Post Zedify-administration: What now for the cycle logistics sector?
The last mile and cargo bike logistics sector received a major blow in January with Zedify heading into administration. What kind of factors took their toll on the urban logistics service provider and what’s the future for the sector now? Jonathon Harker speaks with PedalMe CEO Ben Knowles…
Q1 brought the wholly unwelcome news that last mile service provider and cycle logistics firm Zedify had gone into administration, putting over 100 jobs at risk.
Despite growing demand for sustainable delivery services, the company (Outspoken Logistics Limited, trading as Zedify) was unable to raise sufficient funding to continue operating, with the directors taking the difficult decision to seek the appointment of Joint Administrators Will Wright and Steve Absolom.
Widely seen as a trailblazer in the field, this was poor news for the cycle logistics sector. Zedify was on a self-styled mission to “transform urban logistics” and be a part of creating cleaner, healthier, more liveable cities of the future.
There were some chinks of light following the news when, days later, electric bike courier firm PedalMe began reaching out to former Zedify employees as it looked to fill 25 vacancies in the remainder of Q1.
PedalMe Founder Ben Knowles was between fielding calls from ex-Zedify employees when he spoke with Cycling Industry News to examine the unfortunate news of its fellow cycle logistics provider.
“My head is spinning, to be honest. All London Zedify staff been given my contact information so my phone is pretty busy.”
According to the official press release from the Administrators, cash flow appeared to be a key factor in Zedify’s demise. Knowles says: “That’s not necessarily unusual for fast growing start-ups. It’s fairly inherent that you price low to try and gain scale quickly, then when you get traction you review whether pricing is sensible for you. Quite often, to earn money to grow quickly, as we did in the very early days of PedalMe, we priced aggressively, and now we’re able to charge more as a premium offering is more established. Enough people know about us and want to use us.
“Zedify was working with some very large-scale companies and I have a huge amount of respect for the work
and his team have done. I think they were really unlucky with the collapse of capital markets.”
Knowles also points to major challenges in the sector, including with criminality, hampering the growth of law-abiding businesses: “Some of the organisations that you’re competing with are almost turning a blind eye to criminal activity. You have to have an incredibly lean business to keep costs down. It’s tough.
“I don’t think the scale of the problem is fully appreciated. It’s hard for me to say how much it factored into Zedify, but it’s not unreasonable to draw the conclusion that we’re tolerating widespread use of modern slavery. In my view, the government should not be tolerating this happening.” (See below).
The costs of being a trailblazer
The trailblazing nature of businesses like Zedify also added to the challenges – and costs – cycle logistics
businesses face: “The key problem is achieving scale in an environment where there aren’t the skills you can
get off the shelf.
“The conventional start-up model is you do something like Uber did: Create a platform which allows customers to access a resource and manage a very simple business. There’s not a lot of complexity there compared to something like cycle logistics, where you design your own bikes, train staff to ride those bikes, training up your own mechanics, having your own tech… customer service skills you can get off the shelf… but there are all those other dimensions to it.”
Recent changes like Labour’s decision to increase National Insurance for businesses may have been a contributor too: “That may have affected how attractive an employee-centred business is. The amount of extra money is not that great in the scheme of things, but it’s more like adding insult to injury, where you’ve already got some companies evading taxes and then the government seems to be taking no meaningful action.”
B2C vs B2B focus
There are potential learnings to be taken from the current state of cycle logistics, explains Knowles, not least in terms of its main customer base.
“Cycle logistics services is a differentiated service. You have to differentiate your products and communicate that differentiation. Are super-scale home deliveries really the market where you can properly do that? As far as the consumer is concerned, they’ve had a delivery and they don’t really see how it got delivered to them. So maybe there is a general business learning from this.
“The vast majority of our workload is business to business. The value of the orders is higher and the customer cares more. We make sure it’s going to get there on time, in the right shape and handed over carefully by someone with all the right details.
“We put the value of the market available to cycle logistics in London as being in the billions. So, it’s currently a tiny fraction of what is possible. When we first started, you hardly saw cargo bikes – maybe there were 100 cargo bikes in the entirety of London when we began – but that’s vastly changed and we’ve been part of that.
“Our impact is much bigger, pushing these larger companies to make use of cargo bikes, showing what’s possible and hopefully also inspiring individuals to use their bikes.”
Aside from clamping down on modern slavery, Government may have another role to play in the sector,
explains Knowles: “In any new industry you are paying lots of upfront costs. You saw it with solar panels and wind power – those industries needed subsidies for decades in order to achieve the scale that was needed to get the efficiencies in price.
“Cycle logistics has so far only really scratched the surface. With the right support, the vast majority of logistics in cities makes sense by cargo bike. There’s this hand-in-hand approach where cargo bike deliveries enable more dramatic street reworkings to make it easier to walk and cycle. Then that enables more cargo bike logistics. It’s a virtuous circle. When people see it they start to realise it’s possible.
“You can try and get a sense of the value to the economy and contribution to society cycle logistics makes. If you go back to the number of cargo bikes, you make some assumptions about how many minutes of cycling they’re doing a day, you can come to a health value of around £2 billion over 10 years. The social value of cargo bikes is off the chart. We can win the good fight at a slow rate and we’re getting really good traction. PedalMe is running something like 50% from February last year to February this year.
“We’ve obviously had some business challenges and we’ve done a huge amount of restructuring of the business. Now we’re growing very quickly and taking on staff from Zedify and giving them employment.”
Leading the cycle logistics charge
Much of Zedify’s operation was focused on (but not limited to) London and likewise PedalMe is centred on the capital. But which international city is a shining light in cycle logistics?
“I think it’s London,” says Knowles. “I speak with major cargo bike manufacturer and they tell me that in the
Netherlands they sell one business bike for every nine. In the UK, they sell nine business bikes for every family bike.
“I think London is one of the largest B2B cycle logistics marketplaces in the world and we’ve got a big part it. We’re an ambitious service that sets out to replace motor vehicle movements. I believe we operate the largest cargo bike-only fleet and I’m willing to bet that we cover many more miles per cargo bike than anyone else.”
HOME OFFICE TIGHTENS RULES ON LOGISTICS BIZ
As recently revealed, the Home Office announced a crackdown on illegal working and rogue employers in the ‘gig economy’. That “crackdown” is targeting multiple sectors, including courier services and the related companies that Knowles refers to.
The Home Office said: “Currently, thousands of companies using these flexible arrangements are not legally required to check the status of these workers. This changes now. Where businesses fail to carry out these checks, they will face hefty penalties already in place for those hiring illegal workers in traditional roles, including fines of up to £60,000 per worker, business closures, director disqualifications and potential prison sentences of up to five years.”
