Feb282013

“The first thing I would say would be ‘stick to your knitting.’ Really focus on that one thing that you think you can do well, and do it really, really well.”

David Kiger
David Kiger
Worldwide Express
CEO

Worldwide Express was founded by David Kiger in 1995 to give smaller companies the same shipping options and cost-saving perks extended to the Fortune 500.

Headquartered in Dallas, Texas, WWE has more than 150 franchises across the country that handles international ground and air shipping and related services for the small and midsize business market.

MO: What inspired you to create a business model that encourages local ownership of Worldwide Express in markets across the country?

David: I figured it would give us a sustainable competitive advantage, and it has. We franchised it, but really that’s just a partnership we have with a local market. By building out these infrastructures in every major city and every local market, we’ve built relationships with small and midsize business owners. This is a very difficult market for the direct carriers to penetrate. It’s expensive and fragmented. It also happens to be the most profitable. It is cost-prohibitive for them to put a direct sales rep who might cost $80,000 or $90,000, fully loaded, onto an account that ships 3-4 packages a day or 3-4 freight shipments a week. And they look to us to do that. We are the low-cost way for them to penetrate that market.

MO: Can you elaborate on how your model attracts and instills entrepreneurialism from the top to bottom of your organization?

David: All of our employees appreciate an entrepreneur and the entrepreneurial opportunities that we offer them. We bridge the gap between starting from scratch and jumping into something that’s already proven. And, it allows you local ownership but with a proven model supporting it. That’s what we offer our franchisees. They own their business, they hire their own people, they come to our Dallas headquarters for training, and we imprint our culture and philosophy on them. It is a franchise-based system, but if you went to different franchises you would see us all doing things the same way, and see the similarities in all the cultures of the offices and our approach to business.

At the same time, we let our franchises be autonomous. They still have the freedom to make decisions on their own. We don’t dictate to them how they run their daily business, but we have an approach and a philosophy in terms of how we attack the market, and our employees tend to follow that model.

The way we go to market locally is door-to-door. The art of cold calling is lost, and we’re old-fashioned. Our sales reps are usually younger — first or second year out of college — and they wear a coat and tie; business attire for the ladies. They knock on doors and meet with business owners. It’s very likely that we are the first people that our potential customers have seen from a shipping company. There we are, we don’t even have their business yet but we’re local and we’re making a connection. That really is a key tenet that separates us from the competition.

MO: How do you think that the shipping industry has evolved since first launching Worldwide Express back in 1995?

David: First, there has been consolidation. We started off with Airborne Express and then Airborne was bought by DHL. In 2008, DHL withdrew from the national market. So that’s a pretty big deal, because in most every large business segment you have at least three competitors. In the light parcel segment you only have two, UPS and FedEx, and the post office on the consumer side. We have one fewer large carrier to go after. That’s the biggest change I’ve seen there.

On the freight side, there has also been some consolidation, but there is still a very fragmented market in terms of the number of carriers that are out there. For instance, in the light package segment UPS is our only partner, but in the less-than-truckload market we have 30 partners. I think those are the major changes. There have been multiple resellers that were around when we first started, but as Airborne was acquired and DHL withdrew, it blew out the other resellers and we’re just one of two. We’re the largest by a long shot.

MO: What influenced your decision to partner with UPS in 2008 and how has that partnership changed the direction of the company and the services you’ve been able to offer your customer base?

David: As DHL began significantly limiting their participation in the U.S. market, we thought it made sense to find a new partner. We had to make some decisions and make a move to get away from the deteriorating situation. We looked at UPS and FedEx. Ultimately, we decided to pick UPS because first, they were operationally the best carrier out there. FedEx is good at what they do, a good marketing and sales organization, but we needed organizational excellence and no one came close to UPS.

Additionally, UPS is operationally focused and we’re a sales organization, so the fit was a natural one.

Culturally, when we did our deal, UPS had been around for about 103 years, and no one from outside had ever represented the shield – their brand. They are incredibly focused on their brand. So for us to come in as an outside entity, representing the shield was a very big deal. They had to get comfortable with us, but at the end, we felt that it was very complimentary, and the synergies outweighed any potential downsides. So we did our deal with UPS and it turned out to be the best thing we could have done. Their quality is outstanding; when you put a package in their system it gets delivered. Their drivers are the most well-known drivers out there. They’re Brown. Everyone knows who their UPS driver is, and everyone loves that guy. We couldn’t say the same with the companies we’d worked with before. Those were significant differences, and the franchise owners immediately had increased confidence in their carriers. Most importantly customers had incredible things to say about UPS.

