Entrepreneurship Zone: 15 July 2021: Formalising Africa’s fragmented logistics industry: Interview with CEO of Sendy

Thu Jul 15 09:18:12 CAT 2021

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Entrepreneurship Zone:  15 July 2021: Formalising Africa’s fragmented logistics industry: Interview with CEO of Sendy

Transporting cargo via road comes with considerable challenges in Africa. Inefficient logistics companies, long distances, potholed roads, and cumbersome border-crossing procedures all add to the cost and time it takes to get from A to B. Recent years have seen the emergence of numerous companies that offer technology solutions to address these and other headaches faced by cargo owners and transporters on the continent.

One company that seeks to digitalise logistics in Africa is the Nairobi-based on-demand delivery platform Sendy. Through its app, Sendy connects individuals and businesses to third-party drivers of delivery vehicles, including motorbikes, vans and pickups. Sendy, founded in 2015, currently operates in Kenya, Uganda, Rwanda, South Sudan, the Democratic Republic of Congo, Tanzania and Côte d’Ivoire. It has raised close to $30 million from investors such as Atlantica Ventures, Toyota Tsusho Corporation, Vested World and Goodwell Investments.

How we made it in Africa spoke to Meshack Alloys, co-founder and CEO of Sendy, about how he grew the business and the continent’s logistics opportunity.

How did you get the idea for Sendy?

The idea came from two observations.

The first one was when I was consulting for consumer goods companies that operate across the African continent. As I helped set up sales and distribution systems, I realised all those systems relied on logistics and that the companies were struggling in this regard.

The second observation happened in my own personal journey. Just seeing the struggle of getting things from one point to another and the cost of products, opened my eyes. When you look at Kenya, East Africa or the African continent, there’s really no large single logistics player that covers the whole terrain. Other markets have large players; Asia for example, has a logistics company that has over 200,000 trucks but here in Africa, only two or three companies have up to 3,000 trucks.

Seeing how fragmented and informal the market was, we saw an opportunity to formalise it and build a better user experience. The question then became how to bring these independent transport providers with motorcycles, pickups, vans and trucks onto one platform and then give companies the ability to do business with them as if they were one entity. We really wanted to standardise the user experience.

Tell us about the early days of the company.

In the early days, we were signing the clients ourselves. We would sign any client because we wanted to see which kinds of customer segments would get the most value from our offering. We also used to do the deliveries ourselves. I remember walking across town to where motorcycles and trucks parked to speak to the drivers and ask about the challenges they were facing. Even while testing the products, we would pick calls and do the dispatch ourselves.

Discuss the steps you took to grow the business to where it is today.

When we were starting out, brands like Uber were not yet around, so, telling a client that we would send a random person to pick up their goods and deliver them was a challenge. We started with motorcycles because they were fast and deliveries could happen within an hour, hence less anxiety on the client’s side.

Several e-commerce companies use Sendy for their deliveries.

The next thing we did was to add more pickups, vans and trucks because the customers had gained our trust and were requesting us to move more volumes and larger goods for them. Later on, our customers started asking us to move across the borders, so, we began picking stuff up at the port and moving across the border to Uganda, Rwanda, South Sudan, DRC and Tanzania.

As we continued to evolve, our customers requested if we could fulfil their orders to the end user and that is how we started Sendy Supply and Sendy Freight. With these services, we help businesses fulfil some of the orders they get directly from their retailers or buyers without going through middlemen. Sendy Supply also allows retailers to order directly from consumer goods companies.

Our evolution so far has seen us integrate logistics, goods movement, delivering and collection of payments on behalf of our clients.

What has been the biggest challenges in the early days?

One of the biggest challenges we faced in the early days was trust. It wasn’t easy to convince people to trust us with their goods and packages. To build confidence, we provided live tracking, where our clients could track the delivery person. We also added third-party insurance to give the clients peace of mind and assurance that our platform is safe.

Another challenge we faced was that back then, not every driver had a smartphone. We were forced to buy smartphones for about 30 drivers in order to track them and so that they could use our platform. It is much easier now because a smartphone is a basic requirement for one to qualify to be on our platform.

A number of African “Uber-for-trucks” platforms have emerged in recent years. How competitive is this industry?

The logistics space in Africa is informal and very fragmented. Every year, manufacturers, retailers and wholesalers spend about $358 billion to move goods from one point to another. Out of that, $132 billion is informal and $197 billion is spent in-house – that is by businesses owning their trucks. Only about $29 billion is taken up by formal, third-party logistics providers. Formal, third-party logistics providers still haven’t even scratched the surface because we occupy only a small percentage of the total market.

>From a competitive advantage angle, our plan is to build a moat within the supply chain. We’re automating the whole chain and building value for our customers. We’re also building scalable technology to make things efficient and affordable for our customers. This makes it possible for consumer goods, e-commerce and even agricultural companies to work with us.

Sendy users can choose to deliver their goods via motorcycle, pickup, van or truck.

Sendy is responsible for many e-commerce deliveries. How has Kenya’s e-commerce industry evolved in recent years?

>From the data I see, e-commerce is growing. It might not be at the scale we want it to be but it’s growing really fast. I was surprised to learn that one of the top e-commerce companies in the country now asks for upfront prepayment via M-Pesa instead of cash on delivery. That is such a huge milestone in an industry where trust is a big challenge and people aren’t willing to pay before they see the physical goods they are ordering.

E-commerce continues to grow, not just for the formal entities, but also for those who sell on Instagram, Facebook, Twitter and WhatsApp.

Another challenge facing the e-commerce industry is the issue of efficient and affordable logistics. That’s what our team at Sendy is working on. We want to get to a point where e-commerce companies can sell something worth a dollar and we will deliver it for them. We want to be able to distribute goods for consumer goods companies across the country at affordable rates. The logistics cost is always passed on to the consumer. For every $100 item, $60 goes to logistics. We hope to lower this cost.

What are your expansion plans?

We’re looking to deepen our presence in East Africa and we recently set up in Côte d’Ivoire. Our plan is to also expand into West Africa and North Africa.

Describe the toughest situation you’ve found yourself in as a business owner.

When the pandemic hit, Sendy made a decision to not lay off any of our staff. Instead, we decided to work twice as hard to make sure that we survive, and that we provide value for our customers and continue to keep the economy moving for us. That was a very tough choice but looking back, I think it was the best choice we made. We ended up hiring more people during the pandemic.

If you had the chance to start this business again, what would you do differently?

I would hire people from different countries so that we could have diversity in the team right from the start. Just being able to think about those countries and build use cases for them from day one would have been great; it would have helped build our infrastructure better.-Howwemadeitinafrica

Meshack Alloys, CEO and co-founder of Kenya-based logistics platform Sendy.

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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