We Screwed Up and We are Pivoting
About a month back, we started with a new startup, ParallelWay. The purpose of ParallelWay is to solve the pain of ecomm companies, when it comes to shipping and delivery. However, we screwed up.
When, we started with a model, we were not too sure if the solution we are proposing is right, and more importantly, is it doable. As, you can check in the website, we essentially provide three main features, Flat Fee COD, White Label Solution and Marketing. So, we approached various different e-comm companies, with the pitch and started talking to them on how they can save up to 40% of their logistics cost.
There were 3 main hypothesis that we were testing.
- Is Flat Fee COD model going to save up to 40% of their existing costs?
- Will the ecomm companies want a white label solution and offline marketing? Can we earn enough revenue from it?
- Can we deliver a flat fee COD model? Is it doable? Is it profitable?
Hypothesis 1: It gave a very positive result. Over the past 1 month, we have been working with about 10 companies, and we have seen great savings in their cost. Many a places, the savings percentage has been up to 60%. I will explain this with an example.
Let assume an ecomm merchant from Bangalore sells a product worth Rs.2000/- in Bangalore.
Product Cost: Rs. 2000.00
Shipping Charges: Rs. 25.00
Current COD Charges: Rs. 40.00
(Higher of Rs.30 or 2%)
Total Cost: Rs. 65.00
Total Cost with us: Rs. 30.00
Thus, you can see the amount saved. As the amount of the product increases, the savings also increases. We found for amounts higher than Rs.500/-, we are better than online payment as well.
Hypothesis 2: Out of 20 odd companies that we spoke to, 15 of them were not too interested in the white label or marketing aspect of the business. They liked the feature, but it was not a top seller for them. So, it is good to have, but not something they can not live without.
Hypothesis 3: Is flat fee COD possible? Yes. We found it doable. Is it profitable? Not at the scale we were operating. But it will be profitable at a higher scale. With our calculations, we would need to be doing 500 packages a day, to be profitable.
There were many other learning, we got from the 1-month experiment. The biggest problem is the customers. In more than 70% of the packages, we had to do a follow-up attempt to deliver the package. At times, the number of follow-up were 5-6. This is the single largest contributor to higher delivery cost. However, we did find a solution in 7 days. There were other learning too.
So, where exactly did we screw up? We screwed up in scaling up. Like mentioned earlier, we have about 10 ecomm companies, both small and big. As we were solving a good pain point, sales was not that difficult. Companies were happy to give us a try. After the first week of trying, they did see benefit and scaled up operations immediately. That is what we were not ready. We were not ready to scale operations fast. We found out, Scaling up this model is very difficult.
We tried to cope with the increasing demand for 2 weeks, but then things fell apart. Anything and everything that could go wrong, went wrong.
So, with the above learning, and the screw-up, we are now pivoting. Although the model is still going to be similar, we are changing a few finer execution details. We have already started working on the pivot, and we should be out testing it sooner than later.
Wish us luck!