Lennise Ng and Aizat Rahim, two local entrepreneurs, met when they both worked at a venture building accelerator in Kuala Lumpur, Malaysia. The two, coming from entrepreneurial families, decided to team up and venture into the retail business, particularly focusing on the food and beverages (F&B) sector.
Yet, the pair had few connections in the F&B industry, which became a problem when they were looking to open their own store. “We had to rely on either Google or acquaintances for referencing the best products and suppliers, but that didn’t convince us. After a few months of research, we ended up not opening the store because we weren’t confident of our suppliers,” Ng told KrASIA in a recent interview.
Ng and Rahim then spoke to other retail business owners and found out that most of them went through the same journey. Ng said that small and medium enterprises (SMEs) had no choice but to explore and experience working with different suppliers until they find the best ones. However, this is not an effective approach, especially for small businesses with limited cash on their pockets.
Identifying and solving a problem
Ng believes the business-to-business (B2B) supply chain ecosystem in Southeast Asia is very fragmented, with most of the players, from manufacturers to retail outlets, operating on a siloed basis. This lack of communication and transparency leads to inefficiencies in B2B transactions.
“Another problem is that pricing of wholesale products can be different for each customer. This could be based on geographical location or the type of business. For example, the prices of certain products in Jakarta is different than in Surabaya or Bali,” Ng explained.
Aware of these challenges, Ng and Rahim decided to scrap their retail business idea. Instead, they founded an online B2B marketplace platform called Dropee in 2017, where they serve as CEO and COO, respectively. Their startup’s goal was, from the beginning, to help local retailers find the best suppliers and products for their businesses in a convenient manner.
Dropee allows retailers to search and source from new and existing suppliers online, while it also allows businesses to digitize sales, track inventories, and fulfill orders with access to real-time data via a single platform. The firm leverages artificial intelligence and predictive analytics to forecast which products will sell more so retailers can source and manage inventory as efficiently as possible.
The majority of Dropee’s customers are mid-tier wholesalers, but the startup also works with international brands such as Unilever, Nestle, and British American Tobacco. To date, Dropee collaborates with over 2,000 merchants or brands, while it has about 15,000 wholesale buyers placing orders on its marketplace platform, which currently operates in Malaysia and Singapore.
After two years and a half operating the marketplace, Ng and Rahim started to receive inquiries from traditional wholesale business owners about how to go digital.
Ng realized that for local businesses, transforming into an online B2B platform is no easy task. For example, wholesalers had to create their digital catalog by uploading thousands of stock-keeping units (SKUs) online, and have to manage retail customers’ orders from their online stores, among other challenges.
“Many of our existing brands and wholesaler clients came up to us and said: ‘I like your marketplace, can you replicate the same thing and white label it for my business?’ Turns out, they’re willing to pay for this service, because there is no other solution out there in the market, except for traditional material requirement planning (MRP) or enterprise resource planning (ERP) providers like Oracle and SAP,” said Ng.
Recognizing this pain point, the two founders decided to introduce a new business line, a software as a service (SaaS) solution for suppliers called Dropee Direct. Launched in late 2019, Dropee Direct automates procurement and helps wholesalers and brands to bring their offline businesses online.
Positive growth amid the COVID-19 pandemic
As Malaysia has had to implement lockdown measures due to the COVID-19 pandemic, more traditional businesses have turned to digital solutions like Dropee’s marketplace and Dropee Direct. Ng said that the startup is seeing a positive trend this year as its user base is growing between 30% and 50% each month.
Dropee has also launched other initiatives. For example, it has partnered with the Malaysian Ministry of Agriculture to help groups of farmers and fishermen across the country to sell their fresh produce online. “The purpose of this partnership is to reduce wastage, which often happens because farmers and fishermen produce products that people don’t buy,” Ng continued.
By joining Dropee’s platform, farmers and fishermen are able to access real-time info on demand for various products. It also provides hands-on guidance, from how to set up an online B2B store to how to market products.
The project has been exciting and challenging, as Dropee has had to work with less tech-savvy customers in rural areas, Ng told KrASIA. “The challenge is how can we provide a convenient user experience for rural customers. We need to make sure that our product is ‘grandma proof’, meaning that it is easy to follow by anyone, regardless of the types of their phones or their tech knowledge.”
There are currently 23,000 farmers and fishermen on Dropee, but the firm aims to support over 90,000 farmers and fishermen in Malaysia to leverage its B2B marketplace.
In March, Dropee became the second Malaysian startup to be admitted into the Y Combinator’s program, an American early-stage startup fund and accelerator based in California, KrASIA reported. “The most important lesson that we’ve learned from the program was to always experiment until you’re able to create the best product. At the end of the day, the goal for any tech company like ours is to build a product that people love,” Ng said.
The startup recently raised USD 1.3 million in an extended seed round. With the new funding, Dropee will continue to strengthen its presence in existing markets, while keeping open the possibilities to expand its business and service regionally, according to Ng.
Going forward, the startup wants to focus on growing its value for existing business and help more conventional enterprises to transform their businesses from offline to online via Dropee Direct.
“Especially during this COVID-19 period, more B2B entrepreneurs want to bring their wholesale business online. Therefore, we want to provide them with the right products and services so they can transform digitally in a very seamless and assisted way,” Ng affirmed.
This article is part of KrASIA’s “Startup Stories” series, where the writers of KrASIA speak with founders of tech companies in South and Southeast Asia.