P.1 How did WisePass evolve the past couple of years?
WisePass has been evolving the past few years from a lifestyle startup with a subscription service starting from 300$ a month in Vietnam in 2016 to a regional startup that expanded in 2017 after its seed funding to Thailand and the Philippines in 2018.
With the pandemic in 2020, what happened to the startup and how did it adapt to such business context?
In this article, we will focus on the way WisePass changed the way it operates. The answers are collected from an interview with the founder and CEO of WisePass, Lam Tran. This a long interview and will be broken down into 3 different articles. Here's the part 1.
The way I approached the business since 2019 is to transition from a heavy business model towards a lighter business model. It affected every single department.
Let me illustrate it:
Purchasing
Before
Merchant Acquisition
In the past, WisePass had to acquire merchants and sign contracts to purchase items from them. It used to range from bottles, lunch, dinner or any other items you can imagine. That required to have a business development team to go out and convince each merchant one after the other to sign up with us.
Cost
When merchants were convinced, the next steps would be to sign a contract and agree on a set amount per item we would list on the app. Eventually each month, we would have to reconcile the items from each merchant, receive a proper invoice and eventually process the transaction to the merchant.
After
Merchant Acquisition
Purchasing is gone. Each venue is now proposed by brands to partner with and a listing is done within our system. There's no contract to sign anymore, no cost per item to track, no more reconciliation and invoicing with the accounting team of the merchant and financial transaction to process.
Cost
Since 2019, WisePass started to partner with brands to get items sponsored and has generalize it as standard procedure in 2020. As we don't have any purchasing team, the company headcount has lowered and the company is more focused on its core function.
Operations
Before
Merchant Management
In the past, the business development team would have to convince several stakeholders with a merchant. For example, when we worked with Starbucks, we had to go first to the General Manager and then discuss with the Finance team, Information & Technology team, Marketing team and eventually Operations team to implement the program and manage the day-to-day program. Imagine doing this with over 100 merchants across multiple markets and I didn't mention yet FX and language barrier yet. Bottom line, the complexity of handling merchants was high.
Interactions
This is the consequence of the way we managed merchants. It led to drive up interactions between our Operations team and the merchant leading to a high amount of time to eventually list the merchant on the app. We had to request several information from the merchant and retrieve the hard copy of a contract. I remembered that a merchant telling us one day that the contract got eaten by the dog... After several weeks following up.
After
Merchant Management
Since WisePass follows the brand. Venues are listed by the brands and we just need to follow and process the workshop done online through videos. Retrieving information from the venue is getting automated this year with Facebook where our system starts retrieving all the information with an API and list a venue within less than 60 seconds by the end of Q3 2021.
Interactions
The amount of interactions with a merchant is drastically lower now. Since we don't need to speak with every stakeholder with a merchant, the amount of people required internally at WisePass is much lower. We can handle way more merchants with less people and focus now on building up a venue dashboard for them to track foot traffic from WisePass.
Finance
Before
Cash Flow
With the model of 2016, whenever a subscriber would pay for 300$US every month, they would be entitled to redeem an item everyday. The average cost at that time was 13$US. If a subscriber redeemed 10 times a month, the cost for this month would have been 130$US. The fact that there's a delay was one of the most complex part to assess on our end in the past.
We had to wait and extrapolate what would be the average redemption per user in a month to prepare the amount of money to prepare to pay our merchants back the month after.
Gross margin
Over time, subscribers redeem more and more and our gross margin would go lower and lower from 2016 until 2019. Despite the fact that we were purchasing lower cost items, the average redemption would still go up and we saw our gross margin going down over time from +60% gross margin on average per user, it went lower and under 30% on average per user.
After
Cash Flow
With the new approach taken in 2019, we can forecast properly our cash flow every month. Whenever a subscriber redeems an item, it doesn't incur any future cash flow out as the item redemption is sponsored by the brand.
It is much simpler to forecast and see if we are cash flow positive or negative on a monthly basis as we only have fixed costs and marketing spend that is already budgeted on quarterly basis.
Gross margin
Over time, subscribers redeem more and more but our gross margin is not impacted and remain the same. Now the gross margin is +90% as we only have to account for transaction costs.
The more subscribers WisePass generates, the higher the gross profit. That helps to quickly assess the necessary gross profit to cover our fixed costs and managed our expenses accordingly.
By transitioning to a lighter business model and doing less operationally, WisePass can focus better on deliver more efficiently value to its stakeholders, especially consumers.
