The South African logistics market has a mix of global giants like Imperial and DHL, mid-sized regional leaders such as Bidvest and Laser Group, and smaller, specialised local players. This last group focuses on overlooked markets, and tries to address some of the hurdles that often eat into a logistics business’ bottom line.
On the day I spoke to Lars Veul, CEO and co-founder of Pargo, I'd just missed a delivery that was scheduled to arrive at some point between 9am and 5pm because I popped out to get a cup of coffee. This is one of the problems Pargo is trying to solve, he said.
While my failed delivery was due to bad timing, Veul says bad addresses are a big contributor to unsuccessful deliveries in South Africa. In 2012, when he and co-founder Derk Hoekert moved to Cape Town from the Netherlands, they were working for a big e-commerce brand. They quickly realised that South Africa had a higher percentage of failed deliveries than other countries, which increases costs for couriers and lowers customer satisfaction. “One of the reasons why deliveries fail is that a lot of people in South Africa don’t have formal addresses, so drivers are sent off to deliver a package to the white house, behind the big tree next to the church.”
By hiring locals, the business earns a certain level of respect in the community because we’re creating jobs.
Ashlin Govender, DKS
Pargo operates a network of over 4 500 pickup points across Southern Africa. “We partner up with existing retail stores, anything from big chains like Clicks to smaller stores like spaza shops, to address this challenge. These locations essentially become mini logistics hubs where customers can collect their orders when it’s convenient for them.” The business is built around two components – the network of pick-up points and a platform that runs the business’ supply-chain ecosystem.
The software platform was developed in-house on AWS. With API integrations, it connects with the checkout pages and systems of ecommerce brands, courier companies, and logistics providers. The platform also enables staff at Pargo pick-up points to easily scan and hand over parcels. Additionally, Pargo manages the consumer experience, handling all customer communication and support with standard track and trace communication with WhatsApp or SMS. “The upside of this approach is that we’re a software and tech business.
We didn’t have to build a massive network of warehouses and trucks and everything else you would traditionally need to make deliveries happen.” Veul says Pargo’s physical footprint means the business is very efficient, particularly in the last mile or final leg of the supply chain when a parcel moves from a distribution hub or warehouse to the customer’s door. This last mile is so costly because drivers are usually delivering one parcel per address. “If a driver loads up his van with 100 packages in the morning, he’ll likely have to travel to 100 different addresses to drop everything off. Usually, around 20% to 30% of these deliveries will be unsuccessful.” With a pick-up point business model, drivers can go to 25 addresses and drop off four or five parcels per address, without any failed deliveries. “It’s much more efficient, which is why the cost of this business model is so much cheaper.”
This also allows Pargo to deliver to informal and rural locations without charging a premium.
What I’ve learned in building solutions like this is that you really need to get to the core problem.
Chante Venter, Wise Move
Because delivering to addresses in townships and outlying areas isn’t easy, some courier companies levy a surcharge to cover the risk and effort. This only makes ecommerce less accessible to the people living in these communities. Delivery Ka Speed (DKS), founded in 2021 by Godiragetse Mogajane, began as a food delivery service on bicycles. “When Godiragetse went back to his hometown of Hammanskraal during the pandemic, he found that many of the services readily available in the city weren’t available in the township,” says Ashlin Govender, head of commercial operations at DKS.
The business began small, with a community WhatsApp group where people could place their food orders. Within six months, this small food delivery service made R1mn. “This showcased that there was a market for this kind of thing, and we raised our first round of funding to develop the Delivery Ka Speed food delivery app,” says Govender. The business expanded into multiple townships in four provinces before pivoting to the logistics area late last year. “We constantly had corporates knocking on our door, asking if we could help them get their products into townships successfully, which is why we took the big decision to close the food delivery side of the business and focus on logistics,” he says. The business has experienced massive growth, with five warehouses in three provinces and 150 delivery drivers. Delivery volumes have increased tenfold.
But because no one was delivering to these areas, DKS had to build everything from scratch. Running on Google Cloud Platform, DKS used local solutions like Shiplogic, Shiprazor and Akiba, among others. “You can’t really get value from something like route optimisation software in an area that isn’t properly mapped,” says Govender. “We had to be very engaged with the community, phoning the customer to get the right directions and then plotting these locations on a map, which has grown larger and larger over time.” It also hired locals to make deliveries. Drivers from the community have an advantage, because they’re familiar with the area, which makes navigation easier. Furthermore, their local ties reduce the risk of crime. “And by hiring locals, DKS also earns a certain level of respect in the community because we’re creating jobs.”
For Wise Move, the strategy was similar. Chante Venter, CEO and co-founder, says when people are looking to move, they’ll ask around for recommendations, because trust, reliability and cost are important. This is what motivated Venter and her co-founder Gedi Burinskis to start Wise Move, an online moving and removals platform that connects people with trusted, vetted movers and transport companies. Through this network of local providers, such as operator owned companies and mom-and-pop shops, movers can find affordable, reliable options tailored to their needs, while also supporting small business owners who often struggle to market themselves and gain traction, says Venter. By bringing the entire process onto a single platform, it’s easy for movers to detail the particulars of their moving job, and get a clear idea of what’s available and what the move might cost.
Wise Move has also integrated the ChatGPT API into its system. Users can now upload a photograph of a handwritten list, for example, and the platform will automatically populate an inventory list. “In the past, a user had to complete an online form by selecting different items. Depending on the amount that needs to be moved, this could take anywhere from half an hour to an hour. But with AI, it’s a two second exercise.” The company is also using the data it gathered from over 30 000 home moves in South Africa to help carriers create better quotes. “This data allows us to automate the quoting process by predicting what a good price would be for a particular move. We then offer the carriers on our platform an instant quote option so that they don’t have to go through the time-consuming process of reviewing each request and compiling an estimate.
“What I’ve learned in building solutions like this is that you really need to get to the core problem,” says Venter. “You don’t want to build tech for the sake of building tech. If you do, it’s easy to lose focus and to get distracted by shiny things that look and sound good, but don’t get you any closer to solving the problem you’re trying to solve.”
* Article first published on brainstorm.itweb.co.za
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