‘We want to be the largest retailer in Pakistan in 10 years’
Ahmad Saeed is the CEO and Co-Founder of GrocerApp which enables users to order their groceries, including fresh fruits, vegetables, meat and dairy, through its web and mobile apps. After completing his bachelor’s from the Lahore School of Economics, Ahmad joined PakWheels in 2010 as the Marketing Manager. Ahmad left PakWheels as the Chief Operating Officer in 2015, with a team of over 200, after the company secured a funding of $3.5 Million from Frontier Digital Ventures.
Ahmad co-founded GrocerApp in 2016 with Rai Bilal and Hassaan Sadiq, after realizing the gap and potential in the online grocery delivery space in Pakistan. After its $1 Million seed funding in 2020 lead by Jabbar Internet Group, GrocerApp raised $5.2 Million in a Series A round lead by Hayaat Global in June 2021. Following are the edited transcripts of a recent conversation BR Research had with Mr. Ahmed Saeed:
BR Research: How did you come up with the idea of a grocery app?
Ahmad Saeed: We realized the need to create a platform that would cater to the grocery delivery needs of all, aiming to have the lowest prices, largest assortment and provide same day delivery. That’s how we started GrocerApp in 2016.
BRR: How would you describe the impact of COVID-19 pandemic on consumer behavior and demand, and your app?
AS: It’s a general phenomenon in Pakistan that females in a household rely on male for grocery shopping. And GrocerApp addresses that gap with the availability of an online platform that helps you buy anything at the ease of just a few clicks. The concept of online groceries was already there in the country. What COVID did was it accelerated the whole transition process that could have taken longer to bring these many online orders. Now people are more open to online delivery services. It might have taken 2-3 years to get where we are today, but this shift was inevitable. COVID acted as a catalyst.
However, be mindful that the COVID factor as a promise by online delivery services is not enough anymore. These promises won’t work for too long; online platforms and marketplaces need to make sure that they provide quality, assortment range, different SKUs, competitive prices as good as a modern trade store, etc. These are a few factors that will make consumers experience ecommerce, be content and stick to it.
BRR: Could you share some growth numbers that GrocerApp has witnessed over the past one year?
AS: When we first started in 2016, we had a marketplace model which we were building for the grocery retailers. We explored that model for two years with limited funds at that time. However, we realized these retailers had their own inventory management challenges; and we didn’t have control over pricing and quality. And as a result, consumer didn’t stick to us.
In March 2019, we pivoted from the marketplace model to fulfilment model. The technology that we were building for our partners such as warehouse management system, guided picking etc., we started building for ourselves. We worked really hard in the fresh produce segment where our team visited the ‘mandis’. So, in February 2020 – almost one year later - when COVID struck, we already had increased our revenue with the new model by 10 times. We were growing at a very fast pace. The revenue doubled in COVID and during the first lockdown; we had to tweak the operations to handle the rise in demand from March till June 2020 in Lahore.
Once the lockdown was over, we scaled our operations with a seed investment round of $1 million and expanded to Islamabad and Rawalpindi. Our revenue for last month was around $1.2 million. Our average order value is around $16. Our Lahore business brings around 75 percent of the revenue, while 20-25 percent of revenue comes from the twin cities. Only last month we launched in Faisalabad, and may I add here, Faisalabad has scaled much faster in its first month of operation than Islamabad when we launched there in September 2020 because we now know what strategies would work in terms of pricing, assortment range, SKUs etc.
BRR: GrocerApp has raised $5.2 million Series A this year. What will the funds be used for this time?
AS: Last year we raised $1 million funding, which was used to increase the existing warehouse capacity in Lahore and scale the business to one more market: Islamabad/Rawalpindi with equally good service metrics. The warehouse capacity in Lahore was increased from 8,000 sq ft to 25,000 sq ft.
This year we have raised $5.2 million, which we plan to use for scaling in all tier-one markets. This year we will focus on Faisalabad and Karachi. We will also be focusing on setting up larger facilities within the cities. Our second fulfilment facility in Lahore is coming up with a warehouse capacity of 40,000 sq ft. And we have scaled Islamabad facility from 10,000 sq ft to 26,000 sq ft.
And third, we want to invest in farm-to-table supply chain; we were buying from the markets initially (mandis), but now we are setting up our own collection centers where we will be working directly with the farmers. We are already working with nine different farmers in Lahore and Islamabad. We will be investing heavily in this model and have more farmers on board in our model; we will be helping farmers increase their yield; we will be giving them direct access to consumers; and most importantly, we will be getting our consumers better quality and better prices. Our first collection center is live in Lahore.
We will also start exploring ways to scale to tier two markets, but that will happen later this year. Right now, our focus is tier-one cities and achieve a city-level profitability by year-end where Lahore is on a very clear path to profitability.
BRR: What kind of challenges do you face be it the regulatory environment or the general consumer behavior?
AS: To be honest, replicating the traditional grocery shopping experience online is a challenge - particularly of fresh produce. However, fruit, vegetables and other fresh produce can also be the greatest differentiator for online marketplaces in terms of superior quality and price for the consumer. For this, we have our collection centers, multiple quality teams at all fulfilment centers, and quality checks after packaging and delivery etc. The weather in Pakistan is very harsh, so we are extra vigilant and train our riders to check quality before delivering the order. Still our customer support department is trained to replace or refund in case there is a complaint on quality without any further questions asked.
Another key challenge is finding the right resources who fit with our mission and vision. That entails building up a team for a startup. We are hiring across all departments from engineering to marketing to quality control.
Third is the funding challenge for the startups. We have raised funding from international investors to make sure that we have enough funds to scale till the time the business is sustainable.
And then there are supply chain problems including the vendor - retailer chain or warehousing challenges that we are streamlining trough technology.
BRR: Where do you see GrocerApp in the next 5-10 years?
AS: The objective is to address the grocery challenge in Pakistan, and our vision of the company is to be the largest retailer in Pakistan in 10 years. The Pakistani market is very fragmented, but we believe that if we scale well and give a good experience to consumers, there is a high chance that we can build a billion-dollar company in the retail sector. For that we definitely have to scale to tier two and three markets. Warehousing might not be the most viable idea for these tier-two and three cities for which we might have to do things differently.
BRR: There is a rising trend of funding by venture capital funds in startups including the B2B online marketplace category in Pakistan with total disclosed funding of over $100 dollar in the 2021 so far. What has invigorated the investor interest?
AS: Pakistan is a huge untapped market, which is a great incentive for any investor or brand. However, a key factor driving the recent interest by VCs is the fact that 4G arrived in the country much later than other countries in the region. With 4G, there has been an increase in internet penetration and smartphone adoption, which has laid the ground for FinTech, EdTech, online groceries, and other startups to come in and attract investors.