Sorabel, an Indonesian fashion e-commerce startup, was known for its "try-first-pay-later" service. Founded in 2014, it quickly gained traction but struggled amid the COVID-19 pandemic. Despite efforts to save the business, Sorabel ceased operations in July 2020, marking a significant rise and fall in the startup world.
What Was Sorabel?
Sorabel, an Indonesian fashion e-commerce platform, offered affordable clothing with a unique "try-first-pay-later" feature, allowing customers to try items before purchasing. Notably, it raised $28M in funding and achieved a 9% market share in women's fashion e-commerce by 2018, with over 5 million app downloads.
What Happened to Sorabel?
The story of Sorabel's rise and fall is a compelling narrative marked by several key phases:
Initial Success and Growth: Sorabel, originally known as Sale Stock, quickly gained traction by offering affordable fashion and a unique "try-first-pay-later" service. By 2018, the company had over 400,000 users, 150,000 SKUs, and fulfilled more than 4 million orders.
Rebranding and Expansion: In January 2019, the company rebranded to Sorabel to explore new verticals and change its brand image. This move was accompanied by innovative services like AR changing rooms and AI-driven fashion trend analysis.
Financial Struggles: Despite raising over USD 49 million in funding, Sorabel faced significant financial challenges. The COVID-19 pandemic exacerbated these issues, leading to an inability to secure further funding and ultimately forcing the company to liquidate its assets.
Increasing Customer Acquisition Costs: The growing cost of acquiring customers in Indonesia became unsustainable for Sorabel. This financial strain made it difficult to compete with other established players in the market.
Impact of the Pandemic: The coronavirus pandemic severely impacted Sorabel's operations, leading to a decline in sales and cash flow. By July 2020, the company announced its closure and began the liquidation process, terminating all employee contracts.
When Did Sorabel Shut Down?
Sorabel officially shut down on July 30, 2020, due to the financial pressures exacerbated by the COVID-19 pandemic. The company began the liquidation process, ensuring all employee rights were fulfilled and assisting them in finding new jobs through an investor network.
Why Did Sorabel Shut Down?
Financial Instability: Sorabel faced significant financial difficulties, leading to insufficient cash flow and an inability to meet short-term obligations. Despite raising over USD 49 million in funding, the company struggled to maintain a sustainable revenue model, ultimately leading to its liquidation in July 2020.
Impact of the Pandemic: The coronavirus pandemic severely affected Sorabel's operations, leading to a decline in sales and cash flow. The pandemic exacerbated existing financial issues, making it impossible for the company to continue its operations, resulting in the termination of all employee contracts.
Growing Customer Acquisition Costs: The increasing cost of acquiring customers in Indonesia became unsustainable for Sorabel. This financial strain made it difficult to compete with other established players in the market, contributing to the company's eventual shutdown.
Loss of Original Customer Base: The rebranding from Sale Stock to Sorabel in 2019 led to a loss of the original customer base. The new brand struggled to attract new customers effectively, which further compounded the company's financial woes.
Business Model Issues: Sorabel's "try-first-pay-later" service increased operational costs and did not align well with the premium pricing strategy. This mismatch led to higher capital expenditure without corresponding revenue growth, contributing to the company's financial instability.
Lessons Learned from Sorabel's Failure
Adaptability: Ensure your business model can quickly adapt to market changes and unforeseen events like a pandemic.
Customer Retention: Maintain a strong connection with your original customer base, especially during rebranding efforts.
Financial Prudence: Monitor cash flow closely and avoid over-reliance on external funding to sustain operations.
Cost Management: Keep customer acquisition costs in check to avoid unsustainable financial strain.
Operational Efficiency: Align your services with your pricing strategy to prevent increased operational costs.
Market Understanding: Conduct thorough market research to understand customer needs and competitive landscape.
Innovation Balance: Innovate cautiously, ensuring new features align with your core business model and customer expectations.
We Shut Down Startups
Sorabel's story is a stark reminder of how quickly a startup can face insurmountable challenges, leading to an inevitable shutdown. If you're in a similar situation, Sunset can help you navigate the complex process of winding down your business.
Sunset takes care of all the legal, tax, and operational burdens, allowing you to avoid penalties and reduce liabilities. Don't let the stress of closing a startup overwhelm you—book a demo today to see how we can assist you in moving on to your next venture.
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