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Prada to nada: How multi-million Reebonz racked up S$65M in debt and facing liquidation

The rise and fall of Reebonz. It used to be a successful Singaporean entrepreneurship story, on how three people came together to create an internet business that rose to over S$200 million in valuation. 

Now, it has become a company that is up to its neck in debt worth a hefty sum of S$65 million.

How did a 12-year-old business run into so much debt? What went wrong, and why are consumers the last to know?

Here’s a look at the company’s growth over the years and the issues that led to its demise.

What happened?

Last Friday (Sept 10), the embattled luxury marketplace appointed a provisional liquidator to wind up the company. Reebonz’s director Samuel Lim took notices in The Business Times to inform creditors it is in “creditors’ voluntary liquidation”.

It “cannot by reason of its liabilities continue its business”, the company said.

reebonz
Image Credit: Reebonz

Reebonz has appointed Acres Advisory’s Tee Wey Lih to handle the winding up of the company.

In a creditors’ voluntary liquidation, directors of the company make an assessment that it is insolvent or likely to become insolvent, and pass resolutions to put the company into provisional liquidation.

A subsequent meeting of shareholders will be held to confirm the liquidation. Thereafter, the creditors will have an opportunity to decide if they want to keep the provisional liquidator or change the liquidator.

So how much does it owe?

Complaints lodged with the Consumers Association of Singapore revealed that Reebonz owed more than S$30,000 to 11 sellers on its platform as of August 26th.

Sellers complained they had not received payments for a few months, although the agreed payout period is 20 business days. These sellers from the White Glove Service did not receive payment for the items sold even after waiting for several months.

Reebonz’s White Glove Service allows people to sell their pre-owned bags through the platform. The service has been suspended since August.

Reebonz has been bleeding cash over the past few years due to debt and declines in valuation.

The startup has been in the red, reporting negative operating loss as far back as 2013. Although the loss margin tried to improve over the years, the slowdown in funding may have been a reason why it no longer could survive.

Even since 2015, Reebonz had to cut on marketing spending to support the stagnating revenue but that was not enough.

It started going downhill further after its initial public offering (IPO) in 2018, with low traction on the public market and a sliding valuation.

It dreamt to make luxury accessible for all

Reebonz dreamt to be a “one-stop luxury ecosystem that allows customers to buy and sell luxury products through various channels catered to their needs”.

It was co-founded by Benjamin Han and the Lim brothers Samuel and Daniel in 2009. Both Benjamin and Daniel were friends since their army days before they became business partners.

The men saw that online luxury shopping was evolving and noted that there was a clear gap in market demand to target the rising middle class in Asia, and decided to set up Reebonz.

Image Credit: Reebonz

At that time, e-commerce was just taking off in Asia. That year was also the year of the Global Financial Crisis, and luxury brands had to rid their inventory by looking for third-party sellers like Reebonz.

Reebonz had tapped on that opportunity to sell branded items at “discounted prices”, and that concept attracted interest from consumers who wanted to shop for “great deals”.

It was one of the most well-funded internet companies in Singapore

The company’s concept gained interest from investors back then, raising S$10 million in its Series A in a round led by GGV Capital in 2010 and another S$14 million the very next year in its Series B with lead investor Intel Capital.

Funds looked like they were easy to raise, as a year later in 2012, Intel Capital invested millions again into Reebonz. 

The year after that, the e-commerce platform raised another S$40 million for its Series C in a financing round led by Singapore’s media giant Mediacorp.

Reebonz was on such a roll it caught the eye of the media too, being featured as one of 30 most promising Asia startups in 2013, for example.

Many Singaporean entrepreneurs and investors also thought of Reebonz as one of the most promising internet companies in the country.

Reebonz founders / Image Credit: Reebonz

In 2014, Reebonz was touted as the largest online luxury sales company in Southeast Asia with an estimated annual turnover of over S$120 million globally.

In a report in 2015,  the firm was also listed among the top 10 most well-funded internet companies in Singapore, and it was ranked side by side with companies that are now startup titans Zalora, PropertyGuru, and Lazada.

Reebonz recorded some impressive numbers for itself in these golden years of 2009 to mid-2015. Its membership grew from 50,000 members in 2009 to 4.5 million in 2015, with orders multiplying by 300 per cent (from 3,885 to 135,000) during that period.

From a small pioneering team of around 20 people, it grew to over 300 staff in that period too.

NASDAQ listing, S$40 million e-commerce hub in Tampines

Nine years after its debut, the internet company in 2018 announced plans to list on US NASDAQ, following its merger with US-based Draper Oakwood Technology Acquisition (DOTA).

The public listing was done via a reverse merger by combining with DOTA. At that time. Reebonz had pegged its company’s total value at around US$284 million.

In the same period, venture capital firm Vertex Ventures also bought US$5 million worth of common shares in the merged entity Reebonz Holding Limited.

That’s a year after it launch its eight-storey e-commerce hub in Tampines worth S$40 million.

The 200,000 square feet facility was to house more than just an office and showroom, as it also was supposed to double up as an incubator and working space for local designers.

Image Credit: Reebonz

It was four times larger than Reebonz’s previous office and distribution centre. 

Reebonz shares began trading in December 2018, but in under a week, it disclosed that it didn’t meet NASDAQ’s listing requirements like having enough stockholders’ equity.

The company found a workaround by raising more money through issuing shares and warrants. However, Reebonz continued to decline in stock value steadily as investors started losing confidence in the business’ financial model.

Reebonz was warned by NASDAQ to meet the minimum bid price of US$1 per share. But it failed to do so.

Even though NASDAQ gave Reebonz time to comply with listing rules, eventually Reebonz was delisted from the exchange in 2020 as it failed to maintain a minimum share price of US$1 for more than 30 days. 

