didn't work.

We now understand that delivery logistics is indeed a highly localized industry, and we need locals to help us understand the market. So we started to get our foreign operations managed by local teams.

We were very ambitious about what we were trying to do, planning a dual launch in Hong Kong and Tokyo market. But we failed in Tokyo. I then flew to Tokyo, talking to local drivers on the streets with the help of a translator, and that’s how we found that almost all of the local drivers in Tokyo were using 2G flip phones, and thus our mobile app could not serve them.

Our nightmare in Tokyo was not over; we were blackmailed by our server partner, who threatened to destroy our data if we didn’t pay. The Tokyo incident gave us an important lesson: Choose your partners very carefully.

Q: Looking back, what do you think you can do better if you are able to start all over again?

A: There was a time when we had three different systems in operations in Hong Kong, Singapore, and Thailand respectively. And then we literally could not decide on which system to use in penetrating the Taiwan market. We eventually spent around two years to integrate the product, pricing and service systems among all of our markets.

Since then, we understand that it is okay taking time setting up the infrastructure, rather than rushing on to the targets. If we don’t have a solid foundation upon which to build, that’s going to cost you much more time and effort to fix eventually.

One exception is our business in Mainland China. Cities in China have a lot of similarities in terms of market characteristics, thus we replicated the business model from one city to another, and we were able to expand to 120 cities in China at a fast pace.

Q: Lalamove has closed a couple of successful funding rounds; does it burn through cash quickly?

A: We once believed that in order to grow fast, it is usual for startups to quickly raise money and burn through cash. A few years ago, Lalamove was once at the brink of bankruptcy, with cash merely enough to pay salaries for two months. Fortunately, our backers believed in us and gave us timely help when we were in trouble.

Then we realized that cash-burning model is not sustainable, and started to find a sustainable profit model.

Some may say we have raised a lot of capital, but our competitors overseas, say in Mainland China and Southeast Asia, have got much, much more funding. If we try to burn cash to compete with them, we are doomed. We have to learn to develop and scale our ideas without burning cash.

This article appeared in the Hong Kong Economic Journal on March 23

Translation by Ben Ng

[Chinese version 中文版]

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