How ShopUp helps Bangladesh SMEs to take on big players with its B2B e-commerce platform

Small potters in his grandfather’s village in Bangladesh faced direct competition from larger companies. These small unorganised businesses struggled due to their lack of access to customers and inability to distribute products as cheaply as bigger firms.

Afeef Zaman wanted to do something to help these small potters reach customers nationwide and improve their earnings.

“ShopUp was founded to assist them in reaching customers nationwide,” Zaman told e27. “We developed products for them and gained valuable experience from our efforts.”

These learnings came in handy during the COVID-19 pandemic, he said. “As the pandemic struck and households struggled to access essential items, we shifted our focus to food and household categories to serve people across Bangladesh. And that was a turning point.”

What is ShopUp?

ShopUp was founded in Dhaka in 2017 by Zaman (CEO), Sujayath Ali (COO & CBO), Ataur Rahim Chowdhury (CPO), and Navaneetha Krishnan (CTO).

Zaman and Chowdhury earlier worked together in the former’s first startup. Ali is a serial entrepreneur who previously worked at Amazon and Visa. Ali and Krishnan were also co-founders of Voonik. Krishnan worked at Freshworks, Aryaka, and Zoho before co-founding ShopUp.

Also Read: These five startups are the dark horses of the frontier markets

In a nutshell, ShopUp is a B2B e-commerce platform connecting small and medium-sized enterprises (SMEs) with mills and manufacturers. Its mission is to supercharge SMEs with easy access to B2B sourcing, best prices, financing, and logistics.

“Our platform provides SMEs with a one-stop-shop solution for sourcing products, reducing the time and effort required to find suppliers, negotiate terms and orchestrate the operations. Additionally, it acts as a nationwide platform for small manufacturers, mills, and brands to sell their products,” Zaman explained the business model.

The startup offers various value-added services, including financing and logistics support. According to Zaman, this makes it easier for small firms to grow their businesses and compete against prominent players.

In addition, ShopUp has built a vast last-mile logistics network in Bangladesh and provides one-click credit access with minimal documents.

The ShopUp CEO boasted that the e-commerce startup’s “robust” technology infrastructure, including advanced algorithms and data analytics, provides SMEs with personalised recommendations and real-time insights. Its user-friendly interface with handwriting and voice recognition technology manages the end-to-end purchasing process — from product discovery to order placement and shipment tracking.

“This combination of a diverse product offering across sourcing, logistics, financing and customer success services powered by cutting-edge technology sets ShopUp apart from other B2B commerce platforms,” he claimed.

The startup has partnered with all major mills and FMCG companies to distribute essential food items like rice, sugar, oil, flour, dairy products, beverages, and hygiene products to 20 million people in Bangladesh through its network of 500,000 shops. The goal is to provide all the food and household products these shops sell to the people in their community. “We’re still early in that journey, but we’re making progress,” he said.

ShopUp’s logistics and fulfilment network, RedX, is now one of the largest in the country. In addition, the e-commerce firm provides an embedded micro-factoring product for small shops and suppliers to purchase products without making upfront payments. It charges separately for each of its offerings.

A trillion-dollar opportunity

Bangladesh’s consumer e-commerce market is rapidly expanding and is projected to become a trillion-dollar economy by 2040, according to a report by BCG in 2022.

Despite this growth, retail consumption remains highly fragmented, with 98 per cent of purchases coming from 4.5 million small shops. These shops purchase an estimated 130 billion worth of goods annually, as per a 2020 Redseer report. This means ShopUp has only started scratching the surface.

“The B2B e-commerce industry is in its early stages in Bangladesh, and only a few players are operating in this field at scale. We are excited to see some early-stage companies in this sector; hopefully, more players will enter this market,” he continued.

While Bangladesh consumers have higher incomes than India, they purchase less than half of the branded FMCG products. This means Bangladesh is still in the early stages of its consumer market journey; there is a potential for multiple new players to enter the market.

The market leaders of most FMCG categories in Bangladesh are yet to launch. These new brands and products will require future-ready distribution platforms to enter the market successfully.

“B2B e-commerce players are well-suited to this purpose. According to a report by Redseer in 2020, the market opportunity in Bangladesh stands at US$130 billion. However, B2B e-commerce players are not set to replace the existing local distribution system but rather to expand the overall consumer market. As such, the pie will get bigger for all involved,” Zaman elaborated.

Doubling down on partnerships

Currently, ShopUp wants to double down on its partnerships with suppliers. Its goal is to help the suppliers reach 50 per cent of the population through small shops by the year-end.

However, there are several hurdles to clear before achieving this goal. “We are working hard to create a distribution platform that is not only accessible to 80 million people but is also the most cost-efficient in the country. This is a difficult task, especially when it comes to food and household items. However, we have been successful in making most of these products available on a large scale profitably,” he said.

ShopUp is a heavily-funded company having secured over US$200 million in investments from global investors since its launch. Its backers include Peter Thiel’s Valar Ventures, Prosus (the investment arm of Naspers), Pierre Omidyar’s family office, Sequoia Capital India, VEON Ventures, and Flourish Ventures.

The five-year-old company recently raised US$30 million in debt financing from UK-based fintech lender Lendable (US$20 million) and The City Bank (US$10 million), a major commercial bank in Bangladesh. This new capital will be used to expand its embedded financial services business. A portion of it will go towards making long-term investments in the supply chain capacity of the profitable categories of the business.

Also Read: Accelerating Asia, South Asia Tech invest in Bangladesh startup Shuttle

But why debt funding when it already has a huge war chest?

“Let me clarify that debt investment is not a substitute for equity capital,” Zaman said. Startups raise equity funding to create platforms. When they are close to profitability, and the revenue is reliable, it is better to use debt to finance any additional working capital requirements.”We are well-capitalised and therefore do not need to raise equity capital at this time. Nevertheless, raised debt to finance profitable parts of the business.”

Anticipating slower growth

Zaman also mentioned that while Bangladesh is not expected to go into recession due to global macroeconomic headwinds, it will experience slower growth than anticipated.

Investors have become more cautious when deploying their capital due to increasing interest rates. As a result, well-capitalised late-stage investible startups have suspended their fund-raising plans, leaving investors in a wait-and-see mode.

This means VCs are sitting on billions of dollars and will have to deploy these funds in the mid-term. “In the near term, capital will likely remain scarce, particularly for Series A or Series B startups in Bangladesh. The bar for future investments is also likely to be higher than in 2021 and 2022,” Zaman observed.

However, this presents a great opportunity for local startups to collaborate and explore new possibilities, and ShopUp is very excited about these opportunities.

“In the long run, Bangladesh remains an attractive emerging market due to its strong base demand and political stability, making it ideal for well-capitalised companies to build enduring businesses,” Zaman signed off.

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