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Most customers merely get irritated when faced by poor service or inefficient businesses. It takes entrepreneurs like Tom Allason to turn such frustrations into an opportunity to revolutionise the marketplace. Allason, alongside university friend Jay Bregman, founded eCourier in 2003 after suffering at the hands of unreliable couriers for several years. The firm’s innovative courier tracking system, unique in the But it may have very different had Allason not been enraged by a particularly bad courier experience three years ago. “I used to use a lot of couriers and things would go wrong, but nothing made me think I should start up a courier company until I had a very bad experience,” he explains. Wanting to treat 10 friends to a day at the Queen’s tennis tournament, Allason called a courier company at “They said it would be 20 minutes, at 8.30 I called and they said it was only going to be five minutes,” Allason says. “I went into a meeting, came out, and they still hadn’t arrived. “I called again and asked to hold, but the problem was that they had to call the courier to find out where he was and then call me back. “They didn’t call me back, this went back and forth, making me furious – the whole point of using a courier was to make my life easier, not harder. “While on the phone, the courier shows up and he doesn’t look like the sort of guy you’d entrust with a day out for your best mates. But I suspend disbelief and ask him to get there in half an hour, which he says is fine. “I get a call from my friends an hour later saying the courier isn’t here, I call the courier company and have the whole same conversation again. “It’s not into the afternoon, the day’s been ruined, I’m furious and get into an argument of the MD of the company, who will remain nameless. I told him I thought I could do a better job, he made the mistake of encouraging me and that’s how it started.” Allason felt there was a significant gap in the market due to the lack of information between the couriers and their controllers. Control room staff would assign jobs to couriers not knowing where they were, only aware of their workload. The budding entrepreneur felt that if he could automate the process, it would save an estimated 30 per cent of revenue and alter the dynamics of the whole industry. He proceeded with some meticulous research. “We learnt a lot about the courier market,” he says. “The market is worth £1 billion, but the largest player had under five per cent of market share. “There was a diseconomy of scale – the smaller the courier, the more profitable, the larger, the less profitable – that’s why the market was so fragmented.” Allason could see multiple benefits for an automated courier management system – not only would it allow him to keep tabs on couriers, it would cut operating staff costs as the system would assign jobs directly to the couriers without the need for human intervention. The technology is certainly impressive – staff and customers are able to zoom in on detailed real-time computerised maps that show the movements of the couriers. Simply clicking on a particular courier give the viewer details such as time travelled, cargo and even the amount of fuel in the tank. Thanks to this system, eCourier takes 85 per cent of bookings online, compared with five per cent of its nearest competitor. As a result, Allason employs 17 times less telephonists than the competition. “Anyone with four mates can start a courier company – there are 600 in “Because they can’t produce efficiencies on the operating line, the courier is the one getting squeezed – a courier today is paid less than 10 years ago, not even considering inflation and fuel costs. That has impacted on service, because if you pay peanuts, you get monkeys. “We’ve got a system that gives us an advantage as we have larger margins, so we can charge customers less and pay our couriers more.” After convincing several friends of the feasibility of the business, the next step was to find and develop the technology needed. Allason admits he would’ve loved to have plucked the software needed straight from a shelf at PC World, but no such product existed. What followed was an extensive, global search for a developer, after being told that such a system could not be built for less than £4million. After identifying an American academic as the person who could build the business-defining technology, Allason and Bregman bombarded her with gift baskets while she was on holiday in She enlisted the help of two Italian universities to design and build the system, with Allason's team having to travel to The initial cost of the technology was £500,000, a figure that Allason impressively managed to raise. Having approached individual investors, friends, family and co-workers, he also secured £100,000 from the bank under the Small Firm Loan Guarantee Scheme. eCourier also benefited from a further£100,000 in funding from Go East Ventures, a subsidiary of the East London Small Business Centre. The money obliged them to be based in the This outside investment has left Allason and Bregman with a minority stake of the business, although they retain day-today control. But with the technology development being so groundbreaking, funds were needed from various sources - "It was important to get your head around the idea that it was much better to have a small slice of something big than a big slice of something small," Allason explains. An initial staff of seven couriers has swelled to 70, with a support team of 10. Unsurprisingly, given the good pay and the efficiency of the system, Allason is swamped by courier job applications every day. “We had some press in the beginning and the couriers love our system, so we’ve had a lot of applications,” he says. “Normally, their work is given to them by a controller, and there’s a lot of favouritism. The courier is the customer-facing part of the business, so you need to invest in them.” The couriers drive their own vehicles, saving further overheads, although they are eCourier-branded. One-off deliveries cost from £5 upwards, although a softly-softly approach to marketing that saw eCourier slowly build up a solid reputation has attract big-name contract clients, including several of “We started off thinking that we couldn’t rake on big clients yet and the technology was untested, we needed to build up critical mass,” Allason explains. “Our ideal client would spend in excess of £100,000 a year. “Our largest client is an investment bank who pay £250,000 a year on couriers. For them, price is quite important so we make sure we’re competitive. But although we can be cheaper, we can do it much better at large margins.” “The weakest link in the ecommerce supply chain is fulfilment,” he says. “It takes just a minute to buy something on the internet, but you’ve got to wait from a couple of days to a couple of weeks, all for an impulse purchase. “How fantastic would it be to have it delivered in a couple of hours? Would people pay a premium for that? Not everyone would, but you would only need one or two per cent of the market to create a new market.” Turnover will exceed an impressive £2.5 million in eCourier’s first full year, a figure Allason admits to being surprised at. In fact, he concedes that some of his early business plans turned out to be slightly unrealistic. “We misguidedly thought we could reach profitability within three months, and it took 14,” he says. “It was naivety. We had no idea of the market and didn’t have sale experience. “We thought we’d take on five couriers a month, who do 20 deliveries a day, which was not very smart because they are lucky if they do four or five.” Despite the early miscalculations, eCourier is looking at consolidating the Since giving up his job as a ship broker to set up the business, Allason has certainly can’t be accused of not dedicating himself fully to eCourier. His flat is 30 feet away from the office – not that he spends much time at home that is, often working into the early hours. He’s promising himself a holiday in the near future as he hasn’t been away for two years. But Allason is adamant it is all worth it. “We get paid a pittance, we’ve seen it grow so you don’t get much more satisfying than that,” he says. Source: www.mybusiness.co.uk ( |
Questions
- “…nothing made me think I should start up a courier company until I had a very bad experience…” Carefully explain how a company is formed.
- What are the advantages of starting up as a company rather than a sole trader or partnership?
- Outline the main difficulties any new business faces when first starting up.
- Explain the term ‘economy of scale’.
- Suggest reasons why there is a ‘diseconomy of scale’ in the courier market.
- “Anyone with four mates can start a courier company…” Is it really that easy?
- “Unsurprisingly, given the good pay and the efficiency of the system, Allason is swamped by courier job applications every day….” Discuss whether pay is the main motivator – whatever the kind of business. (Education?)
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