With soaring prices at the pump driving Canadians around the bend, Alok Ahuja says his business is gearing up for a boom.
Ahuja, the co-founder and CEO of Ottawa-based last-mile delivery service Trexity, says the company’s drivers have been going flat-out over the past few months as cash-strapped consumers cut back on trips to the store and fed-up retailers seek cheaper ways to ferry goods to customers.
“We’re riding an incredible wave right now,” he says, explaining that revenues at the firm have been growing at more than 25 per cent year-over-year in 2022.
Gas prices in Ottawa topped $2 a litre this week, a record high. It was a similar story in Toronto, Calgary and Winnipeg, the other cities where Trexity’s drivers ship everything from beer to bagels.
Stoked partly by Russia’s invasion of Ukraine as well as surging demand for petroleum as economies around the world reopen, rising energy costs are helping drive inflation to heights not seen in decades.
That’s bad news for consumers, who have less money to spend on other goods and are shelling out more for groceries and other household staples that cost more to make their way to supermarket shelves. Businesses around the globe are also feeling the pinch as rising energy prices drive up the cost of manufacturing and shipping.
Yet while soaring pump prices have become a thorn in the side for most of the economy, Trexity says rising energy costs are driving increased demand for its services.
“It’s people not wanting to drive their cars – and then merchants having to get really smart about, ‘If they’re not going to come to us, how do we get to them?’” Ahuja explains. “We’re seeing … merchants just turning off their vehicles … and just handing that business over to us because it’s way more cost-effective.”
Ahuja, who founded Trexity in 2018 with businesses partners Mathieu Bouchard, Mourad Gazale and Darren Schnare, says his service is more valuable today than it was when COVID-related health restrictions forced brick-and-mortar retailers to turn to companies like his to get their wares into customers’ hands.
“Delivery has become even more important than (earlier in) the pandemic, believe it or not,” he says. “We’re finding a lot of our merchants are getting very smart around subscriptions, deliveries and getting to their customers’ doorsteps in a way that they couldn’t do it before.”
Trexity now has more than 750 merchants on its platform, including well-known Ottawa retailers such as Dominion City Brewing, Happy Goat Coffee and Kettleman’s Bagel Co. The firm is poised to expand to Edmonton, Halifax and Vancouver over the next few months, with plans to set up shop in the United States before the end of the year.
The 26-person company doesn’t charge merchants monthly fees or take a commission. Delivery fees, which are included in the purchase price of delivered items, are calculated based on time and distance.
Trexity then bills retailers for the amount of the fee. Drivers receive 70 per cent of the total delivery charge, which typically averages about $12, with the company keeping the rest.
Ahuja says the firm has a total of about 15,000 drivers in its database across its four markets, with between 250 and 300 working in each city on any given day. He says they typically earn anywhere from $150 to $250 for a full shift.
Like those at ride-hailing services like Uber and Lyft, Trexity’s drivers are independent contractors who pay for their own gas. While recent media reports have suggested a growing number of Uber and Lyft drivers are thinking of quitting as fuelling up becomes pricier, Ahuja says that hasn’t been a problem at Trexity.
A couple of months ago, the company added a fuel surcharge that kicks in when the price of gas goes above $1.30 a litre. Calculated as a percentage of the total delivery fee, the surcharge varies according to fuel prices in each market and is paid directly to drivers.
Before imposing the surcharge, Trexity sent a memo to every merchant on the platform explaining why it was being implemented. Ahuja says the response was overwhelmingly positive.
“Not one of our merchants complained,” he says. “If anything, it was the reverse. Every one of them was like, ‘Good on you. We love it.’”