FAN Courier builds key tie with e-commerce

The business of local delivery company FAN Courier has been reshaped by the boom in e-commerce, which generated one fifth of its turnover last year. Managing director Felix Patrascanu told BR in an interview that the company has opened a subsidiary in Bulgaria and is looking to tap the warehousing segment due to higher online demand.

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Patrascanu said the firm was planning to invest up to EUR 10 million in a new logistics center near Bucharest that will be used mainly for e-commerce business, although he did not mention a timeframe for its construction.

“We have seen the development of large companies from abroad that have a wide array of services. If we look at FedEx or DHL we see they have a lot of services including shipping and warehousing, cross dock – things we can implement because sometimes the market is asking for them. A warehousing service would be welcomed by some of our most important clients,” said Patrascanu. The company will have to buy land and hire new people for the warehousing facility, which should be built at its hub near Bucharest. He added that additional investments will be made in automatization equipment at the Brasov and Cluj hubs.

As the e-commerce industry has gained significant ground in Romania over the last few years, with everything from insurance to food being for sale on the internet these days, Patrascanu predicts that this will further contribute to the company’s turnover, which climbed 16 percent to over EUR 60 million last year. He expects a further increase of 10 percent this year.

He reckons the courier sector has the advantage of adapting quickly to the growth industries in the economy. The MD cited e-commerce as one of the sectors that will grow for an extensive period going forward.

“We have around 16,000 customers from all fields and we work with the biggest in almost all sectors. In telecom we work with the three biggest players, in cosmetics the same, on e-commerce with eMag which has around 60-70 percent of the market and with other players,” said Patrascanu.

“We are still working with dealerships, car importers, auto firms – a very developed market because of the high sales of second hand cars that need spare parts,” he added.

He said the country has seen “a nice development” of food e-commerce in the recent period.

“We are working with Carrefour which has opened a pilot project, which is working – this is in fine-tuning mode at this moment. Deliveries were initially made only from Baneasa but now the retailer has also started to make them from Militari.”

“There are dedicated cars and people. This is also a big market. There are market rumors that even Cora and Mega Image are planning to do it,” stated Patrascanu.

Management models

When asked by BR which entrepreneurs inspire him, Patrascanu immediately named two managers of companies that have long-standing relations with FAN Courier.

He closely observes eMag founder Iulian Stanciu for his business development skills.

“I have seen him very focused on each business detail. Even the scotch tape he used for the boxes, he was looking for it somewhere where it was cheaper than in the other place. We three (e.n. the FAN Courier founders) thought he was missing the wider business picture but he sees it very well. He sets himself some targets that he meets,” said Patrascanu.

“In my opinion, he is very thorough in business. We are not doing charity here – it’s business,” he added.

Stanciu announced last week that he was planning to grow eMag, which is controlled by media giant Naspers, by 40 percent to EUR 262 million this year.

FAN Courier does the majority of deliveries for Romanian firm eMag, controlled by South African media giant Naspers.

Patrascanu said that he also appreciated the team management skills of Srdjan Mijuskovic, a Serb who managed the local operations of Avon Cosmetics Romania. They started working together in the late 90s, when both companies were in their early development stages in Romania.

“I was impressed by the way he built the team. They were so dedicated that they were staying day and night, a couple of them, and I wondered what he was telling them to make them so dedicated because they were not that well paid at the start in 1997-1998,” said Patrascanu.

Dragos Anastasiu, president of transport and tourism group Eurolines, alongside Mihail Marcu, the president of the board at private healthcare services provider MedLife, were the other inspiring figures mentioned by Patrascanu. He also referred to several intrapreneurs including Bogdan Ion, the country manager of professional services firm EY Romania, and Ioana Filipescu, managing director at Raiffeisen Investment.

Patrascanu is in fact working with some of them in helping more Romanians open businesses, as part of a program within the Romanian Business Leaders (RBL) association.

