Large brand distributors dominate the top of the supply chain, but toward the bottom, there are thousands of middlemen, including wholesalers, who are the ones creating relationships with retailers. Founded last year, Baskit wants to provide them with tools to digitize the management of their inventory and services to help them get better prices. The Indonesia-based startup announced today it has raised $3.3 million for its seed round, from investors including Betatron, Forge, 1982, Investible, DS/X, Orvel and Michael Sampoerna. This follows a $1.5 million seed round three months ago.
Founder Yann Schuermans said he is a “very big believer in the space. Supply chains are fundamental to the economies of every major economy in Southeast Asia, as anywhere from 40% to 50% of their GDP are dependent on supply chains. Eventually they have to modernize and digitize.”
Baskit currently works with more than 50 wholesalers, predominantly in West Java. Schuermans noted that supply chains in emerging markets are very fragmented, especially in Indonesia, which has a complicated geography with thousands of islands. As a result, a supply chain is not as simple as getting goods from point A to point B. Middlemen are necessary, he said, because supply chains start with a manufacturer and distributors, then the smaller distributors and wholesalers who sell to retailers.
“All of these guys in the middle are so critical with their relationships and connectivity to their communities,” he added. “Their kids go to school with the kids of shop owners who are buying their product.”
Wholesalers often don’t have exclusivity to brands, operating more like traders by buying products they can sell at higher prices. Instead of striving to cut out the role of middlemen from supply chains, Baskit provides them with several layers of tools to grow their businesses. This includes software that helps them digitize their operations and bring inventory online.
Schuermans said Baskit differentiates from other supply chain startups because those often focus on creating ERP software for the upper enterprise part of supply chains, like big brand distributors who do tens of millions of dollars a month in turnover. In contrast, Baskit’s software helps middlemen by organizing their warehouses and inventory, giving them visibility into pricing, missing goods or items that are aging. Then their inventory is connected to an ordering system, so customers who were previously buying goods through offline processes can do so online through a catalog.
Baskit also offers customer service that helps wholesalers source better products and pricing from manufacturers.
“The best way to describe our business is a hybrid between software digitization partner, but with a very commercial kind of service provider angle where we provide in that respect, we almost look like a marketplace,” Schuermans said. “We help to connect the buyers and sellers, but it’s a very tightly managed marketplace.” Ultimately, Baskit’s goal is to make the middlemen in supply chains more attractive partners to the organizations at the top, including big manufacturers and brand owners.
“Inventory is the gold standard here, because when I have the data, I have information on pricing, I know how much product there is available. I know what products are moving fast. That is the centerpiece to our entire stack. Once we have inventory visibility, we can do a lot of magic in how we help them sell, but also in helping that wholesaler optimize their margins,” he added. This is important because wholesalers often operate on thin margins of 3% to 7%, and are also dealing with inflation. By helping middlemen get a handle on their inventory, Baskit is also able to help them decide what suppliers to purchase from and price it correctly for the people they are selling goods to.
Baskit also offers financing services to middlemen, who often struggle to get working capital from traditional financial institutions. It is able to do so because its software has data on how much turnover a business has, and how much money is going and coming in. Baskit is currently working with several P2P lenders, and some traditional banks, including one of which is on its cap table.
Baskit’s plan is to expand into more cities, with the goal of reaching double-digit penetration of the wholesaler base in each one, which Schuermans says will make it an indispensable player. “That gives us a very broad distribution because these 50 wholesalers can cover the entire territory and it also gives us access to a very important supply base, a share of wallet. It’s interesting how very few suppliers, very few wholesalers, can do so much in covering the overall needs of retailers that they serve.”