Start-ups battle to lead last-mile delivery market in Pakistan

KARACHI: A new wave of tech start-ups is cropping up in Pakistan to provide logistics to ecommerce businesses with big names, including ride-hailing Careem having ambition and resources to lead the last mile delivery market.

Boasting of half a million drivers (also known as captains), Careem seems to emerge as the torch-bearer in the logistic business, especially considering a fact that it’s already operating a delivery service in Dubai, its hometown.

The company was recently acquired by its US-headquartered rival Uber for $3.1 billion. A tech veteran, who’s been vying for a share in the $35 billion logistics market, said Careem is well-heeled to corner the market. Then, there is a new entrant in Pakistani shared-economy from Egypt Swvl that promised $25 million in the mobility space. “Their customer base is strong and they have good number of riders, but taking onboard merchants is difficult,” Ahmed Khan, co-founder of Cheetay.pk, said.

Cheetay has at least 250 riders to spring up for delivery and caters to consumers within a radius of 10 kilometers unlike its rivals FoodPanda and Delivery Chacha covering half the distance. So, basically the platform caters to customers who live within this distance to desirable merchants. Cheetay.pk is a new breed in the ecommerce landscape as it entered the market to capitalise on consumers’ growing interest in online shopping and tech use for availing utilities. The core operation of the platform is fulfillment or logistics, although it tags up online retail marketplaces on its platform to let consumers benefit from discovery as well.

Cheetay delivers grocery, foods and health products. The fulfillment platform picks products from retailers and drops them at customer’s doorstep and collects money. Its logistics business kick-started in 2015 in Lahore and is gradually rolling out in Karachi and Islamabad. “Ecommerce businesses are not geared towards logistics,” Khan said, referring to need of logistic firms that handle their transactions through automation process. Ecommerce business has specialty to source products and build categories.

“Alibaba’s Daraz has reached to a scale where it can develop its own logistic cell,” he said. The ecommerce sensation is doing this to some extent.

Khan was in the core team that set up Daraz in 2012 as a project of Germany’s incubator Rocket Internet. The ecommerce platform was recently acquired by a Chinese e-retailer Alibaba. A conservative estimate puts the transaction value at as much as $150 million. Logistic firm TCS started its ecommerce business at the same time. But, it couldn’t reach to the height Daraz has touched.

“Technology company has a different DNA,” Khan said. “An important aspect in logistics is to capture the density and batching. That means one rider has to have more than one orders when he is out in the field.”

Foreign early-stage investors and venture capital firms are taking increasing interest in such start-ups in emerging and frontier markets, including Pakistan, but lack of trust makes new businesses to be incorporated outside the country to market and sell their equity.

Fatima Ventures is a popular local venture capital firm – a term used to define a consortium of investors who acquire equity against investment in start-ups.

“The ticket size of local VCs is used to be small, one hundred thousand or so,” Khan said whose company has so far raised $11.5 million in a combination of seed money and series A from international private individuals.

The fund was raised through convertible notes that entailed equity size to be determined at a later stage.

“This is difficult to gain trust of investors on convertible notes,” said Cheetay’s executive whose company was first registered in Dubai and now is incorporated in British Virgin Island.