All posts in “eCommerce”

Luckin leaves bitter aftertaste, now trading below IPO price

In the first few days following Luckin Coffee’s initial public offering, the stock chart for LK looked like a roller coaster. Now it’s looking more like a freefall.

The Chinese Coffee chain successfully completed its highly anticipated offering roughly a week ago, raising over $550 million after pricing at $17 per share, the high end of its $15-$17 per share range.

Luckin was met with a warm reception from the markets, with the stock skyrocketing roughly 20% to a greater than $5 billion market cap in its first day of trading. However, concerns over the company’s lofty valuation, major cash burn and uncertain path to profitability have caused the stock to nosedive since.

Luckin has around 25% since closing its debut trading day at $20.38 per share, and 40% from its intraday peak of $25.96. As of Friday’s open, Luckin stock sat at $15.44, now well below its IPO price.

Leading into the IPO, Luckin had already been the topic of much debate. Luckin had filed for its public offering just a year and a half after its founding. And prior to its filing, Luckin had raised over $500 million in venture capital through four fundraising rounds that all occurred just within roughly one year’s time, per Pitchbook and Crunchbase data.

As Luckin’s valuation continued to level up, many questioned the sustainability of its business model and heavily discounted pricing strategy, with Luckin’s limited operating history already pointing to substantial losses and heavy cash outflows.

The concerns have followed Luckin into the public markets and it’s unclear whether the stock’s early struggles are just growing pains or a broader indication that public investors have limits to the levels of nascency and unprofitability they are willing to accept and bet capital on.

As one of the few publicly-traded early-stage growth companies, and likely the only one in the “coffee” vertical, Luckin lacks similar companies for investors to compare the stock to and also seems to lack a natural investor base – with the story a bit too foreign for typical tech sector investors and a bit too hectic for your typical food and beverage investor.

What is clear is that much is still misunderstood regarding the company’s unique history, its growth strategy, local market dynamics or otherwise. We’ll continue to keep an eye on Luckin stock to see whether the picture gets a bit brighter once investors get more comfortable with the story and as management proves its ability to execute.

For now, check out articles on Extra Crunch written by TechCrunch’s Danny Crichton and Rita Liao for deep dive primers into Luckin and all its moving parts.

Indian PM Narendra Modi’s reelection spells more frustration for US tech giants

The re-election of Modi will in many ways chart the path of India’s burgeoning startup ecosystem, the local play of Silicon Valley companies, and future of India’s internet

Amazon and Walmart’s problems in India look set to continue after Narendra Modi, the biggest force to embrace the country’s politics in decades, led his Hindu nationalist Bharatiya Janata Party to a historic landslide re-election on Thursday, reaffirming his popularity in the eyes of world’s largest democracy.

The re-election, which gives Modi’s government another five years in power, will in many ways chart the path of India’s burgeoning startup ecosystem, and the local play of Silicon Valley companies that have grown increasingly wary of recent policy changes.

At stake is also the future of India’s internet, the second largest in the world. With more than 550 million internet users in India, the nation has emerged as one of the last great growth markets for Silicon Valley companies. Google, Facebook, and Amazon count India as one of their largest and fastest growing markets. And until late 2016, they enjoyed great dynamics with the Indian government.

But in recent years, New Delhi has ordered more internet shutdowns than ever before; and puzzled many over crackdowns on sometimes legitimate websites. To top that, the government recently proposed a law that would require any intermediary — telecom operators, messaging apps, and social media services among others — with more than 5 million users to introduce a number of changes to how they operate in the nation. More on this shortly.

Growing tension

Automattic acquires subscription payment company Prospress

Automattic, the company behind WordPress.com, WooCommerce, Longreads, Simplenote and a bunch of other cool things, is acquiring a small startup called Prospress. Among other things, Prospress has developed WooCommerce Subscriptions, a recurring payment solution specifically designed for WooCommerce.

Given that physical and digital subscriptions are taking over the e-commerce world, it makes sense that Automattic wants to own WooCommerce Subscriptions. Charging customers on a regular basis is one of the most painful challenges when it comes to payment.

Prospress also works on a marketing automation tool to remind customers that they have abandoned their carts, follow up, cross sell and more. The company also has a tool to test your checkout functionality before going live. After the acquisition, the Prospress team will keep iterating on its own products and join the rest of the WooCommerce team.

