Remember the olden days when you could hear thelaywalas pass through your street, screaming on top of their lungs and you could just stop them to buy some fruit, vegetable or even fish? Well, now they are on steroids and branded as tech startups. Triggered by the pandemic, a number of e-commerce players have emerged promising to deliver you groceries and other stuff in 30 minutes or less, paving the way for the world of quick commerce. And the investors seem to be absolutely sold on it. And are willing to throw their buck behind it as recent mega-rounds globally, such as GoPuff’s $1.5 billion or Turkish Getir’s $1bn, have shown.
Given the globalised nature of tech and venture capital, Pakistani startups have also tried to cash in on this wave with Airlift bagging $85 million Series B and Krave Mart announcing a $6m pre-seed round for 10-minute deliveries less than a month into operations. Then there’s Pandamart which launched towards the last quarter of 2020 and seems to have grown rapidly since then.
But how does it really work? E-commerce players of all sizes find logistics to be a major headache but now to do it in less than 30 minutes, that too with a fleet of independent contractors? Doesn’t it sound like a huge operational challenge to ensure everything from product availability and packing to pick up and last mile in such a small window? To have control over the product as well as pricing, companies buy inventory which is then stocked up in dark stores — sort of small warehouses in the middle of cities that are much cheaper than retail outlets because of their no-fringe approach. Depending on the promised delivery timing, more dark stores need to be built and the radius brought down accordingly.
Until a thing is there, people don’t know they need it — if Henry Ford would have asked people what they wanted, they would have said faster horses
That means Krave Mart — founded by a team that includes former Daraz CCO Kassim Shroff, Swvl General Manager Ahsan Kidwai and Foodpanda execs Haziq Ahmed and Hammad Bawany — for its 10-minute offering will need more stores spread out over shorter radii compared to other players. “Our upcoming expansion beyond Karachi will take us to 30 dark stores by the next month, with each operating in a radius of around 2.5-3km,” says Krave Mart CEO Kassim Shroff.
On the other hand, Airlift claims operations in eight Pakistani cities through reportedly some 30 dark, in addition to serving Johannesburg, Cape Town and Pretoria in South Africa as part of its international expansion. Meanwhile, Pandamart is present across five cities in the country and lays claim to 51 dark stores each serving a radius of roughly 5kms.
To have your stuff delivered in less than 30 minutes is surely convenient, often made better by the fact that there is a venture capital firm more than happy to subsidise your impulse purchases. But the question is, how many items does a customer truly need in such a short time window?
“You can roughly divide your grocery shopping into three categories: the monthly raashan, top-ups for stuff that’s run out, and adhoc which is like cravings that need instant fulfilment. The second and third categories are where a user is usually willing to pay a premium but have a more limited range of products as well as a low average order value. On the other hand, the first one is more planned shopping, often treated as a family experience, with higher price sensitivity,” says Muneeb Maayr, the founder and CEO of Bykea, which also has a delivery vertical. But unlike the other players, the company has long argued for a more hyperlocal model as it’s much more asset-light and doesn’t require the cash burn characteristic of dark stores. What that means is you can use their app to select from a generic assortment of some 800 stock keeping units (SKU) and the rider will buy the stuff and deliver it from a nearby store.
However, other players don’t necessarily agree with this approach. “You need to have control over your supply chain,” says Mr Shroff. Ibad Ahmed, who is the Director of New Verticals at Foodpanda and oversees Pandamart, has instead gone for a hybrid offering. “We have two models: one is the dark stores which is basically Pandamart and then there’s the shops model, which is what we originally started with soon after the onset of the pandemic,” he says.
“There are merits of both the models, one has more longer-term benefits and the other has easier shorter-term gains. But the marriage of the two is very important to us as it helps to be the platform of choice. In terms of adoption, for many people trusting a new brand might not come so naturally so we want to ease them into the lifecycle of groceries and more getting delivered to their doorstep from their preferred brands. That means more and more adoption of us as there are certain things that we can offer through dark stores which are not easily translatable in shops. The most obvious one is if you partner with someone, they don’t give you access to their inventory and very understandably so. With Pandamart, what you see on the app is what’s available,” continues Mr Ahmed.
That need to ensure control over inventory and some stake in the margins has even prompted Bykea to experiment with the dark side as it partnered with Chase Up earlier this month to open a warehouse, serving as the lead generation and last-mile provider while the retail giant will manage the warehouse operations. However, the offering is a slightly longer haul with promised delivery timings between one and two hours. This is part of the ride-hailing startup’s broader shift towards deliveries as it looks to achieve a mix of around 65 per cent mobility and 35pc commerce from the current 75-25, COO Rafiq Malik tells Dawn.
In any case, questions regarding the small range of products and low average basket size are still left unanswered. After all, how many items are there that you or I would want to be delivered in such a short duration? And surely, they can’t add up to much, right? Well, that might be true in theory but the existing players haven’t really limited themselves in terms of SKUs. For example, Pandamart and its ‘shops’ vertical currently has some 20,000 products on offer, from a packet of chips to hair straighteners — helping q-commerce verticals to now account for a fifth of Foodpanda’s gross merchandise value. Similarly, Airlift — in a bid to pump up the average order value — was selling iPhones on discounts until some time back.
On the quick part, Mr Ahmed considers it a natural evolution of the customer experience. “Until a thing was there, people didn’t know there was a need,” he says. Haziq Ahmed, the COO of Krave Mart, quotes Henry Ford to support his argument: If I had asked people what they wanted, they would have said faster horses.”
In any case, who am I to complain as a user considering my stuff is getting delivered within no time and often at discounts? May the capital frenzy forever continue to fund my impulse purchases.
Published in Dawn, The Business and Finance Weekly, January 31st, 2022