SINGAPORE (Oct 15): Cross-border logistics is notoriously competitive and highly expensive, setting high barriers for small start-ups that want to enter the game. Singapore-headquartered Global Parcel Network, or ParcelX, wants to change that.
The company is launching a blockchain-based logistics platform, which runs on its own cryptocurrency, for cross-border parcel deliveries across Asia. It will leverage on the business of an associate company in Shanghai, Wuyao E-Commerce, which matches parcel delivery requests with logistics companies across borders, among other things.
ParcelX counts Rakuten, eBay and LG as customers. Its logistics partners include Alibaba Group Holding’s Cainiao and Shenzhen Stock Exchange-listed Yunda Holdings.
Wuyao has been operating for four years. It carries out 10,000 deliveries a day, with an average parcel delivery cost of US$6 ($8.32). ParcelX, which shares the same co-founders as Wuyao, wants to move Wuyao’s business onto its platform.
ParcelX started experimenting with blockchain technology last year. It expects its blockchain-powered platform to benefit the industry with the greater standardisation of trade data, and a levelling of the playing field. Delivery requests will be transparent and open to logistics delivery companies, and records will be easily verifiable. There will be improvements to the existing logistics systems that will help traders and logistics companies save time and cost.
“One of the problems we find with cross-border logistics is the paperwork cost for moving goods is very high. Just between Japan and China, the process of recording the weight of a parcel is repeated at least four times. With blockchain, the record can be standardised and shared [among different players]. And I hope that will drive prices down to US$4, which is similar to domestic parcel deliveries,” says Yang Mingyi, co-founder of Wuyao and ParcelX. He also founded Shanghai United-Cities Industrial Co, a company that sells credit cards.
Yang first took an interest in cross-border trade after he graduated from the University of Tokyo in 2000. It was a time when dotcoms were sprouting up by the hundreds. He decided to start his own e-commerce venture, UCJ, Co, which operated a Japan-China online shopping site. “At that time, a 500g parcel from Japan to China cost about US$30 [to deliver]. It didn’t make sense because the parcels were not worth more than US$70,” he says.
“We partner local logistics companies in different markets. We help them fill up orders during their lull periods, so in that way, they give us cheaper prices,” explains ParcelX’s chief marketing officer, Steven Roussanov.
It is perhaps not surprising that small companies engaged in cross-border logistics trade would want to adopt blockchain, but the business is highly competitive. Other players in the space include Singapore-based Janio, which offers its service in Southeast Asia, and ASX-listed Yojee.
“There is a demand for platform companies that can function like a ride-hailing company for logistics [but the] space is very competitive and the differentiators will be the quality of partners, pricing model and effectiveness of marketing to create perceived value,” says Patrick Yeo, Venture Hub leader at PwC Singapore.
ParcelX is launching an initial cryptocurrency offering to raise up to US$40 million for its Global Parcel Network Token (GPX). The funds will be used to build its infrastructure and expand the business. There will be one billion GPXs in total, but only 30% will be for sale in the ICO. Another 30% will be held by the team and the company’s advisers, while 15% will go to strategic partners.
The tokens can be used to pay for services on the platform. “Logistics companies will get paid immediately after they complete their tasks with the tokens, which they can change to fiat immediately or keep them,” says Roussanov. “Now, with fiat, they are paid two months after completing their tasks.” Roussanov and Yang recently hosted potential investors in Singapore. ICO sales are banned in China.
The company has set up a treasury to ensure liquidity for logistics companies to exchange their tokens. Prices are also set at the point of payment and hedged against the US dollar. This means if GPX plunges in value, logistics players working with ParcelX may be less exposed to cryptocurrency fluctuations. ParcelX tokens are currently listed on the RightBTC exchange in Dubai, trading at 22 US cents a token. It is in talks to list on three other exchanges.
There are concerns surrounding the company’s use of cryptocurrency, however. “In reality, huge fluctuations in the crypto market mean that the risks of holding on to tokens to transact are disproportionate to the cost savings,” Yeo points out. “There is also a cost to convert tokens into fiat, which can differ depending on the exchange used.”
Additionally, regulatory requirements could eat into the cost savings that the blockchain crypto platform offers. For example, payment tokens would be subject to rules governing payments, such as the Payment Services Act in Singapore.
There are also concerns related to confidentiality and data protection in blockchain technology.
“As data on a publicly distributed ledger is accessible by all users, users may not be comfortable with disclosing data publicly. This can purportedly be addressed by the use of private blockchains, where only authorised parties can access restricted information,” says Koh Chia Ling, managing director of legal practice Osborne Clarke.
Whether ParcelX takes off depends on whether logistics companies are confident enough to work with it. Whatever the case, ParcelX is not the only company attempting to simplify trades through blockchain technology. Singapore’s Global eTrade Services, a subsidiary of CrimsonLogic, started Open Trade Blockchain. The cross-border platform stores trade documents on the blockchain to make cross-border trading more transparent.
For ParcelX, blockchain technology and cryptocurrency is one way to raise funds and grow market share quickly. Today, Wuyao takes a 10% cut of the value of transactions. ParcelX, with its new blockchain platform, claims it can do without taking a cut. That proposition has already attracted more than 30 air carriers and 20 national postal companies to the platform. “We are hoping to grow the number of parcels we can deliver a day [from 10,000] to three million,” Yang says. “That would give us a 30% market share of the global cross-border parcel market.”
