Once a leading ecommerce player in Dhaka, Picakboo has been going through a tough time from the beginning of 2019. Early this year, the company went through several major layoffs and management challenges such as product theft, Pickaboo’s once operator and CEO Shahrear Sattar left and the company significantly scaled back its operation.
The most recently Tech Shohor reports that the company is considering a shutdown or a further scaling back of its operation from December this year unless it could raise investment in the next two months. Pickaboo has been trying to raise money from both local and international investors with limited success. The company has already been operating on a limited scale for the last several months.
Started in 2016, Pickaboo quickly became one of the leading eCommerce players in Dhaka. Excellent customer service, authentic products, and effective marketing helped the company quickly rise in the rank of ecommerce competition in Dhaka.
Funded by Edison Group, a local conglomerate that owns mobile handset brand Symphony, and Indian MoMagic, Picakboo invested heavily in growth in the first few years of its journey until more competition came into the market like Daraz who started to outspend and change the dynamics of the market in the process. Growing competition, expensive operation, and a series of management and strategic errors took a toll on Pickaboo. In the meantime, Pickaboo tried and failed to raise external investment that handicapped its growth initiatives.
eCommerce broadly remains an urban service in Bangladesh. Although a significant percentage of ecommerce orders come from outside Dhaka, particularly for products like electronic gadgets, mobile, etc, and fashion items, the market for ecommerce remains limited due to myriad reasons including a lack of price competitiveness.
While ecommerce offers convenience and many ecommerce companies tout it as a value proposition, in retail convenience is seldom a value proposition. It is the price benefits that attract customers. The most successful retail companies across the world including Walmart and Amazon are a testament to this reality. This phenomenon is equally evident in Dhaka.
Most ecommerce shoppers are generally bounty hunters who mostly shop when there is an offer or discounts but seldom return for regular shopping.
The challenge for ecommerce companies is to find a sustainable way to offer price competitiveness to customers so that they shop regularly on ecommerce.
The majority of ecommerce companies including Alibaba owned Daraz has failed to offer consistent quality service and price advantage outside of discounts and offers to customers. As a result, the market for overall ecommerce has not grown much in Dhaka. I wrote in “They Don’t Come Back: Dhaka’s E-commerce Has A Retention Problem”:
“During a special occasion or campaign the number of orders goes up by at least 100%,” says Founder of a Dhaka-based Ecommerce company in an interview with FS. Ecommerce players like Daraz, Ajkerdeal and many others experience an occasional spike in orders with exclusive offers and discounts. For many ecommerce players, the number of orders doubles when there is a meaningful discount. But the growth seldom survives past discounts or crazy offers. Growing orders is a priority for any company. For ecommerce companies in Dhaka, it is more so. “We have seen the growing awareness about ecommerce over the past few years. But it has not materialized in terms of numbers,” one founder tells FS. Ecommerce companies combinedly serve about 45,000 orders per day in Dhaka, according to several industry sources. The problem is that the number of orders has not changed much in the past year. It has seen incremental growth but the dramatic growth that shape internet business is missing from the graph.”
For local ecommerce companies, this has been a challenging ride for several reasons. Since the market for ecommerce has not grown much, it has affected the GMV of most companies. The numbers of orders most ecommerce companies serve, even the leading ones, are disappointing at best.
One of the reasons many ecommerce companies are struggling to raise late-stage funding is that many of these companies don’t have a number that is required for late-stage funding. To add to that, the state of late-stage funding is quite depressing in Bangladesh.
The state of late-stage funding in Bangladesh and Pickaboo Lessons
The number of companies that raised Series A and B in Dhaka is a handful. The best tech companies have struggled to raise growth funds except a few.
There are several reasons for it. The state of late-stage funding is grim. The VC ecosystem is not yet there. In fact, there is no local VC ecosystem in Dhaka as yet.
Although many international investors have taken notice of and shown interest in the Bangladesh market, it has not materialized in terms of real investment. Perception regarding Bangladesh among international VCs need more work before this scenario improves.
While Bangladesh shows excellent economic prospects and is being touted as a big market, tech startups have so far remained urban services in nature which is one of the reasons they struggle to generate numbers that would impress potential investors and are representatives of the big market narrative. Along with that, there has been a shift in global funding conversation around profitability and all that.
These market realities along with the mood in startup investment have added to the already precarious situation that Pickaboo was going through. The company waited too long to start its fundraising drive. In fact, it started its funding raising drive past its best days when competition slowly started to eat into its market share.
Pickaboo started off strong, played an important role in the development of commerce in Dhaka, but it kind of failed to realize the reality of internet business when the company needed that intuition the most. The Tech Shohor report says that the company is in talks with investors and if all goes well the company might as well return to its old self and push growth in full force. Otherwise, the company says it will stay in operation on a relatively small scale.
There are lessons to be learned from Picakboo but I don’t think the lesson is in the fact that the company is struggling to keep itself afloat and that ecommerce is bad business rather it is in the fact that you need to try to raise money when you are strong instead of waiting for an imagined right time when your money in the bank slowly dries up. Second, it is far better to be in a position where you are not in need of others' money to merely survive. Make sure you are tracking the right metrics. Make sure that when you need money you don’t need it to merely to survive but to grow your business.
Having said that, I think an even more important lesson would be to take it as a warning sign for all healthy companies and discerning entrepreneurs that tough time comes for best of the companies and there is nothing much to learn from it other than the fact that you internalize it and prepare yourself anytime it may come!