An inconspicuous sign is stuck to the entrance door on the third floor of Building 451 in Cargo City North at Frankfurt Airport. It points the way to one of the fastest-growing start-ups in Europe, perhaps even the world. The company's name: heyworld. Founded in 2019, it is a legally independent subsidiary of Lufthansa Cargo, and expects year-over-year revenue growth of more than 500% for this fiscal year.
Things are going well at heyworld. Managing Director, Timo Schamber is not allowed to give figures for operational reasons, but he does reveal this much: “The sales forecast for 2021 is in the double-digit million range”. Indicators speak more for the upper floors than for the ground floor. Though Schamber does not comment on that when asked, his facial expression indicates approval rather than disapproval of this interpretation.
Operationally, heyworld is earning money
Yet, sales are just one criterion for business success. The most important one by far, is profitability. “Operationally, we are profitable,” is his answer to this question.
There are several factors, internal and external, that have enabled the rapid rise of the start-up. Externally, it is the corona pandemic which caused and continues to cause an extreme boom in e-commerce, heyworld's central product. For example, China's share of shipments of packages weighing up to 20 kilograms, alone, will double from 20% to 40% this year. Alongside Europe and the USA, China is one of heyworld's main markets.
Success through technology
Internally, it is mainly the One Stop Shop (IOSS) platform developed for imports, for B2C businesses, i.e. a digital customs clearance tool that heyworld offers to the market. “We worked on its development for 6 months, but when it was launched on July 1 this year, we were ready to go, so there were no delays in the flow of goods due to the new EU customs clearance rules," says Schamber.
New EU VAT regulations benefit heyworld
The innovation was necessary due to a rule change by the EU: since 01JUL21, the VAT exemption for the importation of goods into the EU not exceeding EUR 22 has been removed. As a result, all goods imported into the EU are subject to VAT irrespective of their value. The Taxation and Customs Union further declares: “If the sale of goods is facilitated through an electronic interface to buyers in the EU, the electronic interface is considered to have made the sale and is in principle liable for the payment of VAT.”
“Customs is extremely opaque due to the multitude of rules and exceptions,” Sales Manager, Florian Goertz comments. “Customs regulations, in particular, sometimes differ extremely from country to country.” Many companies simply do not have the capacity to take care of the details, Timo Schamber adds. Instead, they trust a service provider that has digitized the processes on piece level, starting from the Chinese shipper all the way to the end customer in Europe or the U.S., including customs clearance modalities. Take Bestseller, Denmark's largest fashion company, for example. “This is one of our most important customers,” Schamber confirms.
Non-asset business model
And, because the volume of shipments is constantly increasing, a fully automated parcel sorter able to handle a throughput of up to 120,000 packages within 24 hours, is due to go into operation at Frankfurt Airport from April, next year. However, the plans go even further. The facility will be expanded to handle 200,000 shipments by the end of 2023.
This raises the question of what actually differentiates heyworld from a classic integrator: “We don't have any assets, but handle our business as a digital forwarder,” Schamber says.
As is usual in the e-commerce sector, all packages are transported by air freight, with customers having to pay a higher price for express shipments. The main carrier is Lufthansa, “but we also use other carriers if routings or flight times are more favorable.” He figures that about 25% of the capacity used by heyworld, is on carriers that are not part of the Lufthansa Group.
Expansion of the partnership network
Future plans include the establishment of a multi-carrier strategy, with at least 2 last mile carriers per country. In Turkey, cooperation has been agreed with KargomKolay, the country's largest logistics platform. The contracts have been signed, and test shipments have gone very satisfactorily, Schamber says. The operational launch is planned with an existing customer later this year.
Despite all the digitalization, the personal conversation with the customer is indispensable, Sales Manager, Goertz knows. “In this regard, we distinguish ourselves through a high consulting competence level,” he adds. For smooth business processes, clarifying questions such as the following, is essential: How should the product be transported over the last mile? Is the company locally registered? What are the import regulations for products such as perfumes, etc.?
Due to the complexity of the topics, but also because of their local peculiarities, there are three groupings among heyworld's 40 employees: market experts concentrating on China, the U.S., and Europe, respectively. Accordingly, many different languages can be heard when visiting the company. “Not only do we have technical discussions, but we are a small center for intercultural exchange,” Schamber states. One that is still growing, because more hires are planned, pushing sales further upwards.
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