I interviewed Simon Hartley, the cofounder of Wumdrop. Wumdrop is a successful last mile logistics company in South Africa. What I took away from this conversation is the perseverance and the hubris, the need for flexibility and luck, and even the heartache and the joy, that are involved in creating a successful business.
The following text has been edited. Paraphrases are used to condense the text and explain information that may not be generally known. But this is in large part told in Mr. Hartley’s voice.
My Job Sucks, Let’s Start a Business
In 2013, I was working in a media company in Cape Town. I did not like where my job was going. I didn’t like the work much anymore. I worked at an online media company scrapping content from other sites and selling advertising. But because we did not develop any content, I was afraid the business would fail. I pitched the owner of the company on generating content, he said ‘no.’ As the owner, that was his prerogative.So, I knew my future at this company was over. I needed to begin looking for a new thing to do. I don’t say this with pride. I say it to emphasize my hubris as a younger person. I was 25 and therefore I had a very limited appreciation for what I could and could not do. But I am naturally confident and ambitious. My appreciation for what I could do was naturally much greater my real capabilities or my appreciation for what I couldn’t do. So, I thought about various options and I was kind of stymied.
I had given my notice and I was emotionally checked out of my job. I started taking cigarette breaks even though I am not a smoker. But these breaks are legally mandated under South African labor law. I took these breaks just to get my 10 minutes out of the office as often as I could.
And I bumped into a person on the smoking balcony of this business park. A guy called Roy Brawley. I had studied TV script writing at the University of Cape Town with Roy. We had become buddies, but had lost touch with each other. I reconnected with him and he asked me how my life was and I tell him that I’m not really enjoying my job very much. And he says, ‘hey, you know, me too.’ And we reconnected and bonded over the course of a few weeks.
Then one day he said, ‘let’s start a business.’ And I said, ‘great let’s start a business. How hard could this be?’ At this stage of our lives we were highly motivated, but fundamentally lazy people.
We had an appreciation for the fact that neither of us had been an executive of any kind; Or worked at a business of any meaningful scale. And neither of us had studied business. But we believed, because we had studied TV script writing, that we knew how to pitch. And that pitching was exactly the same as selling. You can write Breaking Bad, but if you don’t know how to pitch it, it doesn’t get made.
Because we were not business savvy, we needed to find a business that was already validated, with not too many variables to pick through. We did appreciate that the business very likely would fail.
The Birth of a Diaper Delivery Business
Roy suggested we sell coffins, we decided that was too depressing. But just as people are always dying, they are always getting born. So, diapers are always going to be in demand. Then we looked at our capital. As 25 year-olds, we had none. We also had no idea how to raise capital. We were nobodies.
OK, we have no money. We can’t afford to rent a place to sell our nappies. We have to sell online, because the Internet is free. And we decided we needed a.com domain. We then learned that the Internet is not free. Dotcom domains can be quite expensive. So, we downloaded a list of dotcome names that were free. We looked for names that were pronounceable. One of them was wumwum.com. Roy is a Black guy from Johannesburg who speaks Zulu and three other languages. It turns out Wum Wum is an abbreviation for “my baby” in Zulu.
Next, we looked for a supplier of products. We went to Procter and Gamble and Kimberly Clark. And we said, ‘we would like to start a business selling our products. Could you please give us your wholesale pricing sheet?’
And they said, ‘Excellent very glad to do it. Please tell us about your credit record!’ And we say, ‘this is our first business. We have no credit record.’
‘OK, then,’ they said, ‘you get the special sheet.’ And they gave us their special pricing sheet which was more or less the same as retail pricing. There was also an issue with the minimum order quantity which was many hundreds of units. And we didn’t have a single customer at this point. Working with the big brands was out.
We settled on a company called Takealot.com. This was South Africa’s most well-known Ecommerce retail brand at the moment. Takealot.com had been well capitalized and was trying to knock out a major competitor. They were being incredibly aggressive on pricing. That’s how they were taking market share. In effect, they were selling at wholesale. So, they became Wumwum.com’s supplier because there was no place we could find diapers cheaper.
Are there possible issues with that strategy? Absolutely! Did we appreciate that at the time? Absolutely not!
