Airmule helps travelers save money on international flights in exchange for a small favor: share your luggage allowance to transport someone else’s stuff. We sit down with Airmule’s CEO Sean Yang to better understand the following: what is Airmule’s value proposition and how does the process work? What core technologies and operations management know-how underpin Airmule’s offering? How can Airmule create a services platform for the long tail of freight forwarders overshadowed by UPS and DHL? What is Airmule’s growth strategy?
What is Airmule?
Adam: Can you tell us more about Airmule’s value proposition?
Sean: Well firstly check out our short video (here)!
Our value proposition is clear to the senders: we can save them a lot of shipping fees. The process is a bit more difficult to understand for travelers. For context, on international flights, airlines allow at least one free check-in luggage. Even if you don’t have additional luggage, you won’t be getting a refund. From our data, it’s clear that younger travelers (age 24-35) travel lightly. All they have are a backpack and a carry-on, and their trips normally last somewhere between 5 - 7 days. So it doesn't make sense for them to bring two large luggage bags full of personal belongings. This additional capacity can be replaced by Airmule instead!
Adam: And can you tell us more about the actual process of delivery itself?
Sean: We pay $150 USD per luggage bag from the U.S. to China. So if you have unused luggage bags, then you can get them sold for $300. On a complete return flight, people can make somewhere between $150-600 bucks.
When we came up with the idea of sharing luggage space, people thought they would need to sell a portion of the space in their own luggage bags. But that’s not true, it’s actually a much more standardized process where they’ll pick up one of our Airmule luggage bags during check-in and then drop it off after arrival.
We’ve made the process very easy and simple for users. For travelers, they’ll meet Airmule at the airport departure terminal. We’ll deliver the luggage and have the travelers sign a waiver so that they don’t have liability. We seal the luggage, so the only people authorized to open them are either TSA customs officials or Airmule. If another third party opens the luggage and breaks the seal, they will put a note in there. If the TSA inspects your luggage, they will put a note in there.
We are a TSA certified company, which is required for indirect air carriers, meaning we don’t have our own air planes and rely on someone else's services. Indirect air carriers need a license, so people can do this onboarding carrier business.
Adam: Just to understand the full process… once travelers get to a destination, they pick up the bag and bring it to another Airmule personnel?
Sean: Yes, at the destination there will be our staff or another logistics partner (wearing our work T-shirts) at the airport receiving the luggage. The travelers just check in when they arrive at the baggage claim, pass off the luggage bag to our guys, and we’ll help them get through customs. The whole process takes about 10 minutes.
Airmule's Core Tech and Differentiators
Adam: So all we've talked about execution, and while complicated it seems that those are all just details and doable. Let’s talk a bit more about your technology. You mentioned that for each traveler, their Airmule luggage bags include delivery goods from multiple senders. I imagine you’ll optimize available storage so as to maximize profits from each bag. How do you go about achieving that? Is that your core technology?
Sean: Right, sometimes it's not even full capacity as we need to abide by weight limits and sender delivery time requirements. The optimization algorithms are very important and complex. We continue to learn because the law is changing every day. We have to compare changing regulations in different countries. So I think there are about at least 50 parameters required for this algorithm to determine the best route, the most affordable option that optimizes capacity and profits with the lowest risk. It also looks at the user’s ranking, whether they’ve done this before, if they are in the priority users pool, etc. There is a lot of going on.
Adam: The data sounds very valuable for airline companies to understand as well.
Sean: Yes, and for us, we’ve learned about a lot of these trending behaviors. How early do customers arrive to the airport? Which airlines delay the most? Think about this, Airmule can actually be the last individual service travelers see before they departure and the first they see after arrival. This is very valuable information.