This is a strategic acquisition more than anything else. Prospress has around 20 employees, so it’s not going to change the face of Automattic and its team of 900 people. But it’s an important move so that Automattic can own a bigger chunk of the (e-commerce) stack.

WooCommerce competitor Shopify doesn’t provide subscriptions out of the box. You have to use third-party products, such as Bold or ReCharge.

Like WordPress, WooCommerce is an open source project — it integrates directly with WordPress. It means that anyone can download WooCommerce and host it on their servers. And the WooCommerce ecosystem is one of the main advantages of WooCommerce compared to obscure e-commerce solutions.

Many WooCommerce users probably host their e-commerce website on WordPress.com. But by controlling the payment module, Automattic can also generate some revenue if WooCommerce users choose to use WooCommerce Subscriptions as their payment solution.

A young entrepreneur is building the Amazon of Bangladesh

At just 26, Waiz Rahim is supposed to be involved in the family business, having returned home in 2016 with an engineering degree from the University of Southern California. Instead, the young entrepreneur is plotting to build the Amazon of Bangladesh.

Deligram, Rahim’s vision of what e-commerce looks like in Bangladesh, a country of nearly 180 million, is making progress, having taken inspiration from a range of established tech giants worldwide, including Amazon, Alibaba and Go-Jek in Indonesia.

It’s a far cry from the family business. That’s Rahimafrooz, a 55-year-old conglomerate that is one of the largest companies in Bangladesh. It started out focused on garment retail, but over the years its businesses have branched out to span power and energy and automotive products while it operates a retail superstore called Agora.

During his time at school in the U.S., Rahim worked for the company as a tech consultant whilst figuring out what he wanted to do after graduation. Little could he have imagined that, fast-forward to 2019, he’d be in charge of his own startup that has scaled to two cities and raised $3 million from investors, one of which is Rahimafrooz.

Deligram CEO Waiz Rahim [Image via Deligram]

“My options after college were to stay in U.S. and do product management or analyst roles,” Rahim told TechCrunch in a recent interview. “But I visited rural areas while back in Bangladesh and realized that when you live in a city, it’s easy to exist in a bubble.”

So rather than stay in America or go to the family business, Rahim decided to pursue his vision to build “a technology company on the wave of rising economic growth, digitization and a vibrant young population.”

The youngster’s ambition was shaped by a stint working for Amazon at its Carlsbad warehouse in California as part of the final year of his degree. That proved to be eye-opening, but it was actually a Kickstarter project with a friend that truly opened his mind to the potential of building a new venture.

Rahim assisted fellow USC classmate Sam Mazumdar with Y Athletics, which raised more than $600,000 from the crowdsourcing site to develop “odor-resistant” sports attire that used silver within the fabric to repel the smell of sweat. The business has since expanded to cover underwear and socks, and it put Rahim’s mind to work on what he could do by himself.

“It blew my mind that you can build a brand from scratch,” he said. “If you are good at product design and branding, you could connect to a manufacturer, raise money from backers and get it to market.”

On his return to Bangladesh, he got Deligram off the ground in January 2017, although it didn’t open its doors to retailers and consumers until March 2018.

E-commerce through local stores

Deligram is an effort to emulate the achievements of Amazon in the U.S. and Alibaba in China. Both companies pioneered online commerce and turned the internet into a major channel for sales, but the young Bangladeshi startup’s early approach is very different from the way those now hundred-billion-dollar companies got started.

Offline retail is the norm in Bangladesh and, with that, it’s the long chain of mom and pop stores that account for the majority of spending.

That’s particularly true outside of urban areas, where such local stores almost become community gathering points, where neighbors, friends and families run into each other and socialize.

Instead of disruption, working with what is part of the social fabric is more logical. Thus, Deligram has taken a hybrid approach that marries its regular e-commerce website and app with offline retail through mom and pop stores, which are known as “mudir dokan” in Bangladesh’s Bengali language.

A customer can order their product through the Deligram app on their phone and have it delivered to their home or office, but a more popular — and oftentimes logical — option is to have it sent to the local mudir dokan store, where it can be collected at any time. But beyond simply taking deliveries, mudir dokans can also operate as Deligram retailers by selling through an agent model.

That’s to say that they enable their customers to order products through Deligram even if they don’t have the app, or even a smartphone — although the latter is increasingly unlikely with smartphone ownership booming. Deligram is proactively recruiting mudir dokan partners to act as agents. It provides them with a tablet and a physical catalog that their customers can use to order via the e-commerce service. Delivery is then taken at the store, making it easy to pick up, and maintaining the local network.

