South African e-commerce startup TUNL gets funding to accelerate growth of its exports platform

TUNL, a South African parcel shipping platform, has secured $1 million in pre-seed funding from investors, including Founders Factory Africa, Digital Africa Ventures, E4E Africa, and Jozi Angels.

The platform, which claims to help e-commerce merchants save between 50% and 80% on international shipping costs, said the funding will fuel its expansion in its primary market, South Africa, and lay the groundwork for its launch in other key African and emerging markets.

CEO Matthew Davey and COO Craig Lowman founded the company in 2022 after Davey sought to solve a challenge he faced as the managing director of a Dutch company that imported South African engineering materials into Europe. The process of moving these materials was cumbersome and expensive, Davey remarked in an interview with TechCrunch, and the experience led him to realize the widespread issue of high shipping costs, particularly for smaller businesses in emerging markets like South Africa.

The current challenges in cross-border shipping cost African businesses an estimated $50 billion annually in missed opportunities. TUNL’s founders identified a recurring issue among small- and medium-sized South African merchants during the pandemic: Shipping costs sometimes surpassed the value of their products. This was true even for high-quality items like textiles, clothing, footwear, camera accessories, and specialized components, despite the presence of major courier services such as DHL, UPS, and FedEx.

Typically, merchants in Cape Town might offer only a single shipping option, such as DHL, to customers trying to buy their products abroad. For instance, a backpack could cost $60, and the shipping cost from South Africa to the U.S. could be around the same price of $50 to $60, negatively impacting conversion rates. What TUNL has done is form partnerships with courier services like UPS and FedEx, secure suitable rates, and subsidize SMEs’ shipping costs by 50% to 75%.

“Our pricing is completely transparent and democratized. We want to ensure that every business, large or small, can have an equal chance to convert overseas sales by reducing the cost of shipping as much as possible,” said Lowman in a statement.

On the TUNL platform, merchants offer customers various shipping options during checkout. This includes an “economy” option with the shipping cost baked into the product price, enabling free shipping via TUNL’s courier service with a slightly longer delivery time (around 10 to 14 days) to reduce cart abandonment during checkouts. Alternatively, customers can opt for faster shipping options (within a week) with FedEx or UPS at a more reasonable cost, like $10 for the same backpack, enhancing flexibility and potentially improving conversion rates (the exact price may vary based on destination and weight but is a consistent ballpark figure, according to Davey).

“It’s all about helping the merchant succeed because if you have one shipping option at checkout that’s expensive and the customer has two choices, they can abandon that cart or decide to pay the money,” said the CEO. “But if you introduce two shipping options, especially one that’s free, the human psychology drives the customer to pick one of those two rather than abandon the cart.”

Primarily, the e-commerce merchants in South Africa using TUNL tend to send most of their products to the U.S., the U.K., Europe and Australia; Davey said two-thirds of the parcels end up in the U.S.. Since its launch, TUNL, which competes with platforms such as Ivorian startup and DHL-partner ANKA, has grown 35% month-on-month, with over 700 merchants now part of its “shipping club.” TUNL’s merchants have shipped over 8,000 international parcels in 2023, representing exports from South Africa worth R19.5 million, the company said in a statement.

The two-year-old e-commerce platform makes money by taking margins on the orders placed on its platform. It handles a diverse range of products, including backpacks, fashion footwear, arts and crafts, books, nanofiber materials and high-performance springs, various types of furniture, musical instruments, and nonperishable products like cosmetics. South Africa is known for its wine industry, with exports reaching 368.5 million liters last year. And though wine (alcohol) shipping hasn’t been included yet as part of exported items on TUNL due to existing restrictions, Davey says the startup is currently in discussions with one of the largest wine subscription businesses in South Africa to venture into that business potentially.

“We’re getting messages from merchants saying we’ve transformed their business. They’re adding new employees and growing because of us. And so it’s a win-win for the ecosystem that we can help merchants feel that the South African market is not the only market they can serve and can see the world as the market,” he said. “We’re all about like merchants success, helping them grow internationally, because the consumer markets overseas are just so much bigger than the domestic markets for these sorts of products.”

Davey said that TUNL, whose monthly revenue is approximately $60,000, will now focus on using its seed funding to improve sales and the onboarding process for new merchants. Notably, it has streamlined the onboarding experience, primarily relying on customer support assistance to a more self-service approach.