Jugnu, a prominent player in Pakistan’s startup ecosystem, and a key participant in the B2B e-commerce supply chain, has recently announced the difficult decision to close its core business operations.
Considering its stature within the industry, this development marks a significant change for Jugnu.
“Jugnu, a key player in Pakistan’s startup ecosystem, is shifting towards a tech-platform model. Utilizing its tech and data suite, it aims to empower businesses, promote financial inclusion, and drive commerce forward.” According to Jugnu’s co-founder.
Jugnu’s co-founder recently disclosed in a podcast that the company is set to undergo a significant transformation. In a departure from its existing approach of managing fulfillment centers, logistics, and inventory in-house, Jugnu plans to shift towards a more capital-efficient business model.
It has been dedicated to empowering over 100,000 small and medium retailers. However, with changing market dynamics, the company recognizes the importance of recalibrating its strategies to adapt to new challenges and opportunities.
The Reason Behind It:
Jugnu is closing down primarily because a key investor pulled out, leading to financial challenges. The E-commerce FMCG sector’s low margins and high costs have made profitability difficult, prompting the closure.
Jugnu, founded in 2019 by former Unilever Executives and co-founders of retail automation tool Salesflo, Sharoon Saleem and Yasir Suleman Memon, had a vision to digitize and empower small and medium-sized retailers. Their mission was to help these retailers gain better control over their inventory and capital flow, fostering growth and success in their businesses.
Jugnu successfully secured a total funding of $25.7 million through three rounds, with its last Series A funding in March 2022 amounting to $22.5 million. The funding came from notable investors such as MENA-based eCommerce marketplace Sary, Sarmayacar, and Systems Limited. The company had already made significant progress in its mission, connecting with 30,000 retailers in the cities of Islamabad, Rawalpindi, and Lahore.
Why Is It Necessary To Close It?
According to Haroon Javed, a former supervisor at Jugnu, the company faced significant losses of 10-15 percent in inventory management alone, primarily due to internal pilferage. In contrast, major companies like Unilever managed to keep their losses as low as 0.2 percent in some distributions.
Haroon disclosed that the senior management at Jugnu was involved in corruption;
organizing frequent parties and inflating expenses by charging the company three times more than the actual cost through falsified vouchers for certain operations. The ill-gotten gains were allegedly split among themselves.
Jugnu faced significant mismanagement, including purchasing nearly expired goods at below-market prices. For instance, they procured 25,000 bags of milk just one day before expiry, making distribution challenging. This compromised product quality and retailer interests.
Upon further investigation, it was discovered that the goods were procured at prices even lower than wholesale rates. When the shop owner noticed and withheld payment, the company’s malpractice came to light. Proper procedures to replace near-expiry goods were not followed, leading to further issues.
Despite the huge funding round done last year, the company was reportedly behind on payments to its logistics partners including a leading logistics startup to which it had to pay Rs. 7.5 million at one time and that was for the few months alone.
The toxic work environment and unprofessional behavior of the senior management were the main contributing factors to this outcome. Despite being a promising project that everyone was excited about, the company’s culture was marred by office politics and preferential treatment, undermining the co-founders’ best intentions.
The Co-founder Haroon pointed out a concerning practice of hiring individuals with banking backgrounds for logistics management roles. These individuals were then trained by the very executives who were supposed to be working under them. Such questionable decisions further fueled the sense of mismanagement and inefficiency within the organization.
These issues with the work culture and management practices played a significant role in the company’s problems and could be attributed to the difficulties and challenges Jugnu faced during its operations.
Jugnu’s Best Action Is:
Jugnu was launched right before the COVID-19 pandemic. This was a stroke of luck for the company, as their product was exactly what people were looking for at the time. The founders had a strong understanding of the distribution and retail networks, thanks to their previous venture. This gave them a significant advantage over their competitors.
Salesflo was launched right alongside the launch of 3G services in the country. This was another case of good timing, as 3G services made it possible to operate Salesflo’s product more efficiently and at a lower cost.
This startup was able to capitalize on favorable market conditions to achieve success. Their founders had the right experience and timing, and their products were well-suited to the needs of their target customers.
Click to share
January 12, 2024
September 5, 2023