“We’ll tell them: ‘Right now, you offer a few hundred products, now you have access to 15,000,’ ” the Deligram CEO said.

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Indeed, Rahim sees this new digital storefront as a key driver of revenue for mudir dokan owners. For Deligram, it is potentially also a major customer acquisition channel, particularly among those who are new to the internet and the world of smartphone apps.

This offline-online model — known by the often-buzzy industry term “omnichannel” — isn’t new, but in a world where apps and messaging is prevalent, reaching and retaining users is challenging, particularly in emerging markets.

“It’s not easy to direct people to a website today, and the app-first approach has made it hard,” Rahim said. “We looked at how companies in Indonesia and India overcame these challenges.”

In particular, he studied the work of Go-Jek in Indonesia, which uses an agent model to push its services to nascent internet users, and Amazon India, which leans heavily on India’s local “kirana” stores for orders and deliveries.

In Deligram’s case, the mudir dokan picks up sales commission as well as money for every delivery that is sent to their store. Home deliveries are possible, but the lack of local infrastructure — “turn right at the blue house, left at the white one, and my place is third from the left,” is a common type of direction — makes finding exact locations difficult and inefficient, so an additional cost is charged for such requests.

E-commerce startups often struggle with last-mile because they rely on a clutch of logistics companies to fulfill orders. In a rare move for an early-stage company, Deligram has opted to run its entire logistics process in-house. That obviously necessitates cost and likely provides significant growing pains and stress, but, in the long term, Rahim is betting that a focus on quality control will pay out through higher customer service and repeat buyers.

A prospective Deligram customer flips through a hard copy of the company’s product brochure in a local store [Image via Deligram]

Startups on the rise in Bangladesh

Rahim’s timing is impeccable. He returned to Bangladesh just as technology was beginning to show the potential to impact daily life. Bangladesh has posted a 7% rise in GDP annually every year since 2016, and with an estimated 80 million internet users, it has the fifth-largest online population on the planet.

“We are riding on a lot of macro trends; we’re among the top five based on GDP growth and have the world’s eighth-largest population,” Rahim told TechCrunch. “There are 11 million people in middle income — that’s growing — and our country has 90 million people aged under 30.”

“An index to track the growth of young people would be [capital city] Dhaka… you can just see the vibrancy with young people using smartphones,” he added.

That’s an ideal storm for startups, and the country has seen a mix of overseas entrants and local ventures pick up speed. Alibaba last year acquired Daraz, the Rocket Internet-founded e-commerce service that covers Pakistan, Bangladesh, Myanmar, Sri Lanka and Nepal, while the Chinese giant also snapped up 20% of bKash, a fintech venture started from Brac Bank as part of the regional expansion of its Ant Financial affiliate.

Uber, too, is present, but it is up against tough local opposition, as is the norm in Asian markets.

That’s because Bangladesh’s most prominent local startups are in ride-hailing. Pathao raised more than $10 million in a funding round that closed last year and was led by Go-Jek, the Indonesia-based ride-hailing firm valued at more than $9 billion that’s backed by the likes of Tencent and Google. Pathao is reportedly on track to raise a $50 million Series B this year, according to Deal Street Asia.

Pathao is one of two local companies that competes alongside Uber in Bangladesh [Image via Pathao]

Its chief rival is Shohoz, a startup that began in ticketing but expanded to rides and services on-demand. Shohoz raised $15 million in a round led by Singapore’s Golden Gate Ventures, which was announced last year.

Deligram has also pulled in impressive funding numbers, too.

The startup announced a $2.5 million Series A raise at the end of March, which Rahim wrote came from “a network of institutional and angel investors;” such is the challenge of finding a large check for a tech play in Bangladesh. The investors involved included Skycatcher, Everblue Management and Microsoft executive Sonia Bashir Kabir. A delighted Rahim also won a check from Rahimafrooz, the family business.

That’s not a given, he said, admitting that his family did initially want him to go to work with their business rather than pursuing his own startup. In that context, contributing to the round is a major endorsement, he said.

Rahimafrooz could be a crucial ally in future fundraising, too. Despite an improving climate for tech companies, Bangladesh’s top startups are still finding it tough to raise money, especially with overseas investors that can write the larger checks that are required to scale.

“I think the biggest challenge is branding. Every time I speak with new investors, I have to start by explaining where Bangladesh is, or the national metrics, not even our business,” Pathao CEO Hussain Elius told TechCrunch.

