Jugnu Shuts Down Its Core Operations A Year After Raising $22.5 million

 

As one more key player in Pakistan’s startup ecosystem, Jugnu, operating within the B2B e-commerce supply chain, has made the decision to shut down its core business operations.

“To ensure that Jugnu continues to live its mission of empowering small and medium businesses, Jugnu will be pivoting towards a tech-platform play by utilizing the expansive tech and data suite to enable commerce and financial inclusion among other enhancements.”, stated a statement sent to ProPakistani by Jugnu’s Team.

It also added that Jugnu will be moving away from the current footprint of self-managed fulfillment centers, logistics and inventory model. It stated that Jugnu has been enabling 100,000 plus small and medium retailers for the past few years but new global macroeconomic realities have been forcing Jugnu to become more capital efficient and work toward profitability and that will require Jugnu to recalibrate its business strategy.

“Unfortunately, this shift in business model will have a significant impact on some of our teams for which we are personally reaching out to organizations to help transition some of the best minds to be key enablers in their respective missions,” added the statement.

Behind The Curtain:

“An investor has pulled out from Jugnu and that’s the primary reason they are closing down” confirmed a former Business Development Executive at Jugnu talking to ProPakistani. He added that E-commerce FMCG companies cannot be in profit due to low margins on products in which they are dealing with high costs.

Jugnu was founded in 2019 by two former Unilever Executives and co-founders of retail automation tool Salesflo, Sharoon Saleem and Yasir Suleman Memon. It was aimed at digitizing, empowering and growing small and medium-sized retailers and enabling them to take more control of their inventory and capital flow.


It raised $25.7 million in total over three funding rounds with the last in Series A in March 2022 of $22.5 million from MENA-based eCommerce marketplace Sary, Sarmayacar and Systems Limited. It had already connected with 30,000 retailers in the twin cities of Islamabad, Rawalpindi and Lahore with expansions planned in other cities.

“Jugnu was facing 10-15 percent losses in inventory management alone caused by the internal pilferage while the companies like Unilever manage to get their losses around 0.2 percent at some distributions.” stated Haroon Javed, a former supervisor at Jugnu talking exclusively to ProPakistani. He also alleged that the senior management used to arrange parties a lot and was also rife with corruption, often charging the company three times more than the actual cost through wrong vouchers for some operations and splitting it among themselves.

The case of mismanagement was so huge that third-grade goods were being bought for the sake of procurement under market prices. In a single instance, 25,000 bags of milk were procured with a single day left in expiry and was even supplied to a shop while at least two weeks to a month of expiry time is needed to efficiently distribute the goods at this scale.

Later it was found that it was procured at even lower than the wholesale prices when the shop owner noticed and held the payment. The goods near expiry can be replaced if the company is informed earlier but no such procedures were followed. The logistics and route planning were also mismanaged significantly.

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 behaviour of senior management could result in this outcome only”, added Haroon. But he also pointed out that it was a great project, and they were all very excited about it but the culture of office politics and preferential behaviour was prevalent despite the best intentions of the co-founders. He said that the people with banking experience were hired in logistics management and were then trained by the very executives who were supposed to work under them.


He said that founders should be appreciated they were able to take it this far with such losses and an environment where promotions at critical positions were being granted to people with literally no B2b experience except on the basis of personal references and a number of very loyal employees left Jugnu because of this environment including the former logistics management.

ProPakistani reached out to both main founders for clarification on the above details, but they did not respond immediately for comment.

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Any Lessons Learnt?

Launched right before the Covid-19 pandemic, Jugnu was exactly the kind of solution people were looking for at the time and with founders already having a strong understanding and network of distribution and retailers through their earlier venture. The same was the case with Salesflo which came right alongside the launch of 3G services in the country which lowered the cost of operations significantly through smartphones

It’s the third major supply chain startup in the country after Airlift and MedznMore to shut down after raising $ millions in funding, and it does not include the downfall of those which never got to the funding stage.

Some startups can also be found burning VC money on marketing to achieve crazy growth in gross revenue so they can raise the next round. This utmost dependence on external investment without perfecting its own operational management is a recipe for failure.

It says everything about the need for rethinking required by the startup community to better equip their founders and upper management to get a grasp of ground realities because that’s found to be the primal cause behind these failures at least in the case of Airlift and Jugnu.

The scale of pilferage and mismanagement can only go unaddressed when the founders are either not paying attention or have blind spots for those responsible.