Scaling Handelnine Global amid the Covid19 Pandemic

Background

Handelnine Global was born from the online retail arm of Headrush Ventures in June 2019 and we rapidly expanded to over 25 countries within the first 6 months. As we started stabilizing the business and planning the next phase of localization to improve profits, an unprecedented event rocked the boat. The Covid19 outbreak affected businesses of all sizes and I think that a combination of fate and tact helped us survive during the early stages of the pandemic. As the world slowly accepted to live with this calamity, we also learnt to adapt and grow as a business.

The Beginning of the Pandemic

In the third week of January 2020, we recorded an unusually high number of orders on our online stores in the United Kingdom and Singapore. Most orders were being placed by people of Chinese origin, who were trying to send face masks to their families in China. As a business, we did not operate any dedicated stores catering to the Chinese market, largely because it was beyond the reach of Google, our preferred advertising partner.

We did allow buyers on other localized stores to add China as a shipping destination for their orders, but had never seen such volumes ever before. As we dug deeper to understand this behaviour, we found that just 2-3 days ago, WHO and the National Health Commission of China had issued statements confirming that the “Wuhan virus” was human-to-human transmissible. Honestly, we did not think that this was the beginning of something that would impact every single person on the planet. I don’t think anyone saw that coming.

Dealing with Panic Buying

By the end of January 2020, the WHO had declared Covid19 a Public Health Emergency of International Concern and the global media started talking about this contagious illness that was now spreading outside of China as well, especially Europe. In a knee-jerk reaction, shoppers worldwide started hoarding essentials like face masks, hand sanitizers, toilet rolls and more.

As people around the world started panicking, the inflow of orders grew torrentially and as resellers, we found ourselves helplessly stuck between suppliers running out of stock and customers demanding high volumes with irrational urgency.

Customers were placing large orders on multiple stores simultaneously and as soon as they received a shipping confirmation from any one of these stores, they wanted to cancel all the other orders. Instead of contacting the stores to request cancellation, many customers directly started filing chargebacks with their credit card issuers. In certain cases, customers found the products offline and we saw chargebacks being filed within hours of placing the order!

In less than two weeks, we had already received orders to deliver almost a million units of face masks, both disposable and N95. In addition, there were thousands of units of Purell and other sanitizers that we were supposed to fulfill, along with various other products that panicked customers were buying in large quantities.

We decided that as a business, we neither had the capability nor the interest in participating in this competitive selling spree and de-listed all such products from all our stores by the first week of February itself. In our bid to play safe, we even went as far as de-listing products like infrared thermometers and immunity boosters from our stores. We thought it would soon be over.

Struggling to Keep the Business Alive

By early March, the Covid19 outbreak was declared a global pandemic by the WHO, and Governments around the world had muddled reactions. New restrictions and regulations came up in different parts of the world, affecting global supply chains. We started seeing delays in last-mile deliveries due to localized lockdowns in parts of Europe and the UK, which constituted over 70% of our orders at that time. Even though we were working with top 3PL companies at that time, the logistical situation seemed to be beyond our direct control.

Our contact centers were not designed to handle this quantum of customer queries and agitated customers (rightfully) started filing chargebacks and disputes to recover their money. Our chargeback rates were already high due to the inadvertent participation in the panic-buying spree for about 2 weeks in late January 2020, and we soon found our metrics going beyond the tolerable levels defined by the payment processors and their acquiring banks.

Following standard protocols, they froze our ability to withdraw funds. This created obvious cash-flow concerns for a bootstrapped company like ours and added operational bottlenecks in the fulfillment process. This was worsened by the emergence of negative reviews on platforms like Trustpilot and Google. The circularity of these problems threatened the very survival of our business and we had to find a solution quickly.

Growing the Business Despite the Mess

The most difficult quarter for us was Apr-Jun 2020. Desperate for business continuity, we had to work with a different league of payment processors, designed for “high-risk” businesses. They offered higher tolerances on chargebacks but the trade-off was that our transaction success rates had dropped by over 50% and the impact on our unit economics was unbearable.

Internally, we improved the quality of our operations and customer service through process optimization and externally, we started fixing the reputational damage by expanding review collection to all customers. The idea was to have the full picture on Trustpilot and Google Reviews and display reviews from both, satisfied and dissatisfied customers, as opposed to earlier when only the agitated ones were motivated enough to leave a review. As global supply chains started normalizing, we were able to go back to our earlier payment associations and transaction success rates were restored.

The pandemic had accelerated the global adoption of online retail and we were fortunate to have recovered just in time to leverage this shift in consumer behaviour. By July 2020, we felt confident about scaling our advertising efforts to grow revenues and neutralize the losses we had suffered in the last few months. Prior to the pandemic, our strongest brands were NinthAvenue and DirectNine, where we sold cosmetics and electronics, respectively.

We had launched a brand called NineLife in late 2019, selling health and nutrition products. We prioritized the global expansion of NineLife and as we launched the brand in over 30 markets, it started accounting for more than half of our topline, overtaking NinthAvenue by a huge margin. We also studied how Covid19 was creating shifts in product categories being demanded, and used that information to scale our fitness wear and gear brand NineFit, as well as our home and kitchen brand, HomeLoft.

The recovery was not easy, though and we continued to face hiccups along the way. For instance, major tech companies had ramped-up their policing algorithms to curb cyber fraud and discourage opportunistic scammers. There were multiple instances of false positives triggered by these systems that led to temporary suspensions of our accounts by Google or Shopify, but such issues were swiftly solved after basic appeals and manual reviews.

Diligent data analysis helped us to understand localized challenges in all our target markets and strategic diversification in revenue sources helped us maintain cash-flow continuity even when certain parts of the business were affected or paused. Overall, we grew exponentially and new fulfillment offices had to be set up. Towards the end of 2020, we found ourselves growing like never before and started doing over a million dollars in monthly revenue.