[INTERVIEW] Vroong takes logistics to a brand new plane

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

Koreans’ mania for speed has made them early adopters – or perhaps seekers – 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 said why not faster – same-day, overnight shipping within 10-30 minutes of ordering?

Mesh Korea, operator of Vroong’s delivery service, is on a mission to bring so-called “quick trade” to more than 500 retailers of various sizes.

The Seoul-based startup is expanding its business horizons beyond delivery to offer customers a wide range of digital order and logistics management tools.

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

A worker at Mesh Korea’s distribution center in Gimpo, Gyeonggi, moves parcels. [MESH KOREA]

It promises that its suite of services, based on a vast pool of data accumulated since its inception in 2013, will drive customer growth and lock in existing customers ranging from Starbucks Korea, McDonald’s, food delivery startup Baedal Minjok and online. Gmarket retailer.

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 IPO plans.

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

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

Who are Mesh Korea’s customers 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 goal is to allow customers to focus primarily on manufacturing their products while we do the rest – demand forecasting and supply chain management as well as packaging, distribution and shipping their products seamlessly. As buying goods online grew in popularity, the demand for faster delivery also increased. We help them adapt to change and provide faster delivery service than Coupang and Market Kurly. Sellers can turn to Mesh Korea for a complete logistics system, which will greatly improve their profitability. Mesh Korea has served more than 550 customers with fast trade and dawn delivery, whose combined sales amounted to 220 trillion won. This figure represents 60% of all sales generated by Korean retailers.

How did quick trading become one of the main services offered by Vroong?

The spread of the coronavirus has certainly served as the main driver. Before the pandemic, retailers tended to choose delivery agencies with lower costs, which did not necessarily guarantee the quality of delivery and often did not meet the delivery quote notified. E-commerce players like Coupang and Market Kurly, on the other hand, have delivered on their promises of same-day or early-morning delivery, a factor that has helped these e-tailers rise. What we do is allow small merchants or brands to provide the same level of delivery service from their own shopping sites. As I said, we now serve about 550 such customers, and among them are Starbucks, McDonald’s and Gmarket. They exploited us for quick trade. More and more consumers want to have a package at their doorstep within minutes or hours of placing an order. This type of service was once limited to food items, but the range has expanded during the pandemic to cover daily necessities, cosmetics and even smartphones and digital devices. A single seller would struggle to transfer inventory and set up a logistics infrastructure. Thus, we provide a suite of digital tools and fulfillment centers for sellers.

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

We see the delivery service as a way to acquire all kinds of data. Based on the data collected by logistics, customer orders, weather and driver behavior analysis, we also offer different software tools and applications on demand. The services, powered by artificial intelligence, are designed to help direct-to-consumer sellers manage orders, inventory levels and production capacity with demand forecasting. Direct-to-consumer sellers refer to any retailer selling their own product directly to their end customers, without the help of third-party wholesalers or retailers. The weekly demand outlook analysis can now correctly predict the margin of error which is usually between 2 and 5%. The analytics offering enables both Mesh Korea and our customers to organize labor in distribution centers and logistics fleets, and optimize production and operations. This is why our corporate clients view Mesh Korea as a data company rather than a delivery agency. It’s important to note that customers tend to use multiple offerings – say our Transportation Management System (TMS), delivered as software as a service, and Commercial Fast Delivery. About 30% of large enterprise customers use two or more services. The proportion has doubled each year and we estimate that it will exceed the majority this year. This is possible because our customers treat us as a partner that maximizes revenue and profits, not just as a delivery service agency.

So, who are Mesh Korea’s main competitors?

I don’t think we are in direct competition with Coupang or Market Kurly because we don’t run e-commerce platforms. The business model of these e-commerce operators is to make a profit by eventually selling their own private label products, a tactic that could offset the losses generated by heavy investments in the national logistics system. But this strategy is meant to compete with sellers on their sites. We’re on the selling side, letting them sell items on their own retail channels. In this regard, our business model is more akin to that of Shopify or Thrasio, and they are our ultimate competitors. Shopify is expanding its services to include logistics and finance. Mesh Korea is also branching out into cloud-based services and financing for partner merchants. There are also delivery agencies inside and outside Korea, but they rarely offer the kind of analytics and data services we have. Their main offer is to provide a delivery service. Therefore, we definitely have a competitive advantage over these agencies.

Does Mesh Korea plan to go public?

Yes, we are planning a public listing in Korea within three years. At this point, what matters is how our investors feel. As Mesh Korea runs through a 300 billion won funding round with a company valuation on par with so-called unicorn start-ups, the company will listen to what investors in the latest funding have to say about a future listing. Since the funding round is not yet closed, we cannot release the names of the investors. Mesh Korea has a track record of double-digit annual sales growth in recent years, surpassing 300 billion won last year, a record high. This year’s sales will likely more than double last year’s. First quarter sales exceeded the quarterly target and we firmly believe that we can achieve our objectives. So, I think Mesh Korea is well positioned for a high valuation in a public listing. Last year, Mesh Korea secured a combined investment of 100 billion won from a group of investors including KB Securities and Korea Development Bank.

Does the company also intend to offer its services to markets other than Korea?

Yes. We are already in discussions with retailers in Turkey and Thailand to provide digital solutions, fast commerce and early morning delivery operations. The vast majority of countries do not have fast trade at work, so we believe there is great potential outside of the domestic market. In the start-up phase, we will seek partnerships with local retailers to provide our logistics and digital solutions. Later, we plan to work with Korean brands and director-to-client sellers in hopes of selling their products overseas. Mesh Korea was also selected to join the Amazon Web Service (AWS) Independent Software Vendor (ISV) program after meeting selection criteria. The program is for companies that deliver software through AWS as it connects us to other Amazon partner companies.

BY PARK EUN-JEE [[email protected]]