That’s just around 17 months after it went public on the US stock exchange.

What went wrong: High cost physical stores

In a 2016 interview, the co-founders said that they would not want to reveal sales figures but revenue has been growing year-on-year, while the marketplaces are growing at double-digit rates quarter-on-quarter.

At that time, they were employing 380 people globally, including 200 in Singapore.

Reebonz had set up a retail presence in Suntec City, among other physical store locations overseas like in Hong Kong.

“Physical stores were a natural extension of our omni-channel strategy, especially for higher-value items, because the barrier to purchase online might be too steep for some,” Benjamin had said at that time.

The brand also conducted events at stores to bring customers in, like festive sales.

Back then, Samuel said that Reebonz planned to expand its market share in Southeast Asia and also invest in markets like North America, China, and South Korea.

Image Credit: Reebonz

He reasoned that they see the potential in these markets – not just for new products, but also for pre-owned luxury products.

The move to retail may have been an over aggressive attempt, as the books were unable to balance due to high operational costs including retail rental costs.

By the end of 2018, Reebonz had accumulated US$81 million in liabilities, which was almost double from a year ago.

The company was low on cash too, and revenue was falling to a four-year low as it failed to narrow its operating losses. 

What went wrong: Capital-intensive inventories

Last year, the firm operated as an ecosystem of business-to-consumer e-tail and marketplace for over 1,000 brands, supported by consumer-to-consumer marketplaces that enable individuals to sell through its platform.

However, unlike Amazon or Apple, it has been in the red for years and the funding tap was drying out to sustain its high operational and inventory costs.

According to Tech in Asia, some suppliers aren’t authorised by luxury brands to sell outside their home markets. Through Reebonz, they get access to a vast Asian market. So Reebonz provided them a unique avenue to sell their wares.

But due to Reebonz’s widening losses piling up over the years, it began delaying payments to luxury items suppliers from 2018, and in 2019 it stopped paying for goods altogether.

Some suppliers were trapped as some are small businesses with little cash flow. 

Reebonz had told the suppliers that it couldn’t collect or pay for the goods. The company had relied on its lines of credit to pay for the items, and those lines were cut by the banks.

Reebonz has also been depending on a capital-intensive model of buying goods from suppliers to sell to consumers. These were locked up funds that could otherwise be used to pay suppliers.

For its consumer-to-consumer service, frustrated sellers told The Straits Times that they had to remind the company repeatedly about their payments for goods sold through the platform’s White Glove Service.

The deployment of the White Glove Service, although not intensive in inventory as the sellers were consumers, was not enough to plug the losses gap in the company. 

Also, the quality of items customers tried to resell was also sometimes of lower quality than second-hand items sold by retailers, due to them being really used and worn out. Thus traction on this service was not as favourable as planned.

What went wrong: Major investors lose faith, valuation plunges

Public filings showed that the company’s co-founder and CEO Samuel and major shareholders like Vertex Ventures, GGV Capital, and Mediacorp offloaded their shares in 2019.

Other investors that also offloaded their shares include Matrix Partners, Intel Capital, and OCBC Bank.

Image Credit: Tech in Asia

In that same year, Samuel had said that the company would double down on the marketplace business, claiming that the company expected to “turn the corner” on growth in the second half of the year or early 2020.

This “mixed message” put off traders and investors who also decided to cash out. That led to the share price faltering below the minimum listing requirements from NASDAQ.

In 2019, Reebonz’s revenue was at US$31 million, a decline from US$44 million in 2018. 

By then, the company’s market capitalisation value had plunged to around US$7 million. That’s a major drop compared with its earlier valuation price of US$284 milllion.

What went wrong: Changing consumer preferences and Covid-19

Another issue was the fast-declining value of fashion items. 

Many branded items were past-season and did not attract the “influencer” crowd who posted bags of latest seasons.

The weakened demand led to prices of the second-hand and discounted items to fall further, contributing to smaller sales.

Some suppliers ended up taking significant losses on their purchases after selling them at huge discounts.

The onset of the pandemic also led to tighter purse strings as unemployment climbed higher in the city state.

Demand fell further, as luxury items across the country, be it first-hand or second-hand performed badly, according to retail sales figures.

This Covid-led weaker demand was probably the final nail in the coffin.

Reebonz buckled under liabilities estimated to be about S$65 million.

The end of Reebonz?

The business is set to face liquidation and all inventory (e.g. bags and clothes) owned by Reebonz will be sold. Its eight-storey complex will most likely be seized.

In a liquidation, the resulting proceeds are used to pay off its debts and liabilities. Upon the completion of the liquidation, the company goes into dissolution and it ceases to exist.

On August 25th this year, co-founder Daniel left the company. Vertex Ventures told The Business Times it is no longer an investor in Reebonz.

Two days before that, on August 23rd, a Reebonz representative said in a response to CNA’s queries on angry sellers that it just needed more time. “We are not running out. All will be paid… we are not the only ones affected by Covid.”

That is unlikely to be the case, since Reebonz has filed for creditors’ voluntary liquidation. 

The business has also suspended the White Glove Service. “We will temporarily put a pause on accepting new White Glove collections. We are reviewing our existing process to better meet your requirements.”

On Google, the Reebonz outlet in Suntec City is listed as permanently closed. The website lists zero Singapore locations as well.

A check on its Facebook page showed that it last posted a post on August 1st this year.

Sellers that still have money unpaid to them will have to wait for the liquidation process to know how much they will receive from the split of assets. 

Usually larger creditors are set to receive more of the returns, and the smaller stakeholders like White Glove sellers are unlikely to get much of their money back by the time the money trickles down to them.

Featured Image Credit: Reebonz

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