“We are mentoring some start-ups. In business you can go for a while, and then you are stuck with three employees, with a turnover of a few tens of hundred thousands in RON, and need help,” said Patrascanu. He said the program aims to more than double the number of entrepreneurs in Romania to 57 per 1,000 inhabitants, which is the EU average. This should be achieved by 2020 and Patrascanu confidently says that Romania can save itself through entrepreneurship.

Taking the Black Friday test

In the past three years Romanian retailers (first online, then bricks and mortar) have started to step up promotions in imitation of Black Friday in the US. This was pioneered by eMag, which did a similar thing in Bulgaria.

Black Friday has brought delivery firms to the forefront of the e-commerce business, but this has been a doubled-edged sword for some of them.

“Some delivery companies shut up shop two years ago because they were engulfed by a wave of deliveries,” said Patrascanu. He said the company made some profit last year during Black Friday and that it was taken “a little bit by surprise” by a torrent of white goods deliveries.

“From the logistics perspective, last year we had to deliver around 7,000 white goods. We can fit 160 in a truck. All were ordered on Black Friday. We invested around EUR 3 million last year around Black Friday to buy new trucks,” said the managing director.

“I am glad that people understood what e-commerce is – all kinds of products can be included there. Even cars, but that was an image thing.(…) I asked some Polish businesspeople how they did on Black Friday and they asked me what it was, because it has not caught on with them – the same is the case in Germany,” he added.

“Online sales in Romania are in the single digits (e.n. out of all sales) so the business opportunity is fantastic here,” said Patrascanu.

One of the characteristics of local online sales is that very few people pay by card, generating additional costs for delivery firms.

“In Romania and in Eastern Europe the cash-on-delivery system is very popular and few people pay by card before seeing the product,” said Patrascanu. He said that the lowering of interbank fees, which has been proposed by the European Commission, the executive arm of the EU, should support the growth of online card payments.

Patrascanu said the fact that e-commerce players are operating with profit margins of below 1 percent in Romania leaves little room for any price hikes. He said the rollout of the new fuel excise will hike FAN Courier’s price of services by 3.5 percent, while indirect prices of car parts, stationery and services will also go up.

The company is also grapping with the poor road infrastructure, which hampers efforts to cut transit times.
“Every investment we have made in automatization and devices has been cancelled out by the impossibility of crossing the Carpathians on time,” said Patrascanu.

Expanding regionally

Patrascanu founded FAN Courier 16 years ago in partnership with the Mihai brothers (Adrian and Mihai). He has a 20 percent stake in the company, while the brothers have 40 percent each. The three share an office at the company’s HQ near Bucharest, which also includes a warehouse.

This hub, which required a greenfield investment of over EUR 20 million, was inaugurated in January 2011. The company’s investments since 1998 have amounted to EUR 50 million and Patrascanu said this will continue throughout 2014

The delivery market has returned to the pre-crisis level of EUR 250 million and is forecast to grow by 10 percent this year, according to Patrascanu. He added that the company was close to having a 50 percent market share for domestic deliveries alone. It falls to 27-30 percent when including both the domestic and international markets.

Holding the leading position locally and working in a market with further growth potential may well have attracted the attention of investment funds.

Patrascanu said that over the years a lot of funds have expressed interest in the company, but the latter has been able to develop on its own so far.

He added that an investment fund could support the company’s regional expansion, but that at the moment the owners were not talking to any fund.

The company has ventured abroad on its own, opening FAN Courier Bulgaria with an HQ in Ruse last month.

“We just launched it. We have some customers there who asked us to go there. eMag and Avon are also in Bulgaria, along with other firms. We hope to go into this market. Even though it is a small market, we have seen some handsome (e.n financial) figures of some local courier firms,” said Patrascanu.

FAN Courier has also looked at the Republic of Moldova, but Patrascanu said that any further steps have been put on hold due to the crisis in Ukraine.

Asked about potential acquisitions locally, he said the company was open to this but has never reached a due diligence process with any firm.

Business Review named Patrascanu entrepreneur of the year in its annual Awards Gala in March.

Ovidiu Posirca

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