Digerati50: Maintaining the mom-and-pop store heartbeat

• Meeting SME needs through microfinancing and community engagement
• Larger countries present larger market gap due to fragmented distribution channels

Digital News Asia (DNA) continues its series that profiles 50 influencers who are helping shape Malaysia’s Digital Economy, from Digerati50 2020-2021 (Vol 4), a special biennial print publication released in July 2020. The digital copy can be downloaded from the sidebar link.

The following article is an expanded version of the print edition.

Lennise Ng meets SME needs through supply chain platform, microfinancing & community engagement.

Growing up with parents who were distributors to retailers, Lennise Ng was well aware of the inefficiencies in the business and challenges faced by Malaysian SMEs. “While volume was fantastic and sales moved by the container load, payments was an issue in terms of negotiating credit terms and extension of payback timeframe,” she recalls.

Launching Dropee in June 2016 however was not an attempt to solve that. Rather, the drop-shipping marketplace was Lennise’s attempt to diversify the revenue of the family business. In fact, that was how the platform was named Dropee. It was a marketplace that drop-shipped goods to customers of e-commerce retailers. Yet after four to five months, Lennise realised the idea was not working out and there was a need to pivot.

“It didn’t work because the basket size was too small and orders were inconsistent.”

But lessons were quickly learnt and today (mid 2020) Dropee is a B2B wholesale marketplace that empowers small and medium enterprises (SMEs). Lennise felt there was an opportunity to bridge the gap for SMEs to procure goods from suppliers in a sustainable and cost-efficient manner, especially mom-and-pop stores that form the heartbeat of many communities.

 Dropee does this by connecting suppliers and retailers on its digital platform, allowing both parties to digitise sales orders and track inventory while providing fulfilment of goods and access to real-time data. The supply chain platform acts as an aggregator by grouping purchases based on postal codes.

“Instead of purchasing individually, retailers in an area with high density of other similar retail businesses get to leverage on aggregating purchases to hit minimum order quantity together (and enjoy lower prices),” she explains.

The first full year of operations saw Lennise raise US$72,500 (RM300,000) from angels, receive a US$36,300 (RM150,000) grant from Cradle Fund Sdn Bhd, in March 2017, and receive its second grant, this time RM500,000 from TERAJU a unit in Malaysia’s Prime Minister’s Department that focuses on helping Bumiputera businesses. Its steady traction saw it raise a further RM1.48 million seed funding in Jan 2019. And in March 2020 Dropee became the second Malaysian startup to be admitted to famed Silicon Valley accelerator, Y-Combinator which Lennise attended with cofounder, Aizat Rahim.

(RM1 = US$0.241)

The platform has over 2,500 retail users as of end May 2020, a growth of 3x from 2019, while the supply side is made up of 15,000 brands. A significant development in early 2020 was the introduction of SME financing for its merchants and retailers. Lennise shares that many “struggle a lot with cash flow especially during festive seasons.”

As she points out, “It is natural for business owners to think of stocking up before a public holiday or festive seasons, but the issue is not having enough cash to buy that extra bit.”

This is where Dropee comes in with two types of financing products, which are working capital loans up to RM250,000 and invoice factoring. The latter, she explains, is for retailers who want to purchase more but are unable to negotiate credit terms with their suppliers.

While its core is to facilitate B2B transactions, Lennise keeps a close ear to the ground to gain better understanding of the challenges business owners face. Other than cash flow grievances, SMEs tend to struggle with managing employees and upgrading skillsets.

Through community engagement and working with partners, Dropee carries out mini-training sessions for businesses in the outskirts of Penang and Alor Setar. “Our engagement bridges both online and offline. For online engagement, we provide content on how businesses can address particular issues via Facebook groups.”

Although Dropee’s presence spans across Malaysia, it is still more concentrated in the metropolitan areas like Klang Valley, Johor and Penang, though the ambition is to grow beyond.

While it is not the only B2B marketplace out there, Lennise likes to highlight a key differentiator between Dropee and the rest. “We emphasise a lot on community building and trust.”

Another differentiator is its passion in helping local retailers keep traditions alive. "Mom-and-pop stores are the best when it comes to customer service and they have been doing so for decades. They treat their customers almost like family, and we want to maintain this tradition by helping them to keep their businesses around for many more decades to come,” she emphasises. That’s a cause certainly worth rooting for.

Digerati50 2020/2021 is proudly sponsored by Maxis - Powering Malaysia's 5G era.