When a little-known ShopUp – a full-stack business-to-business (B2B) commerce platform – raised a staggering $22.5 million in funding in October of last year, the highest ever for a Bangladeshi start-up, many people were surprised.
ShopUp - for those who knew about them - was an online platform that has been supporting SMEs in reaching customers since 2018.
As soon as the pandemic began, the start-up quickly shifted gears and became the go-to platform for struggling small businesses, providing them with support in not just delivering goods, but in every other form possible.
This ability to shift quickly attracted international investors. The money was raised in a round co-led by Sequoia Capital India and Flourish Ventures. For both the venture firms, this was the first time they were backing a Bangladeshi startup. Veon Ventures, Speedinvest and Lonsdale Capital also participated in the Series A financing round.
So how have things changed for ShopUp since the massive injection of capital?
"We were already in the process of expanding when we received the funding," says Afeef Zaman, co-founder & CEO of ShopUp. "Instead of introducing anything new, the funding helped us build our technology and expand our services to retailers."
In December of 2019, ShopUp introduced Mokam, which helps neighbourhood stores stock up on inventory. Their logistics service, RedX, was introduced in March 2020 while Baki, which provides access to credit, was introduced a month later.
Since the injection of funding, ShopUp essentially invested in infrastructure and team building to strengthen the new services.
Golap Parvin is one of those people who benefitted from ShopUp's expansion. Her grocery store in Uttara was doing well before the pandemic. Slowly, her business started to incur losses as the lockdown last year kept prolonging. Many of her customers left the city without paying their dues, which forced her to live on her savings completely.
"I could sense that I was falling into a dark pit," said Golap.
ShopUp came to the rescue. Golap found out about Mokam. It simplifies the sourcing process by making 10,000+ products available in a simple smartphone app.
By sourcing products directly from producers, Mokam cuts down on extra layers, using a common delivery channel for all products. This significantly brings down costs and transfers more of the value to traders instead.
"My store was almost empty because I did not have enough money to order new products. Then I used Mokam, got products at a cheaper price and also without any transport cost. It has saved money and time and now my business is running in full swing," said Golap.
Last year, when ShopUp went for massive expansion even before the funding arrived, the company struggled to maintain a high quality in its service, largely because of the sudden rise in the volume of their activity, especially with regards to RedX. Despite the new injection, some of the issues appear to be persisting.
On the eve of Eid al-Fitr, Mizanur Rahman, CEO of Home Basket, sent a legal notice to ShopUp for missing its deadline, undermining his business, and demanded Tk5 lakh in compensation.
Although ShopUp stated the issue had been resolved in May, Mizanur, when approached by The Business Standard, claimed "Instead of apologizing, RedX sent me a legal notice saying I had tried to extort them."
Afeef admits they are still not providing the best support.
"As a 'Merchant First' company, we're always trying to prioritise merchant experience. We have a dedicated team to look into issues and offer solutions. I believe that our merchants also understand that we are trying our best."
He went on saying, "compared to last year, now the type of complaints has changed. Actually, it is good that customers are complaining and setting a new bar of expectation for us. Maintaining Service Level Agreement perfectly is always challenging in a pandemic scenario, but as a young company we learn, grow, and get better every day," he added.
While RedX is still learning to cope with a massive rise in demand, Baki, the most attractive and innovative of ShopUp's services, is yet to take off.
Explaining how Baki works, Afeef said, "Baki is a digital embedded credit offering. It enables traders to bypass the complexities of traditional financing and opt for a simple buy now, pay later (BNPL) model."
Baki however hit a snag right after its launch. Not every step of the system was fully automated when it was introduced, which meant that dues and payments were not being recorded on time on the platform.
"This created a lot of confusion and the company shut down the service," claimed a sales representative of ShopUp from Mohammadia Housing Area.
Afeef, however, claimed the service was operational on a limited scale and only a few selected shops get access to it, based on their transaction history.
REDX, the logistics wing of ShopUp, is an end-to-end logistics platform offering the largest coverage in Bangladesh, claimed Afeef. The complementary nature of Mokam and REDX services enable ShopUp to scale both businesses in tandem, creating a flywheel model encompassing a massive retailer base across the country, he says.
ShopUp invested heavily in infrastructure and team building of RedX since the injection of funding. Its goal was to build the largest logistics infrastructure in the country.
"To do that, we required huge investment in central hubs, regional hubs, last-mile hubs and other office spaces spread out across all 64 districts of the country," said Raquib Chowdhury, director of Brands and Communications, ShopUp.
"Along with investment in physical spaces we also had to invest in vehicle fleets and technology that would enable us to transport goods both for our logistics business, our retail sourcing platform and customers to track their products," he added.
To operate its newly added wings, the company needed a huge team of approximately 4,000 people for field level activities, along with other critical resources. ShopUp has a leadership team who have worked in Amazon, Flipkart, Unilever and Grameenphone.
"This team is working on bringing more transparency and trackability to the merchants and customers. ShopUp is trying to build the best team to serve its sellers," Raquib said. Currently, it is serving over 500,000 sellers and has 200 distribution hubs.
ShopUp is showing tremendous growth momentum – having a 15x growth over the past year alone, said Raquib.
"The reason we have grown so fast is tied to our core philosophy of empowering small businesses. During the first lockdown last year, we not only stayed operational but took the risk of expanding our operations in order to protect merchants and retailers from suffering losses," said Afeef.
Even after this growth, it is not planning to directly reach customers. Instead, their plan is to remain a B2B commerce platform like. Raquib also informed that ShopUp has already achieved the business scale of a mid-sized FMCG (Fast Moving Consumer Goods).