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Bangladesh’s ShopUp eyes expansion after revenue growth, improving profitability in FY23

Afeef Zaman, Founder & CEO, ShopUp

Buoyed by a positive financial performance in financial year 2023, Bangladesh’s biggest full-stack B2B commerce platform ShopUp is doubling down on its plans to help small businesses expand their reach in the country. The startup also has plans to expand its business to other countries in Asia such as the Gulf region.

ShopUp’s revenues rose to $129 million in FY23 compared with $83 million in FY22. The company also turned adjusted EBITDA positive in the month of December 2023.

This, along with the backing of prominent investors such as Valar Ventures, Tiger Global, and Prosus Ventures, places ShopUp in a strong position to help brands navigate Bangladesh’s fragmented market and connect with end consumers.

Mudir Dokans, as the country’s 4.5 million neighborhood mom-and-pop shops are locally called, dominate Bangladesh’s retail space accounting for 98% of the country’s retail consumption.

 This fragmented nature of the retail market poses significant challenges for brands striving to reach end consumers efficiently. Traditional e-commerce models, which are heavily reliant on internet penetration, fall short due to the high costs associated with customer acquisition.

Afeef Zaman, ShopUp’s Founder and CEO, advocates a new commerce model to address these market challenges, which he refers to as Commerce 3.0. This model integrates embedded financing, payment processing, and logistics to streamline distribution and effectively target end consumers.

ShopUp has formed direct partnerships with the country’s leading brands, mills, and manufacturers to ensure the smooth distribution of food and essentials through 427 micro-fulfillment hubs established throughout the country.

Currently, these brands, mills, and manufacturers reach 31 million people in Bangladesh through ShopUp’s network of small shops, a figure that is nearly double the country’s total e-commerce user base.

Afeef envisions ShopUp’s commerce model being applicable to other emerging markets, especially within the Gulf region.

The next billion consumers will emerge from regions such as MENA, GCC, South Asia, and Southeast Asia, which are expanding 5-6 times faster than the developed world. By conservative estimates, these countries are set to form a $4.7 trillion economy. “SMEs are the actual cornerstone of the economic prosperity of these regions. We want to put them in the driving seat of the growth of these regions as well,” says Afeef.

We sat down with ShopUp’s CFO Vashistha Maheshwari to delve into the numbers.

What is ShopUp’s future growth trajectory, especially in the light of your FY23 earnings. Could you share insights into your growth and other driving factors?

 ShopUp operates as a comprehensive e-distribution platform for consumer and retailer goods in one of the world’s fastest-growing economies Our services in Bangladesh cover goods supply, logistics, and embedded financing, focusing primarily on essentials like sugar, rice, oil, and FMCG products.

Last fiscal year, we saw a significant 1.6x growth in our topline, fueled by the robust consumption patterns in Bangladesh, particularly within our operational categories. Our network and infrastructure have been instrumental in facilitating seamless operations for our retail partners, enabling us to support over 31 million people with food and daily necessities.

Could you shed light on your plans towards profitability?

In Bangladesh, generating demand is less of a challenge due to the substantial population and high per capita consumption in our market segments. Therefore, our focus has been on achieving sustainable growth with positive unit economics. This fiscal year, we’ve seen gross margin positivity and a reduction in ESOP-expense adjusted losses by approximately 15%.

From July 2022 to December 2023, our monthly profitability at the EBITDA level has steadily improved, achieving EBITDA positivity in December 2023.

This success stems from our unique go-to-market strategy, leveraging a nationwide network of hubs where ShopUp enables demand generation, supply chain technology, and embedded financing, while the hubs manage last-mile delivery and warehousing. This hub model has significantly improved our unit economics, which drove us towards EBITDA breakeven in December 2023.

With the company on a clear path to profitability, what should investors and partners expect in the coming years?

 Our aim is to sustain our profitability trajectory and enhance monetization through our expansive distribution network, including services like embedded financing, payments infrastructure, and logistics. We plan to extend our market reach, augment our platform’s capabilities, and optimize our efficiency. These efforts are expected to not only cement our profitability but also reinforce our leadership in transforming commerce for SMEs in emerging markets, creating lasting value for all stakeholders.

How does ShopUp’s model influence global commerce, particularly in emerging markets?

At the core of our model is technology-led embedded financing, which positions us to scale across emerging markets effectively. This model addresses liquidity gaps in the supply chain for both suppliers and demand generators, tapping into the potential of 1 billion new consumers. This represents a significant opportunity for growth and impact in emerging economies.

Could you provide a glimpse into ShopUp’s future plans?

Looking ahead, our strategy involves expanding into markets with similarities to Bangladesh while continuing to drive strong growth and profitability at home. Within Bangladesh, we plan to increase our distribution hub network to 500 by December 2024, and further to 700 by December 2025. This expansion will allow us to deepen our market penetration across various product categories and along the value chain. Our aim is to evolve ShopUp into a premier tech-enabled distribution platform, serving the next billion consumers in emerging markets by facilitating streamlined commerce and financial inclusion.