Regardless of timing, it is generally a wise decision to think long-term. If not anything, it saves you many short-term mistakes and heartaches. Let’s try to understand it with an example closer to our domain — startup. There are many paths to building a company.
You can bootstrap — there are both supporters and detractors of bootstrapping as a venture-building model.
You can raise money and choose a deliberate approach to growth where you focus on building sustainably.
You can raise money and choose an aggressive growth path where you see growth as the only meaningful metric.
None of these approaches can be termed wrong. But like everything else, some approaches are superior to others. And there are seasons for everything.
To me, thinking from a long-term framework appears superior to other alternatives. And what is the superior thinking framework here? A simple answer maybe you build a robust organization that can survive unforeseen risks in the market.
Many startups pursue aggressive growth without minding much about business fundamentals. It is debatable whether this is a good or bad strategy. But even people who are fervent supporters of the growth-first approach would agree that doing things that can weaken your business foundation to long-term uncertainties is imprudent. You shouldn’t build existential risk into your foundation.
There are more prudent approaches. Prudent does not mean you don’t aim big or try to grow faster than your competition, a common complaint of people who prefer growth against other models. In this case, it just means that you design a strategy that allows you to achieve a balance between sustainability and growth. For instance, you may take time to fine-tune your business model before going all in.
In this alternate universe, you have taken a long-term approach to build your business. You have to accept that things can go wrong at any time and it is risky to ignore reality.
You can call this approach cautious or deliberate. Others may call it too conservative and unlike a startup. But I would argue it serves in the long run.
This approach makes even more sense in today’s environment when economic slowdown threatens growth across the world and the funding environment for startups gets tougher.
I call this approach long-term orientation. I’ve explained how this works in this essay on how to create an infinite runway.
Dhaka has several companies that have used this strategy well. Partly because it is a strategically superior option to operate and win in a market like Dhaka where access to resources remains unusually difficult.
One company that has used this strategy to its advantage is Pickaboo. A few years ago, the company decided to put sustainable growth at the center of its operation. Instead of joining the discount race typically common among startups, Pickaboo decided to go in the opposite direction, focusing on improving customer experience and services.
The strategy has paid off. No, Pickaboo has not become the largest ecommerce player in Dhaka but it has managed to build a solid business and a loyal customer base, and grow a business that apparently works with limited resources. In this article, we explore how Pickaboo has done it.
Pickaboo was founded in 2016 as a mobile phones and electronics gadget-focused ecommerce marketplace. The company quickly rose to a small cohort of leading eCommerce players in Dhaka using a combination of excellent customer service, authentic products, and effective marketing. It then ran into a momentary setback owing to strategic missteps and other challenges around 2018. The company, however, came back with a refined strategy.
In Q1 2020, Pickaboo made its first foray into physical retail. By the second quarter of the same year, Pickaboo had built a strong omnichannel operation with a growing offline business complementing its online operation. Today, Pickaboo is probably the only omnichannel ecommerce player of its size in the market and wants to become the largest multi-brand omnichannel retail chain for mobile and gadgets in Bangladesh.
Pickaboo took the lessons and transformed its business towards a more sustainable orientation after its setback in 2018. It wanted, along with consistent growth, to build a sustainable business. This decision has served the company well. More so in today’s environment where raising funds has gotten tougher for startups due to the economic downturn and investors have started looking for solid fundamentals in startups they invest in.
Pickaboo CEO Morin Talukder told me that Pickaboo has been able to achieve profitable growth. He said that an efficient operation helped the company in achieving this goal without affecting its growth projections. He also subtly pointed out that since Pickaboo has built a sustainable business, it can consistently maintain a certain rhythm of growth. There is no pressure on the company to either go fast or slow. Being a healthy business means it can continue its growth push at a certain level throughout the year.
Pickaboo putting extra emphasis on sustainability makes sense. After almost four years, the result is somewhat out. It appears the company has been on the right path. Let’s take a look into how Pickaboo has made sustainable growth a feasible strategy.
