Kaodim was a Malaysian home services marketplace startup. Founded back in early 2014, Kaodim set out to make it easy for customers to find service providers such as plumbers, electricians, painters, contractors, etc. Kaodim had only started four months before it was able to achieve USD 10 million in sales, and this attracted the attention of investors. In total, the company managed to float USD 17.6 million and penetrate four markets, which are Malaysia, Singapore, Indonesia, and and the Philippines. Kaodim seemed destined for the long-term success. It has strong investors behind them and is the clear market leader in the Southeast Asia home services market. Admist the promising start, Kaodim declared bankrupt in year 2022.
Of course, external circumstances such as the pandemic and increasing inflation affected negatively on Kaodim’s operations, but the fundamental issues with its model were clear from the company’s founding. Among these, the problem of marketplace loyalty was identified. Customers who engaged a service provider through Kaodim could directly engage the provider for subsequent business, thus escaping platform costs. This made customer retention and platform loyalty hard to achieve, thus reducing Kaodim’s value proposition. Further, with no repeat purchase model and no way to tie customers and service providers to the platform, Kaodim was unable to generate a concrete and lucrative business model.
This situation worsened with the pandemic. When COVID-19 broke the news, people became reluctant to let service contractors into their homes, thus the drastic downfall. Infrastructure instabilities, inadequate workforce, and exorbitant operation expenses continue to financially deplete Kaodim and its operations. Inflation also played a big role in cutting customer purchasing power, which in turn affected the company’s revenue. Even though these macroeconomic factors were beyond Kaodim’s control, untimely the weaknesses of the business model and establishing sustainable customer ties was the main factors to their downfall.
Looking at Kaodim’s story, there is a lot that every budding entrepreneur can learn from their collapse. Firstly, although fundraising can be valuable to startups to gain time and test their strategies, and it can also hide multiple problems within the models currently being used. Kaodim was able to raise USD 17.6 million allowed it to grow rapidly but consequently kept a company with a flawed business model afloat. Venture capitalists will only prop up a company by providing outside funds; the founders should make sure they correct all the foundational problems in their business. Second, the matter of how to make customers remain loyal to sellers in the marketplace context is critical for all marketplace models. Kaodim’s inability to lock in customers after their first service of the platform meant the company lost huge opportunities to follow revenue, a fatal flaw in service-based models.
Kaodim’s story illustrates what future founders should avoid. A complete business failure can be blamed on external factors, such as global pandemic or inflation, but in most cases it is due to failure of the business model. Managers must remain absolutely strategic when building a business model with scalability while also ensuring customer loyalty. To avoid history from being repeated, businesses must pay close attention to the customers, guarantee they provide differentiation, and constantly adjust to the environment.
