Norwegian Xeneta disrupts the global sea freight market
The Norwegian company Xeneta is disrupting the global sea freight market by making the prices transparent. Before Xeneta it was next to impossible for a customer to see through prices. Now Xeneta has put a stop to the suppliers’ opportunity to delude unenlightened customers.
From a world with no transparency
Imagine you would still have to go to a physical travel agency down the street to obtain price information regarding your next trip. This would leave you with very little chance to compare prices and thus find the best one. Thanks to the Internet this is no longer necessary.
It seems like ages ago when we had to cope with a market so non-transparent. Nonetheless, until Xeneta, this was what companies wishing to have their freight carried oversea had to put up with.
“The supply chain employees in large corporations would have to call, fax and email people to negotiate prices. It could take several months just to get offers and decide what to do next. There were no automatic systems for pricing, booking etc,” Vilhelm Vardøy, SCO and co-founder of Xeneta explains and continues
“We use to say that the biggest innovation since the container itself in the 1950’s is going from fax to email. And that is although the same amount of people still had to do all the work manually, it is just email instead of fax.”
For Vilhelm Vardøy and his co-founders it was clear, that the biggest problem in the industry was the lack of price transparency for the customer. They never knew whether the price they were presented was in accordance with the current market fluctuations, or whether the supplier tried to “trick” them.
“The market is going up and down all the time depending on oil prices, supply and demand and other factors that are really hard to figure out what are. In just a couple of weeks the price can go up a 100%. So when your supplier tells you that he has to raise the price for everybody, you don’t know whether this is actually true,” he says
At first Xeneta pitched the idea of gathering prices to the freight companies. They were willing to reveal their prices but in Xeneta they weren’t really sure whether they could trust these prices.
“So we went to all the buyers instead, all the big industrial buyers like IKEA, and asked them to send us their contracts from their suppliers. In this way we were sure that the prices were fact,” Vilhelm Vardøy tells
With enough of these Xeneta could start calculating market average prices. In return for providing the information the customers benefitted from being able to ensure fair prices.
“We are emphasising on providing pure facts. And the only way to obtain this is from the real contracts,” Vilhelm Vardøy says
A change in the power balance
Xeneta started gathering price information from all over Europe but are now basically covering the whole world. As an effect of the transparency it wasn’t long before the customers started questioning the prices they received from their suppliers if they weren’t in accordance with the market averages revealed by Xeneta.
“The customers confront the suppliers if the prices are not consistent with the market prices we provide. Even the suppliers don’t know how the market is, because neither they have the full information. So eventually the suppliers also came to us asking for data, as they of course also needed to know it when negotiating,” Vilhelm Vardøy explains
“If you do this, someone will kill you”
It is not hard to imagine some kind of reluctance from the suppliers towards the shift in the power balance. When Xeneta was still a small startup one of the partners presented the idea to a person who was high in rank within the Israeli carrier industry.
“The guy basically said to him, that if we launched this, someone is going to kill you.”
Luckily Xeneta has not experiencing any active acts of hostility from the supplier side, although they have heard of smaller acts of reluctance, Vilhelm Vardøy tells:
“They are not actively trying to stop us. But we have heard of examples where they try to convince the customers not to trust us.”
However, they are not that daunted by them being unbidden:
“What happens is that eventually we have so many customers on the buying side, that the selling side has to adopt to us.”
Besides, the legitimacy of the service has been paramount for Xeneta right from the start.
“We spent a huge amount of time checking whether this is actually legal, and as long as we don’t disclose the price of one single company, it is. Privacy is very important for us due to this,” Vilhelm Vardøy explains
Impossible mission if not for the perfect team
Xeneta would have been an impossible mission if it was not for the perfect team. Vilhelm Vardøy has started up companies and worked with startups for almost 10 years and thus have crucial experience regarding the business part. His two partners both have domain experience from previous jobs.
“It has been crucial that we had actual domain experience. The market is very complex and hard to understand. It would not have been possible without the experience,” Vilhelm Vardøy says
Xeneta operates with a freemium model where you get the basic product for free if you submit data. The choice to give the data away for free has been an important part of the strategy right from the beginning.
“We asked ourselves the question: do we want to get really big or make a normal size business. We decided to give it away and grow big,” Vilhelm Vardøy ends
