Digital rush: How the pandemic made Shopmatic a profitable business

Severely affected by the pandemic, small businesses scampered to go digital as lockdown and physical distancing norms became prevalent. Millions of brick and mortar businesses and kirana shops pivoted to online marketplaces, with some enlisting among large players such as Amazon, Flipkart and Snapdeal, while many others created an independent digital identity. Tapping into this lucrative opportunity, Shopmatic, the Singapore-based startup which builds e-commerce stores for SMEs, found its golden moment.

The company, which opened its presence in India five years ago, expanded its offerings to kirana stores in May as food and grocery topped the buying chart in the country. The platform which already offered inventory management, instant online payments, contactless delivery, and self-pickup options, found it easier to onboard new kirana merchants. As a result, Shopmatic crossed 5, 00,000 merchants by June 2020 and ended the first quarter with 200% growth in transactions, revenue, and GMV. The company has now announced achieving profitability a year ahead of plan.

“The opportunity for businesses to come on board is huge. Today, daily we are acquiring about 2000-2500 merchants, but the potential in India is still untapped. I believe we can take this up to 3000 merchants coming through the door in a day. The idea for us has been to help the local merchant become successful by giving them different channels they want to sell through,” Anurag Avula, CEO, Shopmatic, told ET Digital.

Pandemic push

Shopmatic was incorporated in Singapore in 2014 by former PayPal executives Avula, Yen Ti Lim and Kris Chen. In 2019, the platform acquired two companies- retail management firm Octopus and CombineSell, a SaaS-based multichannel e-commerce platform.

Shopmatic offers different online mediums for individual entrepreneurs and SMEs to operate such as customized online stores, selling through social and chat commerce, selling on multiple marketplaces with integrated global payment options and shipping solutions, etc.

In the first half of 2020, it registered revenues of more than S$5.5 million beating its targets by 190%. This led to the company achieving a positive EBITDA of 30% – a year earlier than originally projected.

Avula attributes the rising tech adoption during the last six months as one of the reasons behind this milestone along with its acquisitions last year. “We had acquired a couple of companies last year and once we completed all the integrations, sometime in January-February, the product capability that we had on the platform was far superior. This allowed a lot of merchants to get a lot more transactions and a lot more orders. We saw much more fee-based revenue coming through, where both new and existing merchants were doing well,” he said.

While the company faced teething problems during the pandemic, the founders made judicious decisions such as cut expenses marketing and customer acquisition, which ultimately meant no pay cuts or layoffs for its employees.

The other factor that contributed the achievement was the huge digital shift in Tier-2 and 3 towns and cities. Today, 40% of the Shopmatic’s customers come from Bharat and its app has more than a million downloads.

Working with SMEs to drive the country’s economy and your own business has become very vital for many large businesses. To facilitate these small businesses, many companies similar to Shopmatic have come up over the years- namely Shopify, LoveLocal, NowFloats, Near.store, etc.,. When asked what Shopmatic did differently to achieve the odds, Avula credited the company’s reasonable transaction model and holistic solution to SMEs.

“We are able to support new businesses coming through our pricing model of 3% transaction fee and 50 rupees per month hosting fee, thereby allowing businesses to start without having to worry about a significant upfront cost. We have also taken a channel approach, in which you can build your store, put it on social media and sell it through the marketplaces and also have a point of sale solution,” he said, adding that another reason is providing the ability to set up an online store using the mobile phone is very user-friendly for many merchants.

With this exponential rise in online stores, what remains to be seen is whether this shift can give digital a dominant position over offline. Avula is, however, off the view and believes that the brick and mortar stores are not going anywhere.

“Yes, at some point, it will come down to the fact that everything that we do will have an online space. However, online will be a percentage of the total retail and will not be a significant majority for many of the brick and mortar retail outlets and SMEs. If you look at the most advanced markets where e-commerce is most prevalent, i.e., China or the US, they are in their mid to high 20s in terms of online sales to overall retail. India is right now about 2-2.5% of that. So there’s a huge upside available for the digital business to grow. But it will always be a smaller contributor to the overall sales in India,” he said.

Digital rush: How the pandemic made Shopmatic a profitable business Digital rush: How the pandemic made Shopmatic a profitable business Reviewed by TechCO on 10/12/2020 Rating: 5

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