- The Runway Ventures
- Posts
- 🪓 B2B E-commerce game is brutal
🪓 B2B E-commerce game is brutal
How ShopX lost the game and went from $100M to bankruptcy
Admond Lee
September 29, 2024
Hey Founders,
Welcome to The Runway Ventures — a weekly newsletter where I deep dive into failed startup stories to help you become the top 1% founder by learning from their mistakes with actionable insights.
Let’s get to it! 🚀
Today at a Glance:
☠️ 1 Failed Startup → ShopX
⚠️ 2 Mistakes → Unviable business model (low margins, high costs)
🧠 3 Lessons Learned → Pivot fast (or get stuck in the mud)
🔗 The Runway Insights → How to deliver bad news when it's not your fault
💰 Southeast Asia Funding Radar → Mobee raises funding from Kaya Founders to let you buy and sell used cars easily
☠️ 1 Failed Startup: ShopX
🚀 The Rise of ShopX
Founded in 2015 by Apoorva Jois and Amit Sharma, ShopX aimed to revolutionise how offline small retailers sourced their products in India. Before diving into this venture, both founders had experience running online private-label brands, which gave them insights into the retail landscape.
The Problem — 🇮🇳 Retailers in India often faced significant challenges when sourcing products.
Many had to physically visit wholesale markets, which could be time-consuming and inefficient.
This not only affected their business hours but also limited their ability to stock a diverse range of products.
The Solution — 🛍️ ShopX provided a mobile and web application that allowed these retailers to order products without leaving their shops, thus saving time and effort without stocking physical goods.
It was a B2B e-commerce platform designed specifically for offline retailers, particularly targeting the underserved tier-2 and tier-3 cities in India.
ShopX also offered services like logistics support and credit lines, making it easier for small businesses to thrive.
In short, ShopX provided a retail operating system that connected brands, retailers, and consumers.
 | 🔥 This was a game-changer. Retailers could browse a vast selection of products from multiple brands and manage their inventory more efficiently without leaving their shops. |
📈 By 2018, ShopX had gained significant traction:
Served around 180,000 retailers across 460 cities and delivered over 1 million packages per month.
Raised $35 million in funding led by Fung Strategic Holdings, which allowed them to expand their operations dramatically.
Valued at over $100 million, and things seemed bright for the company.
At its peak, ShopX ventured into new categories like lifestyle and clothing, which reportedly increased their net margins by 500%. It seemed like they were on the path to becoming a dominant player in the B2B e-commerce space.
📉 The Fall of ShopX
ShopX has played an important role in co-creating the e-B2B business. Given the industry’s poor margin profile, it has been unprofitable to operate at scale over time, prompting the decision to halt operations.
But the e-commerce game is brutal, and ShopX learned that the hard way. Despite the initial hype and traction in the B2B e-commerce space, things took a sharp downturn.
In 2022, ShopX died and filed for bankruptcy under India's Insolvency and Bankruptcy Code.
📌 Here’s what happened to ShopX:
Aug 2015 — ShopX was founded by Apoorva Jois and Amit Sharma.
May 2018 — 💰 Raised $35M in funding ($100M valuation) led by Fung Strategic Holdings (FSH).
Nandan Nilekani, co-founder of Infosys personally invested $18M into the company.
Served around 180,000 retailers across 460 cities and delivered over 1 million packages per month.
May 2019 — 💰Raised $21.5M from FSH again.
Apr 2020 — 💧 Struggles began as fundraising dried up due to the pandemic.
💰 Raised $1.49M from angels (probably the last fight?).
ShopX was struggling to survive in the cutthroat market of low-margin B2B operations.
2021 — Pivoted 2x after realising B2B E-commerce didn’t work out.
1st pivot — E-commerce enablement platform ❌
2nd pivot — move to a B2C model by launching a cashback app that allowed consumers to get rewards and discounts from their bulk and retail buying at any local retailer and partners ❌
🪓 Because of high marketing costs and fierce competition from established players like Amazon, ShopX struggled to generate consistent cash flow, hence laying off 50% of its workforce.
Aug 2022 — ☠️ Declared bankruptcy after failing to meet financial obligations and unable to raise new capital.
⚰️ The final nail in the coffin came when ShopX took out multiple loans from its Singapore-based investor Fung Investment but couldn’t meet the repayment obligations.
With mounting interest and no fresh capital, ShopX closed shop and around 130 employees were laid off.
🙏🏻 The reason? The company cited an "unviable" business model and low margins as the primary reasons for its closure, marking the end of a once-promising startup journey.
We are deeply pained to take this decision, but we have exhausted all options. We would like to thank our employees, partners, and customers for their support over the years, and we hope that our vision of empowering small retailers will continue to be realised.
ShopX's story serves as a reminder of how fast-paced and unforgiving the Indian e-commerce ecosystem can be, where scaling too fast without a solid, sustainable business model can lead to catastrophic failures.
Want to learn more about ShopX’s downfall?
⚠️ 2 Mistakes
Mistake 1: Unviable business model (low margins, high costs)
💸 From the start, ShopX struggled with low margins in B2B e-commerce. Sure, their platform connected small retailers with products they needed, but the cost of operations (logistics, marketing, tech development, and providing credit lines) ate into profits.
While ShopX's initial concept was promising, the reality of the B2B e-commerce landscape in India proved harsh. The margins were razor-thin, making it nearly impossible to operate profitably at scale.
At the end of the day, ShopX aimed to serve a market filled with small retailers who were often cash-strapped and unable to pay high prices. As costs soared and sales slowed, it became clear that their business model was fundamentally flawed.
