Russian Delivery Firm Invents Gamified Model for International Expansion

Last week at Web Summit in Lisbon, the use of AI, algorithms, machine learning, and other related fields was being discussed on stage, on the show floor, and at the after-parties. While the conversations touched on many fields, the gig economy took center stage, and especially the world of last-mile delivery platforms.

Borzo is a delivery service originally founded in Russia - now headquartered in Amsterdam. With operations in Brazil, India, Indonesia, Mexico, and more, it is a startup that understands the process of global expansion.

It's been a speedy ride to international operations. A few years ago, Borzo started to expand into other territories. They had one big obstacle they needed to overcome before they could do this: convincing food delivery businesses to sign up with them.

They marketed themselves as an 'anti-Amazon delivery service' and convinced food delivery operations that they would provide more than just delivery; they would help build their client base with services catered to large quantities of food for catering companies and restaurants and delivery services.

But, international expansion isn't easy, despite what some may claim.

One of the most important considerations should be whether your company can build a solid customer base internationally. Products that sell well in your country/region may not have the same appeal in the international target market, and if you gear your business around those assumptions, you'll fall foul.

And for many, it is generally economically unwise to open up a new business in a foreign country because the cost-benefit analysis seldom proves to be efficient. One will need to invest in expensive equipment, staff, and training to achieve the desired outcomes. Beyond this, there's also the issue of language barriers, specific laws, and local regulations that may not be well known to foreigners, with government procedures that only locals know how to navigate.

Borzo chose a unique and exciting way to research and introduce its service in a new market. It launched a "virtual delivery game" that allowed local people with spare time to make pretend pickups and dropoffs, earning points and treating it like a mobile game. By simulating the experience, they gained a whole army of delivery people, ready for the real deal.

The challenges that come with global expansion didn't deter Borzo, which now operates in 10 countries. I spoke with the CEO and founder Mike Alexandrovski about the hurdles and what he has learned as the startup expands to new territories.

"When we started the company, there were a few trends that are still relevant today," Alexandrovski said. "Firstly, people want quicker delivery of items. It used to be that consumers could get a delivery in a week and be happy. As we've progressed, and with the advent of better supply chains, delivery networks, and the gig economy, we optimized that to a few days, then next day, and now we almost expect things to turn up the same hour as we order them. Same day delivery looks and feels like magic - people love it, and it benefits the retailer, the delivery company, and most importantly, the consumer."

The other trend is the resurgence of the micro business. While your local greengrocer, butcher, and bread maker may have fallen by the wayside in favor of the supermarket and hypermarket, small companies are making a significant comeback. Before services like Borzo, you either needed to visit a supermarket or mall, or you may have needed to visit ten different shops to get what you need - now, delivery companies are doing the leg-work for us. And all from our smartphones.

As delivery services are becoming more competitive, startups like Borzo are looking at ways to differentiate themselves.

"We're focusing on particular areas where delivery logistics aren't suited well," Alexandrovski said. "Retailers of all kinds are becoming more diverse and are meeting consumer needs better than anonymous chains. Maybe the person you're ordering from works or cooks alone, and the latest delivery technologies help them to compete - in a David versus Goliath fashion - with the likes of Walmart, Target, Zara, and more. Big companies have been slow to move from legacy systems to selling online and providing instant value, which has allowed the boutique reseller, the artisan, and the craftspeople to benefit from their inherent agility and nimbleness."

Core to Borzo's solution is the idea of fractional employment. Many people have time - a few hours a day - to put down their video games and use their time to provide support for many different services. Uber and Lyft are great examples, allowing drivers to earn additional money by ferrying us around. After all, Uber is the world's largest taxi firm, and it doesn't own a single taxi. Airbnb is the world's biggest property rental company, yet it doesn't own any properties. Fractional employment has changed how we provide products, services, accommodation, transport, and - in Borzo's case - delivery.

"For us, delivery was the simplest service you can start with," Alexandrovski said. "Why? Because it can take you maybe one hour to complete a job, and you feel like you've accomplished something important. The advent of smartphones with location-based technologies made everything possible for us. We can identify the start and endpoints. We can route on the fly, taking into consideration traffic and other issues. We can make the right assignments. Like every puzzle, it's easier when you have the right pieces and a picture of what it should look like, and the vast improvements in smartphones gave us everything we needed."

As with many companies of this nature, the global pandemic has positively affected Borzo's fortunes.

"The pandemic accelerated everything and brought our vision of the future even closer," Alexandrovski said. "We genuinely believe that soon, almost all deliveries will be within two hours, either directly to the consumer's address or, when that isn't convenient, to the nearest hub so that the consumer can pick up their order within a few minutes receipt of a notification. Our vision is simple to describe, even if it is complex to - pun intended - deliver. In the future, almost everything will be delivered in minutes, and we are one of the companies building the product, infrastructure, and processes that do this.

