Hagar was looking to create something BIG. As an entrepreneur, she yearned to build a company that could disrupt a large market, but she wasn’t sure where to start. Slowly, she researched various markets until she landed on logistics. Learning that it was worth $90 trillion dollars in goods, she delved deeper, fishing for inefficiencies and a good idea. It was then that she stumbled onto the logistics of container shipping. While not a $90 trillion dollar market (though still up there in the trillions),24 she found some interesting data points that raised eyebrows and slowly shaped some big ideas in her mind. For starters, she learned that containers were being shipped all over the world, many 25% to 50% empty.25 So she asked herself, “What if we optimize those containers by creating shared container shipments?” Two years later, Ladingo was brought to market.
But what did Hagar actually do in order to create a platform that would reduce so much business cost for both e-commerce businesses and forwarders?
Once Hagar realized the inefficiencies concerning the container space, which cost money and time for all those involved in shipping large items, she set out to speak directly with both freight forwarders and e-commerce businesses in order to learn more. Eager to speak with large online retail businesses, Hagar went to conventions, sent out cold emails and reached deep into her network, asking mutual friends to make introductions. During that process, she spoke with the likes of Walmart, Amazon, and others, all validating the gaps she identified in the industry. After meeting with Zim Integrated Shipping Service, they agreed with her initiative to address those gaps. In fact, they were so much aligned with Hagar that they became an investor,26 and introduced her to Alibaba.
From all of her interviews and meetings, she narrowed down three key friction points she would focus on solving:
1. Ocean freight does try to consolidate containers, but they are hindered by old and slow processes that make the experience inefficient. For example, most of them work with outdated software, and although digital, they still type the details manually, which often causes human errors.
2. Ocean freight forwarders don't want to work with one another. There is such fierce competition between them that customers will choose one forwarder over another due to a $50 dollars price difference alone. Thus, it would be too difficult to try to solve their problems collectively, as they are unwilling to work with each other.
3. Most forwarders and container shipping companies seek to acquire e-commerce sellers as customers in order to ship and deliver their goods.
After hours of reading, meeting, and thinking, Hagar felt that she had a grasp of why containers oftentimes get shipped half-empty, and why there was no simple solution released yet. Working with the forwarders would be too difficult because they didn't want to work together to solve this industry-wide problem. However, Hagar thought outside the box, and believed the e-commerce side would cooperate.
To create the Ladingo platform, Hagar solved a couple of major issues between e-commerce businesses trying to ship large goods, and the forwarders:
Simply put, e-commerce (and most people in general for that matter) do not speak “customs”. In this case, customs refers to the documentation required to ship any goods from one country to another. Also, ocean freight forwarders do not care if a shipping container is sent full or half-empty, as the shipper(s) pay(s) for the full container regardless. (Sometimes forwarders can be more efficient and have three other shippers with large items share one container, but even in such a scenario, Hagar noticed that the containers were still left with a lot of extra space). Not to mention that the instructions that forwarders provide to the shippers on how to manage customs documentation and product handling are both dense and complex.
Understanding the barrier, Hagar and her team discovered an automated way to collect customs information and classify the products being shipped in order to provide the applicable tax costs. The e-commerce shipper indicates the product category and has the option to add a link to the product page. It then scrapes the information and routes it to a customs document, applying all necessary information, including origin and destination of shipment, product type, size, value, and more. Ultimately, it returns to the e-commerce shipper a price quote to ship the goods to their final destination, including tax and duties. Prior to this solution, e-commerce businesses would have to deal directly with the forwarders, filling out the custom forms manually and negotiating prices. By creating a simple bridge and evading the prerequisite for e-commerce companies to handle the logistics and customs documentation, both sides are now able to do business together more seamlessly.
Once the e-commerce side had a solution, Hagar went back to the forwarder side. She set out to automate the filling of containers in order to optimally use the space and save on containers and transportation redundancy. Today, Ladingo has an algorithm that uses the same information uploaded from the shipper’s invoice to fit as many goods into containers as possible, while still adhering to the timeline and destination requested. “Imagine it like a game of Tetris. The algorithm optimizes the space of the container so well that it could save forwarders one ship out of four, each carrying an average of 20,000 containers,” said Hagar, referencing her calculation, which is based on the assumption that an entire ship handles e-commerce solely with Ladingo.
Today, Ladingo is a platform that facilitates e-commerce businesses with oversized shipments via ground and ocean forwarders at a reduced cost. It does so by optimizing the consolidation of containers and truck space, and therefore, cutting down on excess spending and resources by such carriers. Their solution targets both business-to-business (B2B) and business- to-consumer (B2C) business models, i.e. a small and medium-sized business (SMB) that sources products in China and sells them in the U.S., as well as an Amazon seller that sells to an individual consumer. Hagar launched Ladingo in the U.S. and Canada to start, with plans to expand to the European, South American, Asian, and Middle Eastern markets.
1. By what criteria did Hagar initially choose the market on which to focus? Is this a good or bad approach, and why?
2. How did Hagar conduct her due diligence on the market? What else could she have done in order to validate the problem?
3. What are the benefits to Ladingo of partnering with Zim Integrated Shipping Service? What could be the potential risks?
4. What about the market dynamics in shipping made Hagar have to think outside of the box? Why do you think no one has previously tried what Hagar is trying with Ladingo?
5. What problems does Ladingo solve for e-commerce businesses? What problems does it solve for forwarders?