Awok’s failure: Pandemic victim or cash mismanagement?
Wamda cannot verify the claims that Hussein Khafagy, head of customer experience at Awok makes below
Last week, Dubai-based Awok.com confirmed in a statement on its website that it had shut down, and speculation swiftly began on what caused the e-commerce startup’s demise. The development coincides with a boom in the e-commerce sector globally and in Middle East and North Africa (Mena) on the back of Covid-19, but according to Awok’s statement, it was the pandemic that caused its failure.
Founded in 2013 by Ulugbek Yuldashev, Awok grew to attract over 10 million visitors per month, offering about 70,000 low-priced products across over 30 categories in UAE and KSA and employing more than 700 employees. On the surface, it appeared that the startup was doing well or at least on the right tracks after announcing a $30 million Series A round back in April 2019. But the company was unable to survive and blamed the global crisis for shutting down its operations.
“Awok's journey as a mass market e-commerce player has unfortunately come to an end, and the company has ceased operations… We are sad to inform you that given the current global situation it left the company no other choice than to close its platform for good,” the statement said.
The $30 million funding round was aimed at realising ambitious growth plans, improving customer experience and attracting more talent to the team and was jointly led by StonePine Ace Partners and Saudi Arabia’s Al Faisaliah Ventures with participation from Endeavor Catalyst. But it is unlikely the company received the full investment amount, as it was dependent on achieving various milestones.
At the time of the announcement, Yuldashev said: “Our success was built on providing our customers with the best experience we could, and with this round of financing we will be able to provide an even better experience to an even larger market.”
Al Faisaliah Ventures had pinned its hopes on Awok becoming the region’s next unicorn. Alejandro Carbon, chief portfolio officer of Al Faisaliah Ventures said at the time of the investment round: “The e-commerce space in the region is set for exponential growth in the coming years. Awok.com is ideally positioned to capitalise on that growth... The Al Faisaliah Ventures team scanned the market for the best end-to-end e-commerce capabilities – from sourcing to last-mile delivery – and found Awok.com to be right player to become the next unicorn while supporting small and medium retailers in the region entering online space.”
However, customer experience remained constantly poor throughout the company’s life pre and post the financing round until the shutdown. From users reporting fake, damaged, refurbished or poor quality products to below average quality of customer service, the company’s rating online had been negative since inception.
“It was never related to Covid-19 at all,” Hussein Khafagy, head of customer experience at Awok, told Wamda. “It was cash mismanagement, we haven’t seen any sign of the funds in reality. The whole situation spoke to bad management and leadership.”
Following the funding last year, a wave of mid- to senior level hiring was made to improve overall operations and customer experience, this is when Khafagy came onboard.
“There was an untrusted relation between the investors and Yuldashev, investors were backing out in January, despite the earlier news reporting the financing was secured. The funds were conditioned to specific KPIs and the cash was not available for us to work with,” says Khafagy.
He says that Yuldashev told the team earlier this year the whole investment was not secure, and instructed them in January – before the Covid-19 situation erupted in Mena – that they needed to work to breakeven by cutting costs. This led to salary freezes from February onwards, pushing staff members to quit or request unpaid leave.
The company’s debt reached over Dh60 million for outstanding bills for suppliers and partners since December 2018, “the outstanding bill for Posta Plus alone was Dh800,000. There were talks of acquisition lately by big names, who refused to go ahead with any deal when they became aware of the size of the debt,” says Khafagy.
Awok’s website was up and running this whole time. Orders were coming in and the payment gateway was running but the orders were not fulfilled with no pathway for refunds. “Yuldashev refused to shut it down. Our emails were down and we were using our personal accounts. We communicated to him that people were complaining they were paying for orders and not receiving anything.”
The team in India went on strike and many filed cases against the company. “We came to know that few C-level execs who were close to him were receiving their full salaries up until the last day. Employees tried to push news about what was happening, but the stories were either removed or blocked a day after publishing,” says Khafagy.
There was no communication with the staff according to Khafagy, and no one internally knew the statement was going up on the website.
Wamda cannot verify Khafagy’s claims, but they are in line with claims that other employees have made. Requests for comment were sent to Yuldashev and other senior executives at Awok but none have responded.