FedEx invented the tracking number in 1970. And for the most part, the logistics business hasn’t been interrupted much since then. Fred Smith, the co-founder of FedEx, says that the information of the package is as important as the package itself. Because they invented the tracking system, they got to where they are today. With Airmule, we think we can be the second one to majorly disrupt this industry via crowdsourcing. It’s not a new method, and has been tried before. But then, the shared economy was not developed, and communication was very difficult (people still didn't have cell phone back then). The time and technology are both right now.
What Does the Market Opportunity Look Like?
Adam: So how big is this market?
Sean: About $240 billion. And in the near term we’ll target a $4.2 billion segment. Because Airmule relies on airports with heavy air traffic, we target major cities and countries. We do a lot of U.S. to China, but our plan is going to be every other country with China. Europe we already do, and we’re expanding to Hong Kong, Thailand, Korea, as well.
In short, we open the lines between every other country and China, and then later on, we can connect these countries. For logistics lines, it’s not worth anything, you need a net.
Adam: And why not the U.S. market? Why don’t you focus on national delivery? In your early days, don’t you want to stay focused before scaling massively?
Sean: There is a demand for domestic, but we just don't think we are that compatible yet. In the domestic business, you compete directly with FedEx and UPS. Their services are already pretty awesome and cheap. Later on when we have more resources, we’ll get in there as well.
Adam: Just for my understanding, you went global because it's about tackling major airports, and I guess globally the current offerings are more expensive and disparate. On the other hand, in the U.S., there are already a few players that do very well at competitive low prices.
Sean: Yes and we want to expand faster. Domestic is very much dominated by FedEx and UPS.
Airmule's Growth Strategy
Adam: That makes sense. So where is your business at today?
Sean: Things are going well since we launched in April 2016! We spent a lot of time educating the market in year 1, but now senders are increasing consistently (400% over this past month), and we are signing on more freight forwarders to work with. We’ve gotten good media coverage as well from ABC, the LA Times, etc. which was all very helpful.
Besides the market expansion I mentioned earlier, I should say we are also doubling down on technology, on optimizing the matching and algorithms side. All these freight forwarders… I call them the long tail of smaller players vs. UPS and DHL. Globally there are many of these smaller freight forwarders doing their own business making money on the margins. But if we can aggregate all of those, let them use our software, set up the hub, give them territorial rights, then that’s a big business! At that point we are selling SaaS while setting up a new shipping platform to directly compete against UPS or DHL.
Adam: And what about the airlines themselves? Your data is valuable for them, if they better know their users and capacity better, might they enter the business and become a competitive threat?
Sean: Every airline company already assigns their cargo department to work with 3rd party onboard courier companies. We can work with the airline companies directly eventually, and buy 10k luggage bags capacity in advantage on a discount. We’ll then just do a revenue share with them, it’s a win-win situation. We’re extending their revenues, increasing their income.
Adam: what about bringing that concept beyond airlines to trains and other modes of transportation?
Sean: It’s possible. There are some companies that are doing that at a small scale. But as I said, we focus only on international right now, but once that’s capped out, we can come back for the national business. Having a long term vision is important, but we also need to be laser focused in the beginning.
Adam: I understand that you’re undergoing fundraise. Where’s the capital going?
Sean: Airmule is positioned as a global company. So we have tons of tasks, especially on the engineering roadmap. The majority of money will go to product development. We’ll need multi-language, and besides every country has different rules. There will be lots of hands on work, and of course we’ll need to improve our algorithms. Marketing will be key as well.
We should be able to launch all the countries we want to do. And we’ll need to improve the product and user experience. Currently we have 3-5 days shipping, but we’ll get to 24 hours. Human beings are very greedy.
Adam: All makes sense. On marketing, I think there’s a lot you can do while addressing millennials. Your branding is young, hot, and hip. It should be helpful to leverage celebrities and influencers who think it’s cool to be an Airmule supporter, save money and be able to travel to new places. I can really see it taking off!
Sean: Right, which is why we’ll need to open up new countries. People get bored flying between just China and U.S., they’re going to want to fly elsewhere. We’ll make that happen 😊