No matter how hard you try, you can’t make every business sustainable, at least in its early days. There are some verticals where you have to buy growth and endure initial red to get to the green zone. But for others, it is not so. And it is wise to choose sustainability when you have the option to do so. Pickaboo operates in a vertical that offers several such benefits when it comes to pursuing sustainability.
Pickaboo deals with mobile phones and select electronic gadgets. The single vertical focus has helped Pickaboo to achieve better margins and be more effective in operation and strategy.
Ensuring quality and supply is relatively easier and inexpensive in mobile and gadgets. There is enough market awareness. People shop for mobiles and electronic gadgets online. You don’t need to spend much money on educating people to buy these products. It has helped Pickaboo save its advertising budget and significantly reduce its customer acquisition cost.
The logistical need for the category is simpler. For example, in clothing, there are a ton of small details you need to take care of. It is not the case with electronic products.
Pickaboo directly works with brands, which provides several benefits to the company. It can ensure better after-sales service, better product quality, and better margins. It also helps with marketing. Smartphone brands have a big reach. The association allows Pickaboo certain benefits such as establishing credibility. For instance, when Samsung mentions that people can buy Samsung products on Pickaboo or get a certain discount on Samsung products on Pickaboo, it is a good association for Pickaboo. It is also meaningful marketing for the company that it gets without spending anything.
Building Growth Over Buying Growth
Building growth is taking the difficult route of achieving growth through sustainable strategies that create a path for long-term growth. Buying growth is rather simple. You pay for easy growth such as rampant discounts without much strategic thinking that ends as soon as you cut discounts. Pickaboo has chosen building growth as a strategy instead of buying growth.
How Pickaboo has done it? It has built a loyal customer base using quality customer service and differentiated benefits. Pickaboo has always prioritized customer services, positioning itself as a customer-first company that sells authentic products and provides excellent service. People care about whether the product is authentic or not when buying a mobile phone. Pickaboo has made a name for selling 100% genuine products. It has helped the company attract and retain customers without spending much on discounts and put a lid on its acquisition cost.
Loyalty is easier to establish with better service than with discounts. Customers who look for discounts are always looking for more discounts. They rarely stick around with one brand. Contrarily, it is easier to make customers who look for service loyal if you deliver them the service you promised. Customer loyalty is the ultimate silver bullet in venture building. It brings down your customer acquisition costs and makes revenue predictable.
Pickaboo has been a customer service innovator. It has introduced several services such as faster delivery — Pickaboo provides same-day delivery and one-hour delivery recently, a loyalty program, flexible EMI facilities, and exchange options, that put it ahead of other competitors allowing the company to reinforce customer loyalty.
Ecommerce has moved from the place where the service was synonymous with discounts. That’s not the case anymore. E-commerce is a necessary service for both distribution for brands and shopping for customers. Price and discounts are no longer the only domains of competition among companies. Service has become the domain of fireset competition.
Apparently, better service can be more effective in building a path for sustainable growth than a discount-first strategy. A discount-first strategy often fizzles out as fast as they come. When a better service strategy delivers, it remains dominant for many years.
E-commerce companies don’t manufacture any products. It is a business of convenience. These companies are more like service companies. So these companies must bet on excellent service for growth. It appears Pickaboo has used it to build the growth instead of taking the shortcut of buying the growth.
Long-term benefits of better strategic decisions
Pickaboo has built an ecosystem around mobile phones and gadgets. It sells mobile phones, ensures after-sales services, and also enables customers to exchange their used phones if they want to. You can sell your old phone to Pickaboo and buy a new one. The service is open for anyone regardless of whether you bought your phone from Pickaboo or not. If you bring your old phone, Pickaboo issues a card in your name and you can buy a new phone from Pickaboo using the card by paying the remaining money in cash. This is a unique Pickaboo service that improves customer stickiness and helps attract new customers.
