A lesson in our illustrious corporate history (Part III)

Yes, we were on a roll, but it was entirely self-funded with no semblance of revenue. When we started running Lootmaar, we faced 5 major issues:

1) Sellers just didn’t get it

Sellers were just unwilling to participate. Getting each retailer online took an enormous amount of personal effort by the founders (predominantly Noman). And these weren’t cold calls, as we were often referred to these vendors through friends or family. Even when they did agree to participate, it was on the condition that Lootmaar would manage all the logistics including maintaining their online inventory, listing items, responding to questions, coordinating with buyers – everything. We agreed to do this initially in the expectation that vendors would be more willing to manage their stores once they see steady sales, but that turned out not to be the case as most sellers were ill-equipped to take on this responsibility and the volumes weren’t enticing enough.

2) Viral marketing didn’t work

We were expecting small-scale viral activities such as charity auctions and 1-rupee auctions to multiply and produce the results of a conventional marketing campaign at a small fraction of the cost. This was very naive of us. Yes, these activities generated a hundred or so user registrations each, but then instead of building buzz, they just petered out. We were unable to generate any viral impact. We tried to rationalize our lack of success at viral marketing by assuming that viral networks don’t work in Pakistan. This is of course, utter bull. Truth is that viral marketing has the potential to work spectacularly well in Pakistan, it just requires consistent, focused attention. There are two types of viral campaigns: Those that are accidentally successful, like the million dollar homepage, and those that require experimentation, investment and nurturing. In hindsight, I see we were banking on the first type. Marketing is the key thing that we got wrong, because to keep sellers and partners (couriers, payment platforms) interested we had to rapidly build scale and this did not happen.

3) Technology cost too much

To launch early and test the market, we bought an off-the-shelf system and privately hired two moonlighting developers to customize the software. It was the cheapest way to do it, and worked well initially. Problem was that when we launched we did not have the capacity to respond to user feedback in a timely manner. The primary developer, well meaning though he was, just did not have time between his day job and family commitments. We got so badly burned by this experience that I did not want any unpredictability in tech dev and started looking for a reliable partner. After months of searching, we got into an agreement with Folio3 after Adnan Lawai offered us friends and family rates to support our fledging start-up. Given the professionalism of the Folio3 team, the rates were indeed a bargain, but for a tiny Pakistani startup (making no money) it was still a significantly amount monthly, and since the contract was dollar denominated the currency shock of 2008 added to the burden.

4) Technology hogged all the management attention

I’m a geek, Noman is a geek, and Maryam is a (quasi) geek. We spent a disproportionate amount of time building and refining technology. Sajjad, the Folio3 software engineer working with us was great, but the underlying code that he had inherited was complete garbage. Given how picky I was, each change, even the minutest one took days and even then I only grudgingly promoted it to production. Truth is that building technology is fun and easy and we consciously fell into the trap.

5) Execution. Execution. Execution

What it really comes down to is poor execution. None of the four points I have written about above came as surprises. Noman and I had expected these problems, and devised plans to address these. The problem was that we did not have the time and resources to execute. Soon after launch, when the challenges of building scale and generating cash-flows were starting to become apparent, I took up a consulting offer and moved to Dubai taking an “advisory” role in Lootmaar, leaving all operational responsibility with Noman. Even with very low volumes, Lootmaar was very resource and operations intensive requiring extensive manual coordination between buyers, sellers, couriers and banks. As if this didn’t keep Noman busy enough, he also had to manage some important aspects of his family business, so his hands were quite full. Hence, we obsessed about technology (at the expense of business) because it was the easy thing to do as it could be directed remotely, and performed asynchronously. Client facing activities, such as bringing retailers onboard, expanding the network of evangelists, integrating payment systems, partnering with media companies-all activities that required on-site face time-suffered.

So now the big question is: What’s next?

-Adnan

Tags: failure, online marketplaces, pakistan, The Lootmaar Story, viral marketing

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