B2B e-commerce start-ups enjoy less of a spotlight in day-to-day news. They also experience a mixed rate of success. Consider Tolexo, one of the better-known B2B platform names, which reportedly shut shop this year; and then start-ups like ShopX and Shotang, which are still in business while serving small and independent retailers.
Shotang reports that it has not only helped 15,000 small retailers get online, but that it’s also now operationally profitable in Bengaluru, one of its key markets.
On how operational profitability was achieved in Bengaluru, Anish Basu Roy, co-founder and CEO, Shotang, says, “We relentlessly focussed on improving our average order values which are at almost ₹18,000 as of today… (this helps us) break even on every order. We also improved our business from repeat customers who constitute 86 per cent of our monthly orders.”
Hyderabad and Bengaluru together contribute more than 40 per cent of Shotang’s overall GMV. The start-up only deals in one category – mobile handsets and accessories – and operates in seven cities, serving 15,000 independent retailers. (In India, based on some estimates, consumers still largely buy products like mobile phones from independent retailers.)
Conservative, not small
In 2015, when it kicked off business, Shotang managed to raise $300,000 in a seed round and subsequently $5 million from Exfinity Ventures and Unitus Impact.
But its founders were decisive about the start-up’s pace of expansions.
“Financial prudence and process control is dear to us. We perfected our model in two cities over a period of 6-9 months before expanding into three other cities. We stabilised operations in the new markets… before getting into two more cities (because) process control is as important as growth,” he says.
It may be useful to consider whether B2B e-commerce platforms that don’t fare well tend to take on too much at once. Shotang isn’t shy about expanding into more markets and adding categories, only conservative.
“In the next five years, we’d like to venture into 4-5 (product) categories, with a target market size of over $80 billion. But we also don’t intend to be in more than 100 cities over the next five years,” he says.
(The article first appeared in The Hindu BusinessLine.)