Karzo is digitizing Myanmar’s fragmented logistics sector: start-up stories.

2020 has been an exciting year for Alex Weeks and Yangon-based logistics startup Karzo. Karzo has become one of the success stories of Myanmar’s startup scene since navigating a nationwide lockdown during the Covid-19 pandemic to win the 2021 Startup World Cup.

Wix started his entrepreneurial journey in Hong Kong and founded a digital content marketing company to help clients with web development and search engine optimization (SEO). In the year Arriving in Myanmar in 2012, Wix realized that SEO was practically nonexistent as the country began to digitize. He still remembers how Burmese search on the country’s popular Facebook, not Google.

However, Wix did not start another SEO company. Instead, he created a logistics technology company: Carzo.

“I was very interested in the sharing economy model, companies like Airbnb and Uber were constantly on my mind. But at the same time I saw empty trucks in Myanmar. There were 430,000 trucks that delivered 90% of goods in the country. Businesses had to use multiple suppliers, the industry was very Because it was so fragmented, it was an absolute headache,” he said.

In the year Launched in 2016, Carzo operates in the business-to-business (B2B) trucking sector, matching trucking providers with businesses. According to Weeks, the firm currently manages the largest virtual cargo fleet in Myanmar, with more than 5,000 drivers on the platform.

The company raised $800,000 in a funding round led by Singapore-based VC firm Cocoon Capital in early May. The fresh funds will be used to expand into other markets over the next 12 months. Photo from Carzo’s Facebook page.

Solving logistical pain points

Myanmar’s freight and logistics market is expected to reach $4 billion in market value by 2025. However, despite rising demand and the entry of new international players, the sector remains highly fragmented, with more than 4,000 logistics companies scattered around the country’s main corridors, including Yangon, Mandalay, Moses and Myawaddy, according to a report by Kane Research.

“The tracking system in the country is mostly paper-based and manual. The entire country has a very small and fragmented fleet, which is a huge pain for businesses that use multiple suppliers,” Weeks said.

Carzo is trying to solve this disconnect by connecting truck drivers, fleet owners and third-party logistics companies (3PLs) through its app, preventing middlemen from eating into drivers’ margins, Weeks explained. The platform allows customers to ensure that their deliveries are on track, track and track delivery. It also offers other services such as last mile distribution, line shipping and truck packing.

The tracking platform accounts for most of the revenue, Weeks said. The platform charges a 5-10% commission from its business customers, and does not take any commission from drivers. Karzo has tried to further expand its business offerings by planning to build an end-to-end supply chain service in the country.

“We’ve started building track, online freight and warehousing for our cross-border logistics core, where our customs clearance is now done entirely in Thailand. These are the foundation of our plan to build an end-to-end supply chain, and that’s where the margin really comes from,” explains Weeks.

Four weeks standing

Weeks noted that Karzo stood down for four weeks in April while trying to stabilize the institution when Myanmar imposed a nationwide lockdown due to Covid-19.

“In Myanmar, April is considered a holiday month because of the Burmese New Year. The country has been in lockdown for almost two weeks. However, due to the nationwide shutdown, not all truck drivers could go home and return to the city [after the holiday]So we lost business for three weeks in April. It was a very difficult time.”

However, from the second week of May, after the lockdown ended, the company experienced a drastic change in its business operations.

“At the time, the company’s average margin was 1 percent because we were doing core transportation on the four freight corridors. Since then, we’ve shifted our focus to building the entire supply chain for corporate businesses, and our margin exploded to 15 percent this month.” [November],” he said.

Increasing competition from regional and international players

Myanmar’s emerging economy and strategic location between China and India, sharing borders with Bangladesh, Laos and Thailand, have attracted the attention of regional players such as DHL, DB Schenker, Kerry Logistics and Indonesia-based Cargo in recent years.

Myanmar-based Konesi Trucks is another competitor that received a six-figure investment last November from local early-stage VC firm Yangon Capital Partners (YCP) and Vietnam-based VC Nest Tech. The company operates an online logistics platform that connects businesses with more than 100 commercial shippers and more than 2,000 trucks with individuals and small fleet owners.

However, according to Weeks, the company’s biggest competitors are still the middle agents scattered around the country. “There aren’t many competitors in our space. There are other global logistics players like DB Schenker who also use us as a key supplier. So it’s natural for us to be the number one key supplier.”

Series A funding

Although logistics contributes 12.24 percent of the country’s GDP annually, the sector remains largely untapped. While modernizing and improving Myanmar’s logistics is included in CARZO’s vision, Weeks said the organization also has a vision to improve cargo connectivity between Southeast Asia and South Asia. “Myanmar’s logistics market is expected to grow by 300%. We need a scalable technology solution to connect all these markets together.

The firm is set to raise a Series A round in the first quarter of 2021 to expand into other markets, Weeks said.

This article is part of KrASIA’s “Startup Stories” series, where KrASIA writers talk to founders of tech companies in South and Southeast Asia.

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