Questioning the Status of J&T Express Logistics Service Unicorn

In 2017, the shipping service company J&T Express (J&T) recorded a total of 300 thousand packages per day. Three years later, J&T set a record high delivery with 2 million packages per day or up to 20 million packages throughout 2020.

In its six-year journey since its founding in 2015, J&T has recorded milestone significant in the logistics industry. The company now has 100 gdeparture center, 4000 orrating points, 30.000 employees, and thousands of fleets to reach all over Indonesia.

The company founded by Jet Lee and Tony Chen, the top executives of the mobile phone company Oppo, has expanded its business to a number of countries in Southeast Asia. After Indonesia, J&T is already present in Malaysia, Vietnam, the Philippines, and Thailand.

This year J&T is said to have received the title unicorn according to the CB Insights list. The valuation is fantastic, $7,8 billion or IDR 113,5 trillion. J&T ranks second unicorn with the largest valuation in Indonesia after Gojek and is claimed to be the first logistics startup in Indonesia.

New business and funding models

This information raises quite a lot of questions. The reason is, J&T is considered to use a traditional business model, the same as logistics companies legacy like JNE. The company is also considered not included in the business category smart logistics.

If the benchmark is valuation, the value released by CB Insights is reasonable considering that the company already operates in four countries. However, if we return to the principle of disruptive startups, it is not known what innovations or technologies the company has developed in the six years it has been established.

From observations and information collected DailySocial, the only thing that can connect J&T with the title unicorn This is its big influence in providing cheap and free shipping services through its partnership with e-commerce.

This can be seen from J&T's key strategy in collaborating marketplace big since 2017, namely Tokopedia, Shopee, and Bukalapak. At that time, as quoted from independent, J&T CEO Robin Lo said that logistics services from the e-commerce business contributed 50% to the company's revenue in 2017.

In the Covid-19 pandemic situation, this contribution increased significantly. Moreover, the 2020 SEA e-Conomy research released by Google, Temasek, and Bain & Company states that the e-commerce sector is still the driving force of the digital economy with growth of 54% or $32 billion.

Chairman of the Indonesian Logistics Association (ALI) Mahendra Rianto reacted to this and considered that this information should be made public. Moreover, J&T also plans to go public on the United States (US) stock exchange. According to him, if this is simply to increase valuations, the government should start regulating competition so that foreign players cannot destroy the logistics market.

"We are asking whether the valuation is really that big? JNE's [valuation] is probably IDR 10 trillion, why isn't it mentioned? unicorn? JNE uses partners in regional areas, while J&T 'sticks' to JNE points with its own capital. Are models business process [J&T] can it not be limited to Indonesia? P"The competition must be on the right terrain," he explained when contacted DailySocial.

With this IPO plan, J&T plans to raise funding of U$ 1 billion or around IDR 14,4 trillion after pocketing an investment of $ 300 million some time ago. "This offer will increase the valuation of J&T Express to $5 billion," said a source at the company as reported Bloomberg.

It is possible that, if the IPO is realized, J&T's technological innovation will make a breakthrough smart logistics more will be done this year.

Smart logistics

In recent years, investors are putting huge investments in the vertical smart logistics. Based on our records, there are eight deal investments obtained by logistics startups throughout 2020.

At the beginning of this year, SiCepat Ekspres (SiCepat), which did not start in business smart logistics, has also received significant funding from VCs. SiCepat obtained IDR 2,4 trillion from a number of investors, such as Falcon House Partners, Kejora Capital, DEG (German Development Finance Institute), MDI Ventures, and Pavilion Capital (a subsidiary of Temasek Holdings).

What differentiates SiCepat and J&T is that the company has adopted an innovation development strategy with massive horizontal expansion. The company annexed ownership of 51% of the platform shares food delivery DigiResto which is under the auspices of PT M Cash Integration Tbk (MCAS). Then SiCepat's parent, Onstar Express Pte. Ltd., invested into Logitek Digital Nusantara (LDN) which is a subsidiary of Telefast, part of the M Cash group.

This expansion is SiCepat's key strategy, especially through DigiResto which is said to have been integrated with three main ecosystems, namely multi delivery, multi merchant, and multipayment.

Talk about innovation smart logistics, Paxel Co-Founder Zaldy Ilham Masita believes that development in this segment is actually considered more difficult compared to other verticals, such as digital paymentst or fintech. Smart logistics related to physical goods so that the role of humans is still very necessary for the movement of goods. In contrast to fintech which can convert physical money into non-cash (cashless). Moreover, the logistics industry in Indonesia is considered to not have ready-made standards.

As a result, many manual processes are still carried out and it is difficult to digitize them. Meanwhile, digitalization in the financial sector is considered easier because it has been standardized by the Financial Services Authority (OJK) and Bank Indonesia (BI).

"Minor example, data standardization. For example, the maximum number of characters for addresses and telephone number formats does not yet exist, making it difficult to integrate APIs between platforms. If smart logistics living abroad plug and play. This is just talking about standardization of pre-conditions smart logistics," he said when contacted DailySocial.

From this situation alone, there is actually an opportunity for logistics startups to enter the realm of development tools or solutions that have not been standardized. However, continued Zaldy, the Covid-19 pandemic has become a big momentum for the logistics sector to help accelerate digitalization towards smart logistics. Consumers are inevitably "forced" to follow digital-based processes.