So, we buy diapers from them, we have them delivered to us, we rebrand them, and because of the cadence we adjusted our business model to be a subscription-based diaper ordering business. Our USP (unique selling proposition) was we will deliver to you on a regular basis, don’t worry about the administration of having to purchase again. You can adjust your order type as your baby grows. We created the website, and we went merrily along for some time. Roy and I were doing the delivery of these diapers in our cars – Ford Figo and Ford Fiesta 2 door hatchbacks, respectively.
The First Failed Business Model
We got 100 customers on a weekly basis, and we couldn’t do the delivery runs ourselves anymore. So, we outsourced the delivery capacity too incumbent courier companies. That is not a lot of volume.
Yeah, so we were not an interesting account. Nevertheless, the incumbent courier companies, all of them, were fantastic for the first week because the account managers do want to please their customers regardless of size. We told the courier companies, that our growth depended upon us being able to follow our customers instructions. These customers have young babies at home. Some of the instructions are ‘please don’t ring the doorbell when we arrive. Please knock on the window because my baby is taking a nap.’
‘We follow those instructions. Can your drivers do that?’ And the account manager would say, ‘absolutely.’ And, for the first week they would. But inevitably they were paying much closer attention to the needs of larger customers. And the service deteriorated.
Couriers optimize routes by centralizing their demand and distributed over the course of the day. The route is optimized on the fly in the back of the vehicle in the morning. That’s why they can’t tell you when it’s going to arrive. I did not know that at the time. I was being foot stompy and upset that my customers weren’t getting their parcels at the particular times they asked for. We got frustrated with this same pattern from the couriers occurring over and over.
Business Model Number Two
W reached out to someone from my past. While working at the media company, I had been involved in a very successful media stunt that got lots of publicity. And this pizza company remembered me. This pizza company hired university students to make their deliveries from their own cars. We had actually made deliveries for this company as college students ourselves.
So, we went to the company and we said ‘how do you crowdsource this? How do you manage college students? We promise we’re not going to compete against you. Would you impart some knowledge?’ And the owner was fantastic. He gave us a multi-day workshop on how to do this.
But he did say to us, ‘There is a good reason this is a Cape Town only business. This method of management will not scale across multiple cities. If you aspire to service more than Cape Town, you are going to need some sort of software that will allow you to scale.’
And we said, “Absolutely! We will remember that.” And we immediately forgot it.
So, we got a couple of student drivers, and we began the business again. We began to get back on track.
While the business was struggling, and we were experiencing churn, we set up retrospective interviews with a couple of our clients and asked them, “why are you leaving?” And I will never forget a particular interview with a woman. She was in her 30s and this was her first kid. And she said, ‘I know that I could source diapers for less money.’ And we said, “is that why you left?’ And she said, ‘No. I knew that before I engaged with your business. The reason why I buy from you instead of Takealot is because Takealot delivers between 9:00 and 5:00. I bought from you because you actually followed the instructions. I’m the primary caregiver. I have other stuff to do in my day apart from just looking after this kid. I can’t plan my day. You remove anxiety from that whole experience. That is why I was buying your diapers.’
And that absolutely blew our minds. That was the impetus that we needed to take back control of our deliveries.
From B2C to B2B
So, as we made sales calls, we kept saying ‘we remove anxiety from the delivery and that’s why you should buy our diapers.’ One day we were talking to a guy that was 55 years old. He said, ‘I love your story, but I haven’t needed to buy diapers for 22 years. That being said, though, I do have a need. I do need to make deliveries on an ad hoc basis. Normally once a week. You are my neighbor. Would you like to do those deliveries? Because I really don’t want to do them myself. And it sounds like you could save us some time.’
And within about two months we were making more money from third party deliveries then from selling diapers and delivering them.
The Angel Investors
We figured the lesson of removing anxiety from a delivery was a scalable opportunity in South Africa. At that point we decided to focus entirely on final mile delivery.
We looked at our bank account again, and again not very much money. But we had a significantly better idea this time. And so, we downloaded the list of free.com URLs again and lo and behold below Wumwum.com was Wumdrop.com. We figured that was kind of poetic. And that is how we have this incredibly strange name. It’s a combination of startup poverty and pragmatism.
But this was a point in time where Uber was a business that was growing with incredible speed. And we had enough knowledge to understand that they were building out a transportation network that moved people and that with very little effort could switch into transportation network that move things.
So, we raised money via Angel investors. Because we were decent at pitching and fairly charismatic, it was easy for us to raise capital in South Africa. The amount of money we were raising, in the greater scheme of things, was negligible.
