This social commerce firm cut its costs by 3x – here’s how

Cost Control is a series where we talk to founders to suss out cost optimization methods.

For Raena, the journey toward profitability goes hand in hand with cost optimization. The Singapore-based beauty-focused social commerce startup says it has reduced its total costs by 3x from March 2022 to the same month this year and expects to generate operating profits by the third quarter 2024.

“Revenue is vanity. Profits are sanity. Cash flow is reality.” Sreejita Deb, co-founder and CEO of Raena, heard this quote on a podcast during the pandemic and it has stayed with her.

“I think this [quote] sums up our experience and how I think about things these days,” she shares with Tech in Asia.

Sreejita Deb, co-founder and CEO of Raena / Photo credit: Raena

In January 2022, the company made a pivot from chasing high-revenue growth metrics to pursuing profitability and improving its cash flow. One way the firm did this was by trimming logistics costs in the Tier 2 and 3 cities the firm caters to in Indonesia.

Deb says cost-cutting measures have helped the company see a nearly 3x rise its revenue from US$8.1 million in 2021 to about US$21 million last year.

Founded in 2018, Raena identifies, sources, and aggregates personal care products directly from brands or local manufacturers. Microentrepreneurs, whether resellers or dropshippers, can buy those products on Raena’s full-stack tech platform.

In 2022, the company – backed by Alpha JWC Ventures, AC Ventures, Alfamart, Beenext, and Alpha Wave Incubation – had to make a tough decision to part with beauty brands that gave them low margins and required advanced payments. This decision led its topline to fall between 20% and 30%, which Deb says was the “hardest time for the company.”

At the same time, the startup laid off about 45 employees across two rounds, in July and December 2022. But this wasn’t a major reason for its costs to reduce, Deb says.

Cut out unprofitability ✂️

After raising US$10 million in a series A extension round in January 2022, the company developed an in-house analytics dashboard to identify beauty brands and sellers that were unprofitable and based in locations where shipping was expensive.

Following this, Raena stopped onboarding any seller or brand that wasn’t profitable to the company.

Source: Giphy

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