“There’s a legacy issue. Bangladesh seems like a country which floods all the time and the garment sector going down — that’s a part of the story but not the full story. It’s also an incredible country that’s growing despite those challenges,” he added.

Pathao is reportedly on track to raise a $50 million Series B this year, according to Deal Street Asia. Elius didn’t address that directly, but he did admit that raising growth funding is a bigger challenge than seed-based financing, where the Bangladesh government helps with its own fund and entrepreneurial programs.

“It’s hard for us as we’re the first ones out there, but it’ll be easier for the ones who’ll follow on,” he explained.

Still, there are some optimistic overseas watchers.

“We remain enthusiastic about the rapidly expanding set of opportunities in Bangladesh,” said Hian Goh, founding partner of Singapore-based VC firm Openspace — which invested in Pathao.

“The country continues to be one of the fastest-growing economies in the world, underpinned by additional growth in its garments manufacturing sector. This has blossomed into an expanding middle class with very active consumption behavior,” Goh added.

Growth plans

With the pain of fundraising put to the side for now, the new money is being put to work growing the Deligram business and its network into more parts of Bangladesh, and the more challenging urban areas.

Geographically, the service is expanding its agent reach into five more cities to give it a total of seven locations nationwide. That necessitates an increase in logistics and operations to keep up with, and prepare for, that new demand.

Deligram workers in one of the company’s warehouses [Image via Deligram]

Rahim said the company had handled 12,000 orders to date as of the end of March, but that has now grown past 20,000 indicating that order volumes are rising. He declined to provide financial figures, but said that the company is on track to increase its monthly GMV volume by six-fold by the end of this year. Electronics, phones and accessories are among its most popular items, but Deligram also sells apparel, daily items and more.

Interestingly, and perhaps counter to assumptions, Deligram started in rural areas, where Rahim saw there was less competition but also potentially more to learn through a more early-adopter customer base. That’s obviously one major challenge when it comes to growth, and now the company is looking at urban expansion points.

On the product side, Deligram is in the early stages of piloting consumer financing using its local store agents as the interface, while Rahim teased “exciting IOT R&D projects” that he said are in the planning stage.

Ultimately, however, he concedes that the road is likely to be a long one.

“Over the last 18-20 years, modern retail hasn’t made much progress here,” Rahim said. “It accounts for around 2.5% of total retail, e-commerce is below 1% and the long tail local stores are the rest.”

“People will eventually shift, but I think it’ll take five to eight years, which is why we provide the convenience via mom and pop shops,” he added.

Postmates CEO Bastian Lehmann is coming to Disrupt SF

It’s a busy time for Postmates . The logistics and delivery company is prepping for its IPO on the back of a fresh $100 million raise in February. However, founder and CEO Bastian Lehmann is still carving out some time from his schedule to join us at Disrupt San Francisco in October.

Before Postmates, Lehmann co-founded Curated.by, a real-time tweet curation platform based out of London. The German native founded Postmates in March 2011 and turned the brand into a household name.

The logistics and food delivery market is clearly growing, particularly when you look at the sheer amount of cash flowing into startups like Postmates ($678 million) and competitors DoorDash ($1.4 billion) and Deliveroo ($1.5 billion). That said, the business of on-demand delivery has its challenges. The fact that humans are delivering real-world products using actual transportation in the physical world creates a lot of opportunity for things to go wrong.

But Postmates has never played it safe.

The startup continues to iterate and experiment with new types of products and models. In 2017, Postmates took on a handful of new competitors with the launch of alcohol delivery. The company tried its hand at grocery delivery in a number of ways, including launching its own grocery delivery service, as well as partnerships with Instacart and Walmart.

The company has also continued to evolve its Postmates Unlimited product, a subscription that allows power-users to pay $9.99/month to skip the delivery fees.

Postmates even introduced its own autonomous delivery robot called Serve in December 2018.

But perhaps most impressive is the fact that Postmates was able to keep the product fresh while expanding… rapidly.

Seven months ago, Postmates was available in 550 cities across the country. Now the service is operational in 3,500 cities nationally, available to 70% of the people in the U.S., with more than 500K merchants on the platform.

We’re thrilled to sit down with Lehmann at Disrupt to discuss lessons learned and what happens next. Disrupt SF runs October 2 to October 4 at the Moscone Center in SF. Tickets are available here.