In 2015 we got our first e-commerce client. They were very interested to test out an express delivery option – a three-hour delivery option from their Cape Town warehouse. That, in combination with their Johannesburg warehouse, allowed us to scale to Johannesburg. This is also the point where we moved from university student drivers to increasingly using professional drivers.
But when raising money, one of the things we did not know was the tough nature of enterprise sales because of the long sales cycles. By 2016, our Angel investors were becoming disenchanted with us. We were growing 40 to 70% year on year; but not the 400 to 500% they were looking for. This was compounded by the tough unit economics, the lack of enough delivery density. To create better density, one needed a fairly significant capital outlay.
But we always stuck to our guns about removing anxiety from a delivery and being customer obsessed. That, and the fact that the media celebrates startups, is the thing that kept us alive and landing new sales. Those sales included a couple of big accounts. But to service these accounts, we needed to grow our network. But the increasingly disinterested Angel investors were no longer interested in funding us. In short, we were running out of money.
Burning Cash on Proprietary Technology
We were also running out of money because we had funded our own proprietary technology. We couldn’t articulate why we needed this, but it turned out to be a good decision. But we felt, instinctually perhaps, South Africa was a different kind of place for last mile delivery. The history of apartheid and the development of townships meant that South Africa was spatially a different kind of place. There are interruptions to what you might call normal town planning.
(Simon is being diplomatic here. I’ve visited Cape Town. The townships are impoverished. They are an incredible warren of difficult to navigate roads and alleys that are largely unmapped and perhaps not fully mappable at all.)
And there is no rhyme or reason to where the townships appear. And to get from one place to another, like driving to the Cape Town airport, may require you to drive through a large township. And the degree to which you can navigate a township is an unknown quantity.
Corporate South Africa does not appreciate how difficult a problem delivering in townships is. There is a section of the population that is isolated in nice suburbs and never had to experience this environment. Therefore, they come up with a plan to increase ecommerce sales by selling in townships using existing logistics solutions. And they just don’t apply. It’s incredibly difficult.
Navigating the Townships
We have not learned every lesson and we don’t know what we don’t know. But there are things you can do. You can commit to iteratively improving address data.
You need to understand the insights that apply to making deliveries more successful in one township don’t necessarily apply to another.
You can learn the risk profiles – in terms of crime rates – of doing deliveries in the township and how it changes over time. These change week by week and month by month. There are times you can’t go in because the risk profile is too high. But you can mitigate this. You can deploy a visible security truck to follow the delivery truck.
You can understand that there are people in the townships with the capacity and local knowledge to make these deliveries. You need to recruit those people. They know how to navigate this space more effectively. You can iteratively capture their knowledge as they are working and systemize it. Then you begin to lay the blueprint for a long-term way of navigating that particular space.
In terms of our software, I’m nontechnical. We hired talented group of young engineers. But I’ve been involved to the extent that I knew exactly the experience I wanted our stakeholders to have. I’ve been a Mama Bear, and extremely opinionated, about the experience of our stakeholders – the client, the driver, the person at the pickup location, and the customer.
So, developing the app is expensive, Angel investors are not interested in putting up more money, so we need a new round of funding.
A Cofounder Quits
At this point, Roy quits. I was devastated and angry. It took me a long time to be mature enough to reach out. It turns out he just burned out. The long and the short of it was we had both been brutalized by this business. Two and a half years of paying ourselves little or no money; multiple personal loans to keep the business going; threadbare clothes. We were at a low point.
A Savior Appears
We did have a client called SA Florist at the time. This was an ecommerce florist with a distributed network marketplace. In short, flowers bought online were delivered from local florists.
There was a man at Massmart, Colin Fleming, who was their head of ecommerce. Massmart is one of South Africa’s largest retail chains, it is owned by Walmart. Colin was on a road trip looking for technology that might be useful for Massmart. Massmart was beginning to take an interest in ecommerce marketplaces. He was there to learn more about SA Flowers’ marketplace and software and perhaps to consider acquiring or licensing their software if it was interesting enough. And I happened to be there on an ad hoc client check in. I told him about our business and what we did. He was very excited and interested. And without me knowing about it, he went away and proposed that Makro – a Massmart banner – should buy us.
I had not even considered that a business like Massmart would buy us. We were thinking much smaller.
