TCS put Rs2 billion into Yayvo, and the best reported offer for it was Rs1 billion

Between 2015 and 2018, TCS put roughly Rs2 billion to Rs2.5 billion into an online shop that rode on its own delivery network. TCS shut that shop, Yayvo, in September 2022, expecting to write off Rs1.2 billion, and the best offer reported for the business was Rs1 billion, from the Jang Group. The sums show what a courier's advantage in delivery was worth when it tried to become a retailer.

A shop that sold two ways

TCS launched an online shop called TCS Connect in 2012, with limited stock, and revamped it as Yayvo. The name joins two Urdu words, yay for "this" and vo for "that". The first half was a conventional inventory model, with more than 15,000 products stocked directly in 2016. The second was dropshipping, in which Yayvo took an order for an item it did not hold, bought it from a supplier and shipped it through TCS. ProPakistani later said the site at one time sold more than 150,000 products.

The pitch was logistics. TCS had about 800 express centres and 4,000 couriers in 2016, according to Aurora, and Bloomberg put it at more than 950 outlets and about 500,000 deliveries a day in 2019. Yayvo's chief executive, Salman Hasan, told Aurora that no other local company had a "massively spread logistics and distribution network" handling deliveries for it, and that customers could return goods at any express centre. A director, Naiyar Saifi, said orders tripled after the shop's first television campaign. The business sat in a TCS subsidiary, and TCS owned more than 95 percent of it, according to Profit.

The two models put different loads on the courier. For a dropshipped order, the customer pays cash at the door, TCS collects it, and the money passes back through Yayvo before it reaches the supplier, who must first have shipped the goods to a TCS centre. That adds a leg to the journey and a wait to the settlement. A returned parcel makes the trip again in the other direction, and the shop, not the supplier, usually bears the cost of that trip. These are standard features of cash on delivery dropshipping, not figures reported for Yayvo, but they show why the same network that made the shop credible also made each order expensive to handle.

The money in and the offers out

Profit reported in September 2022, citing sources, that TCS had put roughly Rs2 billion to Rs2.5 billion into Yayvo between 2015 and 2018, as loans to that subsidiary, and faced a write down of Rs1.2 billion. TCS has published nothing on the closure, so the figures below rest on those sources.

Four numbers can be set against one another. Over the four years, the spend works out at Rs500 million to Rs625 million a year, or about $4 million to $6 million at the rates of the time, which ran from roughly Rs105 to Rs125 to the dollar (the magazine's approximation). The write down of Rs1.2 billion is 48 to 60 percent of the money put in. Profit said the Jang Group had proposed buying Yayvo at a valuation of Rs1 billion, which TCS declined. Brainchild Communications was offering only Rs500 million for all of the company.

Both offers can be measured against the cost. Rs1 billion is 40 to 50 percent of the Rs2 billion to Rs2.5 billion spent, and Rs500 million is 20 to 25 percent, about one year of the reported spend. A sale at Rs1 billion would have meant a loss of Rs1 billion to Rs1.5 billion on the money put in, close to the Rs1.2 billion write down. Declining that offer was in effect a bet that the business was worth more.

Bloomberg reported in February 2019 that Yayvo, by then Pakistan's second largest online retailer, had hired advisers to raise money from investors in the Middle East and China, and that people with knowledge of the matter put its value at about $100 million before the raise. Yayvo's head, Adam Dawood, declined to comment on the valuation. He said the company wanted to bring in experts who could help it grow faster and bring in more money.

What it cost to compete

The reported spend can be set against the cost of building a rival. Hamaad Ravda, a former chief marketing officer at Daraz, told Profit that a proper ecommerce business in Pakistan takes $20 million to $30 million to set up. At about Rs105 to Rs125 to the dollar, Rs2 billion to Rs2.5 billion is roughly $16 million to $24 million, spread over four years. That is the low end of Ravda's range, spent against Daraz, which Alibaba bought in 2018.

A second ledger ran through the courier. Marketplaces in Pakistan depend on cash on delivery, in which the courier collects the money and remits it to the seller. Profit reported that TCS owed vendors as much as Rs100 million for such collections in 2019, and that it owed banks and other lenders as much as Rs5 billion, about 75 percent of its capital structure. On those figures the parent that funded Yayvo was itself heavily borrowed.

The slow fade

The decline was visible before the closure. Farzal Dojki of Next Generation Innovations said on LinkedIn that Yayvo had been mostly a zombie since falling out of the top 10 in 2020, according to ProPakistani. That report said the launch advertising appeared skewed towards appliances rather than clothing, accessories and shoes. Profit said the last 17 core staff were laid off the week before it published, and that a notice told customers the site would be offline from 1 October for scheduled maintenance, which its sources said was not temporary.

“This was a long time coming and it's a huge lesson for founders in Pakistan.”

The figures suggest a narrower lesson than that. Yayvo did not fail for lack of delivery capacity. It failed to turn a logistics advantage into a customer one, and a parent that could move 500,000 parcels a day was unable to make shoppers prefer its shop to Daraz. A courier that owns a store also competes with every merchant that uses the courier, a conflict a pure marketplace does not have.

The outcome splits the gains and losses unevenly. TCS and its shareholders carried the loss on the loans. Sellers and suppliers dependent on Yayvo had to find another channel, and Daraz, already the larger marketplace and owned by Alibaba since 2018, faced one fewer rival with a courier behind it. Customers lost a shop whose pitch was that it could be returned to any TCS centre.

Three unknowns

No source gives Yayvo's revenue, order count or loss in any year, so its unit economics, including the cost of a parcel to TCS's own shop against an outside seller, are not known. The terms of the Rs1 billion and Rs500 million offers are not public. The $100 million valuation of 2019 came from unnamed people and was never tested by a buyer.

For a reader weighing the next courier or bank that wants to run its own marketplace, the useful tests are practical: what share of orders come from outside sellers, how soon sellers are paid on delivered cash orders, and whether the parent books its funding as equity or loans.