Retail analysts who follow only Western markets may be surprised to discover that e-commerce is not a dominant force everywhere – in Pakistan, for example, just 3% of retail sales are made online, despite this being a country where 70% of the population have smartphones. The biggest obstacle to increased adoption of online retail is that shoppers have had a poor experience when trying e-commerce – something that start-up logistics business Rider, which is today announcing a $3.1 million seed funding round, hopes to put right.
“When e-commerce arrived in Pakistan, the response of the logistics industry was to cut and paste the model it had used to deliver mail and freight for the past 150 years,” explains Salman Allana, founder and CEO of Rider. “It very quickly descended into disaster.”
Retailers selling products online in Pakistan often run into big problems, Allana explains. As many as 20% of deliveries don’t make it to consumers because it is often difficult to find the right address; as a result, many shoppers don’t bother making further deliveries. Also, Pakistan has a cash-on-delivery culture and by the time delivery agents have collected cash and the logistics provider has reconciled the account, merchants have often begun suffering cashflow problems.
“Our thesis at Rider was that if we started small, solved problems one by one, and then optimised the solution before moving on to the next problem, we could make e-commerce work much more effectively,” Allana says.
So it has proved. Rider set up shop in Karachi in 2019 with just four members of staff and made only 10 deliveries in its first month. But three years on, its logistics network covers 60% of Pakistan’s population in 60 cities across the country; it has now made more than 3 million deliveries, and staff numbers are closing in on 700.
Rider’s advantage over Pakistan’s incumbent logistics providers has been that Allana and his team were able to build a business from scratch. The company operates through 16 hubs across the country, picking up products from merchants who have received an online order and scanning them in order to decide which hub they need to go to. Once the product arrives at the hub, it is scanned again and sent to a delivery centre, from where it is allocated to a bag to be picked up by a Rider delivery agent.
Around 80% of these agents are employed directly by the company, with the rest sourced from the gig economy in order to provide flex and scale-up potential. Agents are given automated routes, calculated for maximum speed and efficiency by Rider’s software. The aim is to provide an Amazon-style next day delivery service with much greater success rates than Pakistan’s incumbent logistics businesses; currently, completed deliveries are running at about 91%, Allana says.
The big picture is that online merchants using Rider’s delivery service can have much greater confidence that their customers’ orders will be fulfilled – and therefore that customers will place further orders. Rider links to merchants’ IT systems through APIs or, with smaller enterprises in particular, it can provide an order management system they can use with their customers while linking to the company.
Another feature that Rider is proud of is its cash collection technology. As soon as agents collect payments when making their delivery, Rider’s digital tools enable it to consolidate the merchant’s account. That means retailers get paid within a couple of days of making their sale, rather than having to wait several weeks like in the past.
“It is all about improving the speed and efficiency of deliveries,” says Allana. “If consumers can be confident they’ll actually receive their goods, and merchants have a partner they trust to deliver, we’ll see e-commerce accelerate rapidly.” And that, of course, is good for Rider too – it earns a living by charging a fee for each delivery, based on parcel weight and distance to destination.
The potential is huge, argues Allana. “Retail is north of a $150 billion industry in Pakistan but it is stuck in bricks and mortar,” he says. “Through our platform, one mile at a time, we are enabling the industry to transform.”
Investors are embracing that pitch. The company raised a pre-seed round last September and today’s additional financing takes the total amount raised by the start-up to $5.4 million. This latest round includes investment from YCombinator, i2i Ventures, Flexport, Soma Capital and Rebel Fund. Existing investors including Global Founders Capital, Fatima Gobi Ventures and TPL E-ventures also provided further support.
Allana says the cash will be used for further investment in refining the product, largely through a strengthening of Rider’s technology. The business is also committed to improving the user experience, to make it easier for more merchants to get online.