May 23, 2022

In many ways, B2B marketplaces have been slower to modernize than their consumer counterparts when it comes to e-commerce. Today, a startup that has been at the forefront in this area announced funding from a major investor, which sheds light on how it is changing and the opportunities it opens up as a result. Profishop, which has built a store for business and industrial goods — such as power tools, jobs, agricultural and hospitality equipment, and stationery — by working directly with manufacturers (rather than wholesalers). “Just provide a platform for now. . Order & Delivery has raised a $35 million equity investment that it will use to expand its business and platform in Europe and beyond.

Based in Bremen, Germany, Profishop currently operates in 13 markets, with the German store currently the largest; Earlier this year, he also spearheaded attempts to infiltrate the US. CEO Arsh Jalali, co-founder of the company along with Anna Hoffman (CTO, who is also Jalali’s wife), said the company achieved $100 million in sales from 500,000 customers last year and is on track. This number this year.

“Since our inception, we have grown by 100-120% year on year every year,” he said.

It was this pace of growth that likely attracted the attention of Tiger Global — a seasoned late investor who has become more active in Europe of late and has been betting in the past — the only investor in this round. Profishop has been operating for almost ten years and during this time it has been making a profit. In fact, he previously raised a seed round from Takt and Hovzat for an undisclosed amount, according to Pitchbook data.

The initial inspiration for Profishop and its subsequent development is a textbook example of a classic startup story.

Jalali told me that he first thought of the Profishop concept when he was working in his first job out of college, at a B2B company, where he saw firsthand what a marketplace is for sellers and buyers.

It was 2010, but the big B2B companies in Germany were still using printed catalogs to tell potential customers about everything they had for sale, and the rest of the buying process was pretty much the same: the process of buying a product. contacting the company. Price estimates and inventory checks were done by fax, including comparing different products from different locations… comparing different faxed documents.

Also, it was a complex process that usually involved intermediary-type players that slowed things down and added to the costs of the system: typically suppliers partnered with wholesalers who then became direct companies, but they could also work with other retailers who then eventually sold to corporate clients.

In this context, the threshold for limiting this position was, paradoxically, both too high and too low.

Less, because a lot more had to be done: even digitizing these catalogs or creating an online payment system would be a significant step towards modernization – better search algorithms, more personalized marketing, competitive prices, better logistics. Forget about more advanced ideas. about services. , analysis for suppliers to understand what customers want or don’t want to buy, etc.

High because it can be difficult to convince companies stuck in traditional ways of doing business to change course. And ProfiShop’s idea to make a difference was relatively revolutionary: the idea was to work directly with companies producing products in the German manufacturing industry and create a system where the business customer bought the product, ProfiShop directly. Pass the order to the manufacturer. , which will send it directly to the company that placed the order. This just-in-time approach would have meant no warehousing and no merchandising for ProfiShop, which was building a platform to position itself as an intermediary between the other two parties.

Jalali said that initial efforts to work with producers were very slow at first. When it opened online, there were only five items on the list, including a workbench and a safe. Both he and his wife had no experience in e-commerce. “We didn’t even do marketing,” he said. “But we got our first sale in 45 minutes.” In fact, they didn’t have the time or even the money to stock up, so the first “just in time” sale nearly fell through.

At first, it was difficult to talk to manufacturers and sell them on the Idea. “No one believed us, and some made fun of us, saying it would never work.”

“We added 20 new manufacturers in the first year,” he said. This year there will be 500 of them, “and soon there will be 5000.”

Ironically, one of his first adversaries is now one of his biggest partners. In total, Profishop has about 1600 manufacturers and offers 1.6 million items for direct delivery.

In creating this business, Profishop has taken advantage of some interesting, major socio-economic trends.

One of the most important is the role of manufacturing and how it has changed over the years. Over the decades, much of the world’s production has moved to Asia, especially China, which has invested heavily to become the world leader in the region. Profishop’s overall business model is based on local production, which is compatible with the logistics and fulfillment model. In fact, it doesn’t currently have any deals with other manufacturers.

This has led to the promotion of a new market entry point and business opportunities for more local construction companies, but this has not always been the case. Jalali noted that in some cases, the factories she visited prior to establishing a partnership with the company were not operational as the company switched to shipping supplies from China and used its factories more as warehouses.

“We will ask: “Where are your employees? Your website says you have 250.” They will answer that now everyone is ordering from China.” “But that has changed.” He said the reason for this is economic: prices have risen both in terms of the costs required to maintain the quality of products and the costs of logistics and delivery of these goods, by an average of about 5 times between 2020 and 2022. said. “This makes many people think about returning production to Europe or Eastern Europe. But this is a process. It’s hard work, but they think about it.” Due in part to the size of the country, the US company has partnered with a logistics company to help deliver the cargo, and as it expands in Europe, it is likely to play a role there as well.

In terms of competitors, there are many other companies that are venturing into B2B, and big marketplaces like Amazon and Alibaba are already big players (wholesalers selling to customers). Even the name Profishop – a combination of the words “professional” and “shop” – is not a trademark and is already used by a niche brand to sell their industrial equipment directly over the Internet. It’s a busy place, but building relationships and giving manufacturers more direct options (without the involvement of wholesalers) gives Profishop a great start.

“The long tail of equipment procurement for businesses often goes unattended and offline. “The ProfiShop B2B marketplace offers these editions online, allowing customers to easily manage and purchase over 1.5 million high-quality SKUs on a single platform,” said Griffin Schroeder, partner at Tiger Global, in a statement. Europe uses Profisop and we are excited to partner with Arsh and Anna to help them expand their business internationally.”

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