The delivery of parcels and packages to their final delivery address can be difficult and expensive for customers and service providers. The delivery problems that the industry faces are often associated with last-mile delivery, which is the practical and optimized handling of the last mile of the product's journey. Common delivery issues include late delivery, damaged goods, or missed deliveries. With increased delivery demand, more deliveries are taking place during off-peak hours. This increases the risk of parcel theft due to unattended packages left on doorsteps or in porches.

"Giving every sole trader, small business, restaurant, cafe, and more the ability to provide same-day deliveries, such as the sort of thing you might see from the likes of Amazon in some cities, is worth its weight in gold," Alexandrovski said.

Borzo claims it will deliver almost anything, within a city, within a tiny time window. Of course, it isn't the be-all and end-all of delivery services yet.

"We don't do international deliveries; we're focused on local logistics only," Alexandrovski said. "Our customers have, in the past before we arrived on the scene, mitigated the cost of delivery and the uncertainty that comes with ecommerce by accumulating orders across a day. They used to spend time on this accumulation, deal with the sporadic demand, any fluctuations injected due to bad weather, and more. We are the company that is specifically dealing with this uncertainty and removing those barriers. So, we don't do international delivery - we provide speedy delivery, locally, in unpredictable times."

And as far as the competition is concerned, Borzo has a few, but they aren't necessarily other last-mile delivery companies.

"We have more traditional competitors," Alexandrovski said. "For example, these days, almost all taxi cab companies also perform deliveries. Companies that work in a niche, such as food delivery services like Wolt, and Lieferando come to mind, but we can deliver everything from clothes to auto parts and beyond. Companies like Yandex in Russia, for example, have a taxi company now, and they began to do deliveries. That's a strong competitor, for sure, because they have an experienced and sizeable team of engineers, which brings up an interesting point. I think that the winner in this field will have the most robust algorithms with exceptional engineering teams. Of course, there are some classical competitors like FedEx or DHL, but we're not competing with them right now. They have another business, where they primarily do next-day deliveries, and with a high percentage of international packages."

So when it comes to global expansion, what are the immediate benefits of taking that approach, rather than focusing on one market and doing it better than anyone else?

"In every country, there is a local player that does the same thing that we're doing," Alexandrovski said. "Because we've chosen this route, we've got the advantage of being global. That allows us to perform experiments and split tests that we can roll out to other countries if we find an outstanding solution in one country. It also means we have the leverage and gravitas to hire better talent for the company. We think that it's vital for us to be global, and that's the way how we're going to succeed."

Does that global footprint translate into success financially and from a logistical perspective?

"When it comes to our users, each territory has its unique cultural differences and nuances," Alexandrovski said. "We have over 2.8 million customers now, from individuals to enterprises, and while our primary focus is SMEs, our clients represent everything from a one-person shop to a huge organization. Most importantly, our unique acquisition method has allowed us to have over 3 million couriers worldwide, doing ten million deliveries a quarter as of our most recent Q3 2021 results. The bottom line? We're currently operating with an annual gross revenue run-rate of more than $150 million."

More importantly, what lessons have been learned, and how can others avoid some of the pitfalls?

"Let's talk about the elephant in the room," Alexandrovski said. "From the start of the pandemic, you know, the demand for delivery increased, and we saw it more or less on every market. So for us, COVID-19 fast-forwarded the market a few years ahead, so while we are a company that benefited from it, the pace was blisteringly fast. It's important to stay focused on the goal and be flexible in the face of such accelerated growth. Other than the pandemic, it is crucially important to understand the local market you're moving into truly. Do not, under any circumstances, scrimp on the investigation team, your legal counsel, and the locals that can help you understand the culture, regulations, rules, and idiosyncrasies of a new region. What works well in one place will most certainly not in another, and if you have not looked at every aspect of the region that could affect you, you will come undone."

So what does the future of deliveries look like? Retail and food delivery is highly optimized in 2021: what more can be done?

"Although it may not seem possible, deliveries are going to become faster and faster," Alexandrovski said. "We will also see and an explosion of new ways to deliver items. It isn't science fiction to suggest that deliveries can be as fast as within 15 minutes, driven by pure data and algorithms, smart doors in houses and apartments, drone deliveries (especially for remote areas), and the further into the future you look, the more likely it is delivery firms will replace people with robots. Just like self-driving cars, the natural technology to deliver across the city is a delivery robot, and we've already seen them in action in places like San Francisco. Maybe the biggest problem we have to solve is not the last mile, but the very last 100 meters from the road to the house or apartment."

Alexandrovski thinks the future is bright for his startup and the industry as a whole and equates it to the recent growth seen in anyone being able to take credit card payments.

"In the past, not every business could accept credit cards," Alexandrovski said. "Now, anyone can order a little box that is battery-powered and connects to the internet for payment processing - whether it be contactless or chip and PIN. We believe in the future - not far away - where every company regardless of size will deliver something, and our platform is here to enable that."

This article was originally published on Grit Daily and is reproduced with permission.