Retail analysts who only monitor Western markets may be surprised to find that e-commerce is not a dominant factor everywhere – in Pakistan, for example, only 3% of retail sales are made online, despite being a country where 70% of the population is. have a smartphone. The biggest obstacle to greater online retail adoption is that shoppers have had a bad experience trying e-commerce — something the logistics startup company Rider, which is announcing a $3.1 million seed funding round today, hopes to rectify. .
“When e-commerce arrived in Pakistan, the response from the logistics industry was to cut and paste the model it had used for the past 150 years to deliver mail and freight,” explains Salman Allana, Rider founder and CEO. . “It turned out to be a disaster very quickly.”
Retailers selling products online in Pakistan often face major problems, explains Allana. No less than 20% of deliveries do not reach the consumer 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 drivers have collected cash and the logistics provider has reconciled the bill, merchants often have cash flow problems.
“Our thesis at Rider was that if we started small, solved problems one at a time, and then optimized the solution before moving on to the next problem, we could make e-commerce work much more effectively,” says Allana.
So it has been proven. Rider set up shop in Karachi in 2019 with just four staff members and made just 10 deliveries in the first month. But three years later, the logistics network covers 60% of Pakistan’s population in 60 cities across the country; it has now made over 3 million deliveries and the workforce is approaching 700.
Rider’s advantage over the established logistics providers in Pakistan is that Allana and his team were able to build a business from scratch. Operating through 16 hubs across the country, the company picks up products from merchants who have received an online order and scans them to decide which hub to go to. Once the product arrives at the hub, it is re-scanned and sent to a delivery center, from where it is assigned to a bag to be picked up by a Rider delivery person.
About 80% of these agents are employed directly by the company, with the remainder coming from the gig economy to provide flex and scale-up potential. Agents get automated routes, calculated for maximum speed and efficiency by Rider’s software. The aim is to provide an Amazon like next day delivery service with much greater success rates than the established logistics companies in Pakistan; currently completed deliveries are at about 91%, Allana says.
The big picture is that online merchants using Rider’s delivery service can feel much more confident that their customers’ orders are being fulfilled – and that customers will place further orders as a result. Rider connects to merchants’ IT systems via APIs or, particularly with smaller businesses, it can provide an order management system that they can use with their customers while linking to the business.
Another feature Rider is proud of is its cash collection technology. Once 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 few days of their sale, rather than having to wait several weeks like in the past.
“It’s all about improving the speed and efficiency of deliveries,” says Allana. “If consumers can trust that they will actually receive their goods and sellers have a partner they trust to deliver, we will see e-commerce accelerate quickly.” And that’s good for Rider, of course – he earns a living by charging a fee for each delivery, based on package weight and distance to destination.
The potential is huge, says Allana. “Retailing is north of a $150 billion industry in Pakistan, but it’s stuck in bricks and mortar,” he says. “Through our platform, one mile at a time, we are empowering the industry to transform.”
Investors are embracing that tone. The company raised a pre-seed round last September, and today’s additional funding brings the total amount raised by the start-up to $5.4 million. This latest round includes investments from YCombinator, i2i Ventures, Flexport, Soma Capital and Rebel Fund. Existing investors, including Global Founders Capital, Fatima Gobi Ventures and TPL E-ventures, also offered further support.
Allana says the money will be used for further investments in refining the product, largely through an enhancement of Rider’s technology. The company is also committed to improving the user experience to make it easier for more merchants to get online.