Anyway, the CEO of Makro said ‘no.’ And Colin reached out and said, “by the way I pitched you, and the CEO said ‘no.’”
About 2 to 3 weeks after that, at a general meeting for Walmart’s worldwide executives, all that the CEO of Walmart could talk about was final mile delivery. The Massmart team came back energized about final mile delivery. The then CEO and head of the supply chain at Makro began a conversation with me. They began to make overtures.
At this point, because of the way Roy left and not being fully vested, the Angels owned 53% of the company. In a fit of radical honesty, I told Makro about the situation we were in and Makro bought 53% of the company for relatively little money.
Flying Under the Radar
Massmart, at this point, was not the entrepreneurial company they became the longer Walmart owned them. So basically, Wumdrop flew under the radar. We avoided scrutiny by virtue of the fact that we unlocked incredible growth in their large appliances business.
Prior to Wumdrop, large appliances were delivered from centralized distribution centers. This meant double handling. This increased the chance the appliance could be dented or scratched. Delivering the goods is costly and it costs even more to take them back and send it on to the manufacturer. It was a nightmare for them. They hated doing it.
We stumbled on this. We had not built any distribution centers because we didn’t have the money. It’s not that we were smart. It was pragmatism.
Our proprietary software allowed us to optimize routes on the fly, to do point to point deliveries from any origin to any destination, essentially avoiding the need for distribution centers. We were way less capital intensive and more agile. There were much stronger unit economies. We didn’t appreciate this until Makro said ‘do you want to take a crack at this?’
Because the unit economics were strong, we were able to deliver at a lower cost than the incumbent couriers with a higher profit margin. This floated our business for a very long time. We did have access to the Makro treasury if we needed it to grow the business. But doing so would have attracted more attention. At this point, Makro was not culturally an entrepreneurial business. So, that is how we ran our business from 2017 through 2020.
We did mature the pricing model. We did route optimization to support 9:00 am to 5:00 pm deliveries. But we still had the point of view that we had to fix problems for the customer. So, we added much greater transparency around the ETA (estimated time of arrival) than other incumbents. This allowed the customer to plan around the delivery window. And we added customer feedback loops that if that window did not work, we could change it on the fly.
If pricing is how you get your foot in the door, then partnership is how you stay. But we had to develop our pricing to get to parity with the incumbents – who are high volume and ultra-cheap – but with better service levels.
Become the Standard for Last Mile Delivery
Then 2019 arrived and everything changed as far as Massmart and Wumdrop goes. An executive was deployed from Walmart International to run Massmart. And he brought in Sylvester John to shake up the ecommerce operation. He was obviously very interested in the ecommerce value chain, including final mile delivery. This is the man that build Walmart Spark, a crowd-sourced, gig delivery platform very much like Wumdrop. And whereas Wumdrop does a couple of thousand deliveries per day, Spark does a couple of million deliveries a week.
Sylvester is an aggressive executor. He was there to get the ecommerce flywheel spinning quickly. So last mile is one pillar of his expertise. And he is working with store operations across all the banners to make picking and packing more efficient.
He was introduced to us. He appraised our skills and our mission. And he told us he wanted us to grow in step with Massmart ecommerce. And he wanted us not to just be best in class, but an international standard for the final mile delivery business. And the team said, ‘Yes, absolutely.’ We had been hungry to invest in the business for a couple of years. Sylvester has offered us the level of investment that will take us to the next level.
So, in July 2021, the remaining shareholders in Wumdrop were bought out and we are beginning to invest.
Wumdrop is, and will remain, focused on the final mile business. That means Massmart will need other technologies to deliver to far flung places across South Africa- anywhere over 60 kilometers from where the delivery starts. Massmart, therefore, needs multiple carriers. We are using FarEye for this. FarEye keeps track of the performance of all carriers at all times. It gives Massmart full visibility on carrier pricing, which was siloed between the banner before.
To sum it up, I’m someone that likes making things. I sing in a choir. I did art at school. I like drawing pictures. I love photography. I like cooking. All those things give me an amazing sense of satisfaction. I can look at a thing that is complete. I can see I made the thing and it’s complete and it’s good. That sense of satisfaction drives me very, very strongly.
And I get the same sense of satisfaction from working on Wumdrop. We are in the middle of the recipe, but we now have all the ingredients. And I and the team are incredibly excited to complete this journey.