In a heartbreaking turn of events, Paperfly, a third-party logistics e-commerce firm, ceased its operations just last week, painting a sombre picture of what could have been the torchbearer of last-mile delivery excellence across the nation.
This abrupt halt has left a staggering 1,000 individuals at a risk of being jobless.
The company has pointed fingers at the non-disbursement of promised funding from its foreign investor, coupled with funds ensnared within the clutches of the non-bank financial institute, CVC Finance.
However, there's more to this tragic tale. The Business Standard has sifted through the rubble of Paperfly's downfall and found a web of unfortunate circumstances that contributed to its demise.
The ultimate decision on the survival of the firm would "depend on the outcome of the next discussion with the board," the company told The Business Standard.
"It would be heartbreaking for the industry if Paperfly cannot resume its operations due to a fund crisis," said M Shahab Uddin, vice president of Bangladesh E-commerce Association (e-CAB).
"Last mile delivery has been the crying need for the country's e-commerce ecosystem and firms like Paperfly brought a real push there," he said, adding that the company was growing in a "compliant way."
Rise and fall
Paperfly, founded in 2016 by four local individuals, expanded its door-to-door pickup and delivery services nationwide in 2021 upon receiving a Tk100 crore equity investment from India-based 3PL giant Ecom Express.
On its journey to lead the transformation of courier services to smart logistics, it was promised to receive further Tk102 core from Ecom in April 2022, which ultimately was not realised following the drastic change in the global investment climate.
Counting on the upcoming investment funds, Paperfly expanded its reach through over 200 hubs across Bangladesh, employing over 2,000 people, and faced significant competition from venture capital-backed smart logistics firm Redx, in its preferred market segment of serving large e-commerce platforms like Daraz.
Besides, investors who were pushing startups to grow at any cost over the cheap money era during the pandemic, became too conservative in betting on the scaling-up potential tech-based firms as soon as the Ukraine war pushed inflation and interest rates too high.
It forced Paperfly to close its SKS Tower office in Mohakhali to merge it with the nearby warehouse earlier this year and still the team of a thousand people was costing the firm around Tk70 lakh a month.
Insiders said Ecom Express, which owns over 80% of Paperfly, was looking to sell its stake at Tk10 crore.
TBS' request for comment on the development remained unresponded by Ecom Express Cofounder TA Krishnan and also the Head of Operations and Chief Process Officer Prashant Gazipur.
CVC Finance Managing Director and CEO Md Mamunur Rashid Molla told TBS that Paperfly had Tk11 crore in deposit with his NBFI and there had been a central-bank mediated monthly repayment schedule resulting in a repayment of over two-thirds of the sum already.
CVC Finance is regular in the monthly repayments nowadays, he added.
However, Paperfly was yet to recover the unpaid logistics bills of over Tk7 crore from the collapsed ecommerce platform Evaly, according to insiders.
Overestimate and overreliance
Bangladesh e-commerce market that saw a massive boom during the pandemic – partly because of the nationwide proliferation of Ponzi e-commerce platforms like Evaly, Dhamaka, E-orange, and Alesha Mart – did not continue its growth in 2022, said technology entrepreneur AKM Fahim Mashroor who founded e-commerce platform AjkerDeal, logistics firm Delivery Tiger and market-leading job portal Bdjobs.
At the same time, the logistics industry, which was counting on an expected e-commerce boom, expanded their delivery capacity to at least five times the actual demand, he said, adding that the overcapacity invited an unhealthy price war in the industry.
"Foreign-funded logistics firms opted to play the volume game by grabbing the market through excessively cutting the service charges, marginalising their competitors who could not afford predatory pricing," added Mashroor.
For instance, conservative logistics firms like Pathao and Steadfast were charging Tk120-Tk140 for a delivery outside the capital and their aggressive competitors Paperfly and Redx dragged it down to Tk75-Tk85 to acquire clients like Daraz.
Paperfly's overreliance on Daraz, which has a huge bargaining power due to its own logistics fleet of over a thousand vans and 80,000-1,20,000 orders a day, backfired when the e-commerce market leader itself was facing a slowdown earlier this year amid high inflation and import restrictions.
Furthermore, after the fuel price hike last year, the cost of delivery shot up but the firm failed to raise charges proportionately and kept burning cash, said Mashroor.
"It was also a product-market fit problem" that cost the overambitious firm a lot amid a risk of ending up without creating a sustainable impact in the potential market, said Ahsanul Hoque Md Shameem, former head of Paperfly's Courier and Cargo division.
Door-to-door pickup and delivery across the country were not financially viable in rural areas in many cases as volume was not enough, he added.
Also, a rush by the smart logistics industry to capture the ground from traditional courier services having a long experience in handling particular goods resulted in field-level mismanagement forcing firms to compensate clients ultimately, Ahsanul Hoque said.
However, the push by aggressive firms and their investors together might have proved fruit-bearing unless the investors geared back after the Ukraine war, said e-Cab's Sahab Uddin.
Nevertheless, the association leader was optimistic about the long-term potential of Bangladesh's e-commerce market which is seeing 2.5 lakh-4 lakh orders a day.
It was tiny in comparison to India, which managed an astounding one crore shipments or deliveries per day as of the fourth quarter of 2022.