Indonesia’s fashion e-commerce startup Sorabel is shutting down its operations by the end of July after struggling to stay afloat amid the COVID-19 pandemic, an investor in the startup confirmed to DealStreetAsia.
The development was first reported by Daily Social, which cited an internal employee memo.
In a letter to Sorabel employees, the company said it had done its best to save the business but was left with no choice but to close down. “Due to this liquidation process, we have to terminate employment contracts with no exception, effective July 30. I am certain that no one would ever expect this to happen,” the letter, quoted by Daily Social, said.
The COVID-19 crisis proved to be the undoing of fashion e-commerce startups as it brought impulse spending to a near halt. “Fashion e-commerce is impacted in general as people don’t need to buy so much these days. Groceries and home appliances are catching more attention online,” an executive at a Southeast Asian venture capital firm said.
DealStreetAsia has reached out to Sorabel for comment.
A source close to the company said Sorabel had lined up financing to sustain operations when the coronavirus crisis hit, causing investors in its upcoming round to withdraw term sheets. Unable to steer operations, CEO Jeff Yuwono offered to step down from the firm and tendered his resignation in June, we understand. The company’s CFO and board have been managing operations since then.
“There are acquisition offers on the table to buy the Sorabel brand, but other parts of the business are likely to be liquidated,” the executive said.
Formerly called Sale Stock in 2014, the firm rebranded to Sorabel, a fashion e-commerce store that sells its private label clothing, in 2019. Its latest financing was a pre-Series C funding from investors including Ncore Ventures.
Sorabel secured its Series B+ funding in mid-2017 when it raised $27 million co-led by Singapore-based Golden Equator Capital and Gobi Partners. The round was joined by SMDV, Alpha JWC, Convergence Ventures, Korea Investment Partners, Openspace Ventures, and MNC Media.
Sorabel CEO Yuwono had earlier said that the firm had positive cash flow, owing to its strategy of producing private labels, which allows it to significantly cut down costs and record a much higher margin per sale.
The firm had previously planned to venture into offline businesses by bringing in third-party brands into its store and a possible expansion into new markets. The firm aimed to expand into the Philippines and the Middle Eastern market, but the COVID-19 outbreak derailed its retail expansion plans in the region.
The startup also faced severe competition from bigger rivals such as Alibaba-backed Lazada, Tokopedia and Shopee. For its fashion products, it operated in the same space as female fashion stores like Berrybenka and Zalora.