Amid Covid-19 pain, Ninja Van eyes e-commerce boom

Singapore

FRESH from raising a blockbuster US$279 million, last-mile logistics startup Ninja Van now faces a mixed bag amid Covid-19 - demand for e-commerce delivery is surging with social distancing, but cargo costs have climbed and productivity is tepid.

Still, chief executive Lai Chang Wen is confident that the company can control costs to eventually break even.

And if he succeeds, Ninja Van could strengthen the barriers to entry in South-east Asia's cut-throat e-commerce logistics sector, industry watchers told The Business Times.

The key question that lies ahead is whether Ninja Van can master the complex cost structure of e-commerce logistics to build a sustainable business into the long term.

On Tuesday, Ninja Van announced that it has raised US$279 million in Series D funding led by French parcel delivery firm GeoPost and two sovereign wealth funds, and joined by other existing investors including Grab and Monk's Hill Ventures.

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Ninja Van declined to comment on its latest valuation, but news outlet DealStreetAsia put the figure at US$590 million. This would bring the six-year-old startup more than halfway to the vaunted US$1 billion valuation mark.

Mr Lai dismisses valuation as a "vanity metric", and says that the company is focused on breaking even. He does not have a concrete timeline at this point, but reckons that Ninja Van is on the path, having quadrupled revenue from 2018 to 2019.

But profitability would be a pipe dream without cost control, and Covid-19 has complicated matters. According to Mr Lai, cargo pricing has gone up amid the outbreak, while driver productivity was hit not just by social distancing measures, but also the shift in basket mix.

"The nail in the coffin for productivity is that we used to have a mix of fashion, gym equipment and dry goods. But now that mix has shifted; a lot more heavy equipment and cartons of water instead of nice dresses in a small pack. That mix changed so quickly that it was hard to react. Cargo became a lot heavier," he said, adding that the company has adapted since then.

Amid these challenges, there could be light at the end of the tunnel. Ninja Van is banking on an inflection point in e-commerce past the pandemic, and Mr Lai in fact thinks that South-east Asia's e-commerce market will grow large enough for several downstream logistics players.

"This is not going to be a single-player market, and that means we should not go crazy on pricing just to take the whole market... This means we should price to get enough volume. By providing value-add and a quality service, people are willing to pay the right price," he added.

Longtime backer Lim Kuo-Yi, managing partner of Monk's Hill Ventures, sees Covid-19 as a means for Ninja Van to prove that its technology can respond to spikes in demand under stress conditions.

"This is a great opportunity for Ninja Van to demonstrate its viability and also cement its position as the go-to platform for e-commerce players large and small," he explained.

Unlike its asset-light peers, Ninja Van hires some 20,000 full-time drivers across six South-east Asia markets and has its own fulfilment centres, giving it an operational edge, Mr Lim added.

Other observers are mixed on Ninja Van's prospects going forward. One big challenge for last-mile logistics players could be cash flow, said Yorlin Ng, chief operating officer of venture builder Momentum Works, especially if the company's revenue model involves billing clients afterwards instead of upfront collection.

Associate Professor Nitin Pangarkar of the National University of Singapore Business School, added: "New entrants looking to fill capacity, such as taxi or shared transport companies, can pose competition and affect pricing and utilisation of assets."

Still, Ninja Van's large funding round could make it harder for its competitors to catch up, given the capital-intensive nature of the sector, Ms Ng said. And South-east Asia's compelling e-commerce story could draw more investor interest in Ninja Van even as Covid-19 rages on.

"We see the pandemic driving lots of merchants into adopting e-commerce; many which were doing well in retail and ignored e-commerce now have no other choice... E-commerce platforms might not benefit from this, but logistics definitely will," Ms Ng said.

Covid-19 could also create opportunities for Ninja Van to solidify its standing. "With global supply chains expected to be severely broken in years to come, I expect Asean to increase intra-trading. With six established markets, they could focus on developing intra-Asean deliveries," said Christopher Quek, managing partner of venture firm Trive.

If executed well, this could help Ninja Van fend off competition. And if the business achieves positive unit economics, it could be ready for a public listing in five to six years barring unfavourable market conditions, Mr Quek added.

When asked about whether Ninja Van is working towards an initial public offering or trade sale, Mr Lai replied that the company is not focused on any one means, but wants to keep all options on the table.