The second strategic upside Pickaboo enjoys due to its inherent design and position comes from its access to vast online and offline data regarding the mobile phone market.
To give you an example, inventory lockup of unsold products is a major challenge for many companies that can practically eliminate your profits. It happens mostly because of poor predictions about the market. You bought a product in excess which did not sell well because you miscalculated the demand.
Pickaboo says it has built effective moats against these kinds of challenges. Being an omnichannel player Pickaboo has access to data from both the online and offline world which allows it to make better decisions. It is a unique advantage that is hard to access for many other online-only e-commerce players.
That’s one example. Pickaboo has invested in systems that can give it better customer insights such as what percentage of customers buy mobile but don’t buy any other product. Using these data it designs strategies that can help the company achieve results faster.
To take advantage further, the company has also silently built a loyal app user base. With 1.7 million installs, Pickaboo has one of the highest app installs in its vertical. The company says over 68% of its orders come from app users. Communication with app users is free — a notification can reach a million people in an instant. Pickaboo is looking to add gamification features to increase user engagement and add other useful features such as grocery shopping in partnership with other relevant players.
These unique strategic upsides have allowed Pickaboo to accrue meaningful benefits that help create an overall flywheel effect.
I’ve written about operational wastage I have seen in many early-stage companies in Dhaka before. Labor productivity can make or break early-stage companies. Labor productivity has three aspects to it. One, you as a team are working on the things that matter. Second, every member of your team is operating at their best. That’s probably why common hiring advice for startups is that you should always be under-resourced. To put it more bluntly, your operation should be designed as such 5 people are always doing the work of at least 7-8 people. Third, you should build an operation that is lean, is not wasteful, and is properly optimized.
Pickaboo has tried to do so over the years. The company currently has a team of roughly 110 people. Pickaboo CEO Morin Talukder told me once that their team size is much more optimized compared to many other companies with similar revenue and business size. This is something I have seen as well. Headcounts aka how big your team is can be a source of pride and thus can work as motivation for many founders to grow team size regardless of the need. But Morin said Pickaboo has deliberately stayed away from that.
Pickaboo has built efficiency across its operation. It has been able to build a faster and leaner delivery process since it does not deal with smaller products. In mobile and electronic products, fulfillment failure is relatively low. Pickaboo has developed a strong system for cross-checking. It reduces operational hassle and system loss.
Pickaboo has invested heavily in building processes and systems to improve the overall efficiency of the company.
These developments are now paying off allowing the company to run a lean operation compared to its size and business. For example, the company saw at one point that as the number of orders grew, the need for people in call centers grew as well. The company then took time to understand common questions customers ask, and automated the entire thing. These small tweaks have solved a lot of problems for Pickaboo customers that used to take a few call center executives to solve before.
Pickaboo has done the same in several other functions. For example, it has improved our efficiency in areas like accounting and other manpower-intensive areas. The company designed an ERP that helps it to manage almost every aspect of its operation better which was not the case before.
For example, Pickaboo has automated product counting. When products come into inventory, it goes through a scanning process and enters inventory. There is no way to manually enter a product. The whole thing is automated. The same is when a product is going out. You scan the product when shipping and it matches the entry. If it does not match, you can’t sell it.
It has a standard reporting system for everyone. It has automated entire supplier management. It created a single system for every piece of information related to customers, operations, payment, and everything in between.
Pickaboo began its strategic reorientation towards sustainable growth at the end of 2019. This was a time when not pursuing aggressive growth was viewed as a bad strategic move. It was a tough and unusual call. It took Pickaboo the next few years to settle on the strategy and find a rhythm in it.
After four years, sustainability has become a huge gain for Pickaboo. More so given the changing current in the startup world where investors are now asking questions like sustainable growth and bottom line.
The strategic gain has reduced uncertainty for the company. It should allow Pickaboo to pursue consistent growth, attract investor interest, and compete effectively in an increasingly hyper-competitive market.