Mistake 2: Pivoted too late (and failed)
✌🏻 When their B2B model started to fall apart (after 5 years), ShopX scrambled to pivot— not once, but twice.
First, they tried becoming an e-commerce enablement platform, which flopped.
Then they shifted to a B2C cashback app for consumers, hoping to cash in on consumer rewards and discounts, but failed due to high marketing costs.
Both moves were costly (time, money) and unsuccessful, leading to a cash burn with no real traction.
🧠 3 Lessons Learned
Lesson 1: Validate business model early
Building a business without a business model might work when capital was easy to get a few years ago. VCs might be okay even if you didn’t have a sound business model.
☔️ But given today’s funding climate, it’s almost certain that if you don’t know how you could make money (or path to profitability), most investors would simply say NO. So it’s safe to assume you’re on your own from day 1, and if you don’t make money, you’ll be dead soon.
🌟 Key Takeaways:
🤑 Get the $1 from your customers
In my opinion, the best way to validate your business model is to get the first $1 from your customers.
Most prospects or users would be kind to say they’re gonna use your product or service when it’s launched, but this lipstick service is cheap and not reliable.
Want to know the truth? Try asking them to pay in advance and you’ll see the truth immediately.
🕺🏻 Service first, then product
STEP 1 - Build an agency (service-based business) to solve problems for clients
Get the first $1 from clients from Day 1.
De-risk yourself by being profitable.
Solve your clients' problems manually (do things that don't scale).
Identify the painful problems that most of your clients are facing.
STEP 2 - Build a SaaS product to solve those painful problems
Observe how other tech startups are solving those problems.
Learn why they failed and why they succeeded.
Finally, piece everything together to build a differentiated product for your existing clients.
Because your existing clients are already using your service, they will use your product and pay for it.
Lesson 2: Pivot fast (or get stuck in the mud)
ShopX stuck with its B2B model for 5 years before realising it wasn’t working out. If your original business model isn't working, don't wait too long to pivot.
In the startup world, time is money (literally). If you sense that your product-market fit isn’t there, or your unit economics aren't sustainable, you need to act fast.
🌟 Key Takeaways:
🎯 Set clear milestones early
Define key performance indicators (KPIs) from the start.
If you’re not hitting certain growth, profitability, or engagement targets within 6-12 months, it’s a sign you may need to consider pivoting.
📊 Listen to your data, not just your gut
The decision to pivot should come from what your users and financials are telling you. Are customers actually paying for your product? Are your margins shrinking as you scale?
Regularly review these numbers so you can react before the situation becomes critical.
🧪 Test and validate before going all in
If you’re considering a pivot, run small tests first.
Launch your new product or service with a small group of users or in a limited market, gather feedback, and measure results before betting the farm on it.
Lesson 3: Stay lean
Stay lean and nimble. Don’t overcommit on costs until your revenue justifies it. Keep your operational expenses in check and don’t get too comfortable with borrowing to fund your growth.
🌟 Key Takeaways:
⚠️ Be cautious with hiring
Early-stage startups should only hire when absolutely necessary because every new hire adds salary, benefits, and overhead costs.
Instead, build a small team of generalists who can wear multiple hats.
🙌🏻 Outsource or automate non-core functions
Don’t hire full-time employees for everything early on.
Outsource tasks like accounting, customer support, or even marketing, or use automated tools to handle repetitive tasks.
This way, you can keep your team small and nimble while still getting the job done.
⚡️ Iterate before you scale
Before expanding into new markets or services, ensure that your core offering is profitable and scalable.
ShopX’s expansion into lifestyle categories and other cities might’ve seemed exciting, but without a solid foundation, it was like building a skyscraper on quicksand.
🔗 The Runway Insights
💰 Southeast Asia Funding Radar
Mobee raises funding from Kaya Founders to let you buy and sell used cars easily (Link)
Blackpanda raises $8.6m funding for IR-1 cyber solution enhancement (Link)
Qarbotech raises $1.5M to help farmers grow 60% more produce (Link)
eToro acquires Spaceship, an Australian investing app, for $55M (Link)
First Coffee secures $1.2M in seed round led by Beenext (Link)
💃 Rate Today’s Edition
What'd you think of today's edition?Your feedback helps me create better content for you! |
🙏🏻 I'm looking to cover more failed startup stories in Asia, so here's my ask:
You share a failed startup story in Asia (VC-backed / bootstrapped - doesn't matter)
No failed startup story is too small or too big
I prioritise failed startup with good story (preferably with insider news 😎)
For example, you previously worked at a company that closed down. Or you're an ex-founder who wants to share your failed startup story to help other founders.
🤝🏻 If your failed startup story is accepted, here's what I can offer to you in return (win-win!):
Promote your product/service to my growing newsletter subscribers — for FREE (45% open rate)
Help you reach your target audience (SEA founders / VCs / investors / high-level executives) with high engagement (8% click rate)
In short, you'll get brand awareness, high-quality traffic & leads, and potentially your next customers or investors.
Sounds good? If you’re down for it, please take 2 minute to share a failed startup story in Asia below.
That’s all for today
Thanks for reading. I hope you enjoyed today's issue. More than that, I hope you’ve learned some actionable tips to build and grow your business.
You can always write to me by simply replying to this newsletter and we can chat.
See you again next week.
- Admond
🤝🏻 Join our founders community on Discord:
Building a startup is one of the toughest things you can do. Why struggle alone when you have our community to help and support you.
This is the founders community I wished I had when I first started.
Disclaimer: The Runway Ventures content is for informational purposes only. Unless otherwise stated, any opinions expressed above belong solely to the author.
Reply