Again, FedEx is very good at what they do – they’re still heady competition – but now when we close an account and UPS is doing the shipments, we know packages will get from point A to point B. With increased confidence for everybody, the stickiness of our customers and retention is much higher. Even though we have one fewer carrier to go after with DHL’s withdrawal, we’re happy to be in the position we’re in now.

MO: Outside of your partnership with UPS, what do you think have been some of key decisions or strategies that have contributed to your impressive growth and increasing presence within the shipping industry?

David: It’s the power of the franchise model and it’s the franchise owners. When DHL was withdrawing from the U.S., we went from over $300 million in system sales to $150 million in system sales in a matter of weeks. That was devastating to the franchise owners’ business, to corporate business, and to customers. But the relationship they had with their customers was so strong that we had their customers emailing us at corporate saying, ‘Please, just find a replacement. We‘re staying with your franchise in Tampa because we have such a good relationship with them. We can’t hang on much longer, but please find a replacement carrier.’

I credit the growth with the relationships that our franchise owners have with their customers and with the sales reps that they hired and we trained here in Dallas to go out to market. The way we’re doing that, knocking on doors and establishing that relationship up front with small to midsize business owners, not only does it make them sticky, which is represented by what happened in that transition, but we’re also likely to get all of their business. If we’re picking up their UPS business, maybe the next day they say, “we do have freight,” and we’re picking up their freight business. These folks that are freshly graduated are knocking on doors in record numbers. We have 280 sales reps and more than 300 selling bodies, and I credit our growth to that—to our approach to the market and to the fact that our franchise owners have continued to reinvest in their business. As we’ve added UPS, customer confidence has increased; and as we’ve added to our freight portfolio they’ve continued to hire sales reps. Our top-line growth is directly related to our sales reps in the system.

MO: What’s the biggest risk that you’ve ever taken and how did it turn out?

David: It was saying goodbye to Trammel Crow and making the decision to start Worldwide Express. That was the biggest leap of faith ever. At that company, if you had a job there, you stayed because that was the place you wanted to be. I was in Houston and I remember getting in my car, pulling out of the parking garage and calling my dad, who is a lawyer, not a business man, and saying, ‘I’ve just left Crow to start this company.’ And as encouraging as he can be, he said, ‘Is it possible for you to go back in and maybe get your job back?’ He just didn’t understand how we could resell the service that was being sold by the company we are working for. To this day, he doesn’t see the value.

The first year for me was a real challenge. When I started Worldwide, it wasn’t in fashion to be starting new businesses. It was a very foreign thing, plus I’d come from a family that was professionals. So, I’d never been around that and seen what that was like. And then we got to no money. We were literally down to nothing. I remember walking in after a run one day at Memorial Park in Houston – that’s what I would do to keep my sanity – walking in and hitting the shag carpet. It was about a $300-per-month apartment. It hit the light switch, and the lights didn’t come on. I was like, ‘Oh well, I can watch TV.’ I hit the TV and it didn’t come on. It dawned on me that I hadn’t paid my electricity bill and they shut it down. I had never experienced something like that. It was a big deal. That was the biggest challenge I’ve ever had.

The second biggest one – just to compare and contrast – was when DHL was pulling out, because we had sold the company. I’d recapped the company in 2007 and I sold at the top of the market. We did the deal on Aug. 5, 2007. So, we sell at the top of the market and it was sold. Then came the rapid decline of the U.S. economy. Then you have our private equity partner going from $21 down to about $1.50. Next, DHL did their slow, then rapid, withdrawal. Franchise owners were calling me at home. At Christmas 2008, people were calling me at home. One guy called from the coastal Carolinas and said, ‘You know, I have a daughter in college, and I have a mortgage, two cars. I don’t have a plan B. My wife and I are praying every night that you will come up with answer.’ And I said, ‘OK, keep praying. I’m sure we will have one soon.’ That’s what I said; we would have an answer soon. Getting UPS to sign, which they did not have to do because while all that is happening they were coming after our customers. DHL themselves had taken our customer list. They were coming after our customers. FedEx is coming after our customers. No one had to play ball with us. They could have just let us fade into oblivion.

