What is the Future of Internet Shopping?
Rafa Brzoska was being surrounded by walls in the summer of 2016. InPost, a college dorm-room firm that shoved grocery coupons through letterboxes, had been transformed into a $120 million-a-year commercial mail operation by the then-38-year-old Polish entrepreneur. However, competing against the government's postal service was putting a strain on the company. He was in debt to the tune of $65 million and was scrambling to find new investors while avoiding the repo man.
“I want to return all the bonds, all the banks, all the individuals who have loaned us money,” Brzoska, now 43, recalls. “When the investors asked why, I said, ‘I want to live in this nation, and you only have one name, one face.'
Those investors were more interested in Brzoska's automated e-commerce lockers offshoot, which he established in 2010, than in his ailing postal operation. These refrigerator-sized public lockers, which cost roughly $20,000 to install, receive shipments from Amazon and other online shops for collection. They're popular in Europe because mailmen rarely leave a package left on a stoop. This successfully prevents package thievery (54 percent of Americans have had a package stolen), but if you miss the doorbell, you're in for a long trip to the post office.
Brzoska big decision
Brzoska, who was on the verge of bankruptcy, decided to shut down the postal firm in summer 2016 before meeting with his savior, Advent International. InPost was taken private by a Boston-based private equity firm in April of the following year. The $110 million transaction wiped off the company's debts and provided Brzoska an extra $125 million to expand his parcel locker network to 4,400 locations in a year.
It was both a shrewd and a sweetheart bargain. Poles were late to adopt online buying, but by 2017, e-commerce sales had grown at a consistent rate of 20.4 percent each year. Then followed the pandemic, which resulted in a 36 percent increase in Internet buying in only 12 months. InPost's sales increased by 104 percent to $677 million in 2020. The lockers in Brzoska handle 36% of all items transported in Poland.
“There were a lot of reasons to say no to this one, and a lot of people did say no,” says Paul Atefi, a managing director at KKR, which provided InPost with a $145 million loan to build more lockers in 2018. Brzoska today has 11,734 lockers in Poland, over 1,100 lockers in the UK, and a few hundred in Italy. “However, when we looked at it on a machine-by-machine basis, it became quite persuasive. The payback period was often as short as 1.5 years per machine... We adore this business.”
The profit margins are also impressive. Brzoska's expenditures are restricted to locker setup, labor, and locker space leasing, and he charges roughly $2 per package. In 2020, InPost made a $97 million profit. He claims that revenue from his automated parcel machines has doubled year over year.
“They're aiming for Ebitda margins of more over 50% in Poland,” says David Kerstens, an analyst at Jefferies International. “This is in comparison to Ebitda for postal companies like Royal Mail, which is in the low single digits.”
The 'Slipper Rule'
According to Marek Róycki, a consultant who advised Advent on the InPost transaction, putting lockers within "slipper distance" of consumers' homes and offices revolutionized the business. “It's not pleasant to have to go a mile to your nearest locker in the pouring rain. In Poland, though, the closest locker is 350 meters away. It's similar to home delivery, but more convenient.”
The "slipper rule" was learnt the hard way by InPost. Brzoska's uncontrolled growth across four continents was halted by Advent, leaving the corporation thinly spread and overextended. “This was a classic scenario,” Róycki adds, “where you had a charming, extremely enterprising guy operating a fast-growing business.” “However, he took on far too many tasks with little resources.”
InPost relisted on Amsterdam's stock exchange in January, valuing the company at $9.7 billion; Brzoska's holding is presently worth $1.1 billion. He has convinced investors that his lockers are a more cost-effective and environmentally friendly alternative to the legions of delivery vehicles that traverse Europe's cities. According to Brzoska, one storage unit can perform the task of 24 vehicles, which is why lockers are the way of the future.
While Brzoska was perfecting the locker business, his primary competitors—European postal agencies, as well as UPS and Amazon, who have dabbled with lockers—took a different approach, expanding home delivery and signing up hundreds of corner businesses to handle package pickups and returns. Compared to lockers, it was a quick and inexpensive way to grow, but the pandemic-driven e-commerce boom has left bodegas from Berlin to Bilbao with congested aisles and lengthy waits for returns. “Convenience stores aren't the best places to pick up packages, especially during a pandemic,” Kerstens explains.
With a $675 million agreement announced in March to purchase delivery company Mondial Relay and place his lockers at the busiest retailers in its France-wide network, Brzoska's objective is to shorten those lines—and vault ahead in Europe.
The impact of Brzoska's work has not gone unnoticed. Alibaba and Allegro, Poland's e-commerce behemoth that accounts for a fifth of InPost's revenues, now have lockers in Poland, and Europe's postal behemoths, such as Germany's Deutsche Post, are banking on parcel machines as well.
This time, Brzoska isn't the underdog, and he won't back down from a battle. He attributes his survival of previous bouts with postal heavyweights to his star sign and fortunate bead bracelets, which look out of place against his impeccable outfits. "I informed my teammates, 'I'm a Scorpio.'" I'll survive, and you'll survive with me, since Scorpios are notorious for battling to the death.'
A version of this article was originally published to Forbes.com