Making billions from just delivering parcels - TheStar Article

SURELY by now, corporate Malaysia would have digested what the digital economy is doing to disrupt the equilibrium.

The digital economy neither frets over incumbents nor does it recognise big names. An entity can build itself up as a household name in a particular service sector, but the digital economy can cut it down to size.

It is blind to the size of a company, its rich history and strong financials. What the digital economy recognises and rewards are people and personalities driving the business, the database of customers and the business model to reach out to as many of them as possible, in the most cost-efficient way possible.

Without a doubt, the cradle of digital economy is in the United States, where innovations have paid off handsomely for the innovators.

The innovators of Google and Facebook are household names who have made their billions, thanks to the digital economy.

In Malaysia, we have not produced people or companies of such calibre.

However, at the moment, we have companies offering last-mile services that play the role of a vital cog to complete the entire digital economy space.

The case in point is GD Express Carrier Bhd (GDex), a company specialising in express delivery services.

GDex has a market capitalisation of RM2.3bil, while incumbents in the delivery service such as Pos Malaysia command a value of only half of that.

Its staggering rise is an example of what the digital economy is doing to uproot the incumbents.

Pos Malaysia comes with a rich history of 200 years, has the most extensive network in Malaysia and handles a quarter of all incoming and outgoing mails and parcels in the country.

Yet, it is GDex that has managed to captivate investors looking at exploiting the e-commerce space in the region.

Japan’s Yamato Holdings Co Ltd has a 22.8% stake in the company, followed by Singapore Post Ltd (SingPost) with 11.2%. The largest shareholder of GDex is its founder Teong Teck Lean, who continues to drive the business as its managing director. An engineer by training who later became a remisier, Teong bought GDex in 2000 and listed it in 2005.

He has a 36.17% stake in GDex and has come a long way since the company listed on Mesdaq some 11 years ago.

In 2005, with hardly 850 employees and a truck fleet of 174, Teong had no qualms about taking the field when there was a shortage of employees.

Today, GDex has a fleet size of 578 and employs 2,315 people.

Yamato and SingPost have chosen to invest in GDex because they saw the company as an important link to realise their position in the e-commerce space in this region.

Yamato is the largest parcel delivery company in Japan with more than a 40% market share in that country. As for SingPost, it counts on AliBaba, the e-commerce champion of Asia, as among its shareholders with a 10.35% stake.

GDex started as a brick-and-mortar business in the area of parcel delivery. However, it exploited the benefits of the digital economy and has carved a niche for itself in the world of e-commerce.

The company is the last mile for the delivery of goods.

Ideally, it should have been Pos Malaysia playing the prime role in the last-mile connectivity in the e-commerce space in this country and perhaps region. Unfortunately, it is not happening yet despite the vast amount of resources in terms of financials and manpower at its disposal.

GDex’s rise is comparable to AirAsia bursting into the domain that used to be under the wings of Malaysia Airlines. The personalities driving the businesses in both companies have some similarities.

Teong is on the operations floor everyday directing traffic. In the early days, he used to drive the delivery trucks himself when there was a shortage of drivers.

Tan Sri Tony Fernandes used to mingle with the in-flight passengers when he first started AirAsia.

He broke new ground when he became a steward on the planes.

A personality who is at ease with all the media attention, Fernandes sometimes used to hold his interviews with reporters on the plane in the early days of AirAsia.

Then, the airline was flying primarily domestic routes and took away a hefty market share from Malaysia Airlines.

Malaysia Airlines does not have an answer to counter the no-frills and low-fare offerings by AirAsia that has grown in value and size.

The business model of GDex and AirAsia is relatively similar when it comes to the market size that they have set their sights on. Both have set their sights on the Asean market, which has a population of 600 million.

It is the main selling point of their business model.

AirAsia has stand-alone operations in Indonesia, Thailand and the Philipines, while GDex has its reach in Singapore and Indonesia.

In its latest annual report, Teong talks about taking the bull by the horns by making GDex the gateway to delivery service in Asean.

He delves into how the company has been consistently achieving growth of between 10% and 18% in the last 10 years, which he feels is normal.

Whether by design or mere coincidence, GDex has become a big beneficiary as e-commerce picks up. The digital economy has once again shown that those who are able to grasp its fundamentals can upstage the incumbents.

It favours the underdogs and paves the way for them to make billions from a business as simple as delivering parcels.

source: theStar