But the business model, that was where it helped again. UPS believed and they knew it was the best way, the lowest-cost way, for them to go after SMB. It brought value. That value prop that existed the first day I went out and set up the first customer was still there. That was when it was just, ‘Wow, thank God for the business model.’ As big as UPS is, they believed we were the way to go after it and they still do.

MO: Can you elaborate on your plans for expansion?

David: Our light parcel business with UPS is growing robustly. It’s consistent. It’s the backbone of our business. Less-than-truckload, we’re still going to see mid-double-digit growth there. That has been a monster for us. We started that, really, four years ago and it’s a quarter of a billion dollars of business already. The next thing would be full truckload — sister to less-than-truckload. Less-than-truckload you have four or five customers with pallets taking a trailer. That’s a good-sized market. That’s $40-50 billion dollars. Full truckload is where one customer takes the whole trailer, like Wal-Mart. But there are lots of small to midsize customers that need a full truckload as well. So they’ve come to us over the years wondering when we are going to offer that option and we do now. We are really in the very initial stages of that. Comparatively, the full-truckload market is five times bigger than light parcel and less-than-truckload. It has massive potential, and a lot of that is SMB again, but our goal would be to really create a very close partnership with a full truckload broker, similar to the way we did with UPS. If we can get to that, I think we can realize our full potential. We’re looking to work with one group for all our full truck needs. If we could do that, I think we could add $100 million a year for the next four or five years. We had an independent company do an analysis of our existing customers, and their takeaway was we have between $200 million to $250 million of embedded full-truckload business sitting right there with our existing customer base.

MO: What advice would you give to our readers for growing their business while still remaining true to their core values?

David: The first thing I would say would be ‘stick to your knitting.’ Really focus on that one thing that you think you can do well, and do it really, really well. It is very easy to get distracted once you have a little success and think that you can sort of bolt on different businesses or things to sell. What we did well was that we were only a light parcel business. That’s all we did until 2008. It was a laser-like focus on the one thing that we thought we could do well. It takes a long time to be pretty good at something, and it takes a really long time to be great at it. So the advice would be stick to the essential and basic business model you have and don’t try to expand it too early. You have to be willing to modify and change that business model as sort of situational dynamics would dictate, but really stick to the knitting and keep that laser-like focus because it’s easy to get distracted when you get some traction.

Secondly, you need to have a Plan B. The promise I can make anyone out there is that you’re going to run into not just an issue but also, potentially, a game-ender. That’s going to happen, and it’s probably going to happen more than once. That’s where the power of sticking to that one thing you do well will really benefit you again. You do need a Plan B, but you can’t let that Plan B ever really become a distraction. You need to have it as the ace in your back pocket if you need it, but hopefully you wont. Hopefully you can stick to what you started and keep going with it.

But again, you have to keep it simple. At GE, they don’t have the person selling light bulbs selling jet engines, and there is a reason for that. They have all these separate sales divisions selling these things, maybe even calling on the same customers. That was always the popular thing, ‘Why don’t we just add something else on, it’ll be easy, we already have the guys in there.’ But I always said, ‘No, we’ll just do what we do.’ No fancy footwork, just take it to the customers and cement that relationship and we’ll know when we’re really good, and when we’re really good we’ll do it. Freight was my ace in the hole; I saved that for a rainy day. I knew what we could do well, but I didn’t want to do it until we really needed to do it, and then we deployed it and it saved our bacon. It gave us something to sell while we were figuring out UPS.

When I started the company, I did not want to start a small company, and I knew it. I knew that if I was leaving Crow, I wanted to start something that would be big. The advice I give and the thing I’ve always said is ‘Find a very big space.” That is what we did. Find a big space dominated by a few competitors and then find a way to make it more efficient. The main competitors usually leave voids behind in big spaces. To UPS and FedEx and DHL, SMB is a nice market, but it isn’t enterprise. It isn’t Fortune 500. But I’ll take it, because it’s a huge business base and it’s getting bigger. I like big spaces, services, and finding a way to make markets more efficient. If you can do that, you’ll have a big business on your hands and one the competition can’t converge on.

 

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