[INTERVIEW] Vroong's taking logistics to a whole new plane

Tech

Published: 18 Apr. 2022, 07:00

[INTERVIEW] Vroong's taking logistics to a whole new plane

Rhyu Joung-bum, founder and CEO at Mesh Korea, poses at the company's office in southern Seoul on April 11.

Koreans' mania for speed made them early adaptors — or perhaps demanders — of one-day deliveries.

Then the Covid-19 pandemic made them even more demanding. While deliveries that take a day or two have become the norm across the world, Korea was saying why not faster — same-day shipping, overnight, within 10 to 30 minutes of ordering?

Mesh Korea, operator of the Vroong delivery service, has made it its mission to bring so-called "quick commerce" to over 500 retailers of different sizes.

The Seoul-based start-up is broadening its business horizons beyond delivery to offer a wide set of digital tools for order and logistics management to its clients.

A worker at Mesh Korea's fulfilment center in Gimpo, Gyeonggi, moves packages. [MESH KOREA]

It promises that its suite of services, based on a large pool of data accumulated since its founding in 2013, will drive further growth of clients and lock in existing customers that range from Starbucks Korea, McDonald’s, food delivery start-up Baedal Minjok and online retailer Gmarket.

Mesh Korea is trying to raise up to 300 billion won ($244 million) in fresh capital in its latest funding round, and plans to go public in the next three years, according to Rhyu Joung-bum, its founder and CEO.

After graduating from Columbia University with a major in financial economics, Rhyu worked as a software engineer at local tech companies before founding Mesh Korea in 2013.

The Korea JoongAng Daily sat down with Rhyu to discuss the company’s growth strategy and initial public offering (IPO) plans.

Mesh Korea's Vroong delivery service deploys both motorcycles and trucks.[MESH KOREA]

Who are Mesh Korea’s clients and what does it offer them?

Mesh Korea enables all types of sellers — from offline stores to large online retailers and brands — to run their own e-commerce platforms. The purpose is to let the clients mainly focus on making their products while we do the rest - demand prediction and supply chain management as well as packing, distributing and shipping their products in a seamless manner. As the online purchase of goods grew in popularity, so has demand for faster delivery. We are helping them adapt to the change and offer a delivery service quicker than that of Coupang and Market Kurly. The sellers can tap Mesh Korea for a comprehensive logistics system, which will significantly enhance their profitability. Mesh Korea has been serving over 550 clients with quick commerce and dawn delivery, whose combined sales stood at 220 trillion won. That figure accounts for 60 percent of all sales being generated by Korean retailers.

How has quick commerce become one of the major services being offered by Vroong?

The spread of the coronavirus certainly served as a main driver. Before the pandemic, retailers tended to choose delivery agencies with cheaper costs, which didn’t necessarily guarantee the quality of delivery and often failed to meet the notified delivery estimate. E-commerce players like Coupang and Market Kurly, on the other hand, fulfilled their promises of same-day or early morning delivery, a factor that contributed to the rise of those online retailers. What we are doing is enabling smaller merchants or brands to provide the same level of delivery service from their own shopping sites. As I said, we now serve around 550 such clients, and among them are Starbucks, McDonald’s and Gmarket. They have tapped us for quick commerce. More consumers want to have a package on their doorsteps within minutes or hours of ordering. That kind of service was once confined to food items, but the range extended during the pandemic to cover daily necessities, cosmetics and even smartphones and digital devices. A single seller would find it hard to transfer inventories and set up logistics infrastructure. So, we provide a suite of digital tools and fulfilment centers for the sellers.

You say Mesh Korea provides a variety of services other than delivery. What are the other services?

We think of the delivery service as a way to acquire all sorts of data. Based on the data gathered through logistics, customer orders, the weather and drivers’ behaviors analysis, we also offer different on-demand software tools and apps. The services — powered by artificial intelligence — are designed to help direct-to-consumer sellers manage orders, inventory levels and production capacity with a demand prediction. Direct-to-consumer sellers refer to any retailer selling its own product directly to its end customers, without the help of third-party wholesalers or retailers. The weekly analysis for demand prospects can now properly predict the margin of error that typically came in the range between 2 and 5 percent. The analytics offering allows both Mesh Korea and our clients to arrange workforce at the fulfilment centers and logistics fleets, and optimize production and operations. This is why our corporate clients consider Mesh Korea a data company rather than a delivery agency. It is important to note that the clients tend to use multiple offerings — let’s say our Transportation Management System (TMS), provided in the form of software as a service, and the quick commerce delivery. About 30 percent of large corporate clients use at least two services. The proportion has doubled every year, and we estimate it will exceed a majority this year. This is possible because our clients treat us as a revenue- and profit-maximizing partner, not just a delivery service agency.

So, who are Mesh Korea's major competitors?

I don’t think we directly compete with Coupang or Market Kurly because we don’t run e-commerce platforms. The business model of these e-commerce operators is to make profit by ultimately selling their own private label branded products, a tactic that could offset the losses generated from heavy investment into nationwide logistics system. But that strategy is bound to compete against the sellers on their sites. We are on the side of the sellers, letting them sell items on their own retail channels. In this respect, our business model is more akin to that of Shopify or Thrasio, and they are our ultimate competitors. Shopify is extending its services to include logistics and finance. Mesh Korea is also marching into cloud-based services and financing for partner merchants. There are also delivery agencies in and outside of Korea, but they rarely offer the kind of analytics and data services that we have. Their mainstay offering is to provide delivery service. Therefore, we certainly have a competitive edge over those agencies.

Is Mesh Korea planning to go public?

Yes, we are eying a public listing in Korea within three years. At this point, what matters is how our investors feel. As Mesh Korea is going through a funding worth 300 billion won with a corporate valuation on par with the so-called unicorn start-ups, the company will listen to what the investors of the latest funding have to say about a future listing. Given that the funding round has yet to be closed, we can’t disclose investors' names. Mesh Korea has a proven track record of achieving double-digit growth in annual sales over the past years with last year’s exceeding 300 billion won, a record high. This year’s sales will likely more than double last year's. Sales in the first quarter surpassed the quarterly target and we strongly believe we can achieve our targets. So, I believe that Mesh Korea is well-positioned for a high valuation in a public listing. Last year, Mesh Korea secured combined investment of 100 billion won from a group of investors including KB Securities and Korea Development Bank.

Is the company also intending to bring its services to markets other than Korea?

Yes. We are already in discussion with retailers in Turkey and Thailand to provide digital solutions, quick commerce and early morning delivery operations. The vast majority of countries don’t have quick commerce at work, so we believe that there is great potential outside the domestic market. In the beginning phase, we will seek partnerships with local retailers in providing our logistics and digital solutions. Later, we plan to work with Korean brands and director-to-customer sellers hoping to sell their products abroad. Mesh Korea was also selected to join Amazon Web Service's (AWS) Independent Software Vendor (ISV) program after passing selective criteria. The program is for companies that provide software through AWS as it connects us to other Amazon partner companies.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]