Karachi-based last-mile eCommerce delivery startup Rider has announced raising $2.3 million in funding to enhance its product offering for SMEs, strengthening the middle-mile presence and geographical expansion within Pakistan.
The recent round was led by venture capital (VC) firm Global Founders Capital, Fatima Gobi Ventures, and Asian Development Bank. The round also saw participation from Pakistan’s TPL E-Ventures and Transhold.
Profit was able to verify the funding amount and can confirm that the amount was $2.3 million. This amount, however, was not raised in one go.
Pakistan’s eCommerce is tiny, forming only about 1-2% of the overall retail, but has been growing. Rising e-commerce demand drives logistics growth and as a result of accelerated digitisation driven by the COVID-19 pandemic, Pakistan’s e-commerce market is projected to record a compounded annual growth rate of 16%, reaching $10 billion by 2025 from its current value of about $2 billion.
The logistics market, a key cog that supports Pakistan’s e-commerce growth, is incredibly fragmented, with traditional players and second or third-generation startups competing for a share of the high-volume, operationally-driven industry.
Launched in 2019 by Salman Allana, Rider provides a last-mile eCommerce delivery network for partners which include Sapphire and Khaadi for efficient deliveries through a predominantly tech-first platform. Allana has previously served as head of strategy at shipping and logistics company UPS Pakistan.
Prior to UPS, Allana served as assistant vice president at CitiBank.
Rider today claims to have coverage in over 80 cities across Pakistan where parcels can be delivered, with shipper clients including Pakistan’s top five online retailers such as Khaadi and Daraz. The startup says it has a 500-strong delivery agent fleet, is easily scalable at peak
times, which has thus far delivered more than 1.5 million eCommerce parcels across Pakistan with a success rate of 93%.
‘Cash Now, Deliver Later’
The business of logistics has thus far been dominated by TCS, followed by Leopards Courier, which has been focused on delivering courier documents for clients that include federal and provincial governments and corporations. The legacy logistics infrastructure TCS and Leopards hinders the efficiency of these companies when it comes to eCommerce deliveries, which requires a high success rate and a better customer experience for it to be a compelling proposition for online retailers.
Most of the online retailers are small and thus a small inefficiency in the delivery cycle is likely to hamper their growth by disrupting cash flow, increasing costs of doing business, and unsatisfied customers.
Startups like Rider claim to be removing the inefficiencies of the big logistics companies through a technology-first platform, which is automated from the time rider picks up a parcel from the retailer to delivering it to the end customer. Besides Rider, startups Trax and Swyft Logistics are also gunning to be the disruptors in the eCommerce delivery market.
On the other hand, PostEx, which also launched at the end of 2019, positions itself as a fintech startup that offers upfront invoice values to online retailers and then takes care of their deliveries – a different model than Rider, Swyft and Trax which focus only on logistics. PostEx recently raised $1.5 million in seed round whereas according to sources, Swyft and Trax are also in the process of raising new rounds.
Rider CEO Salman Allana tells Profit that they have also launched a new product called ‘Cash Now, Deliver Later’ (CNDL) which primarily competes with PostEx’s proposition of paying cash upfront to merchants for their deliveries.
“Cash Now, Deliver Later is a play on buy now pay later. It is a great and interesting product, however, you need to have a very diversified shipper base to control your cash flow and to have insight into that shipper’s overall success,” says Salman.
“When you onboard a certain shipper and you gave him Rs1,000 upfront but you come to know that 60% of all the orders were returned, you are left with a hole in your pocket and that starts to add on very fast. So we feel that we have launched CNDL, but we see certain challenges in the market with that product and will we roll it out cautiously. Our model is a little different from PostEx in that we have a combination of large shippers whose cash of capital is cheaper than ours, so they do not need that product but for the SMEs, it is definitely a key attraction for them to get that money upfront,” adds Salman.
The launching of the CNDL product also diversifies Rider’s market from large fashion stores like Khaadi and Sapphire to a focus on SMEs, Instagram and Facebook stores – a market that consists of small sellers, with big cash flow problems because of long delivery cycles with TCS and Leopards. Both Rider and PostEx pay these stores a value of their invoice upfront, thereby helping them with their cash flows and then do the deliveries for them.
Covid has provided the impetus to eCommerce in general and hence Rider says that their growth has been 150% year-on-year, from September 2020 to September 2021, in terms of delivery volume.
“Over the last quarter, we witnessed 37% growth quarter-on-quarter for the total number of orders collected,” he adds.
How would the funds be utilised?
Rider had been focusing on strengthening its middle-mile presence for a more efficient and cost-effective inter-city delivery network. It had earlier been doing that through a B2B trucking vertical that would not only serve as a marketplace for truckers and shippers but would also deliver parcels from one city to the other, and Rider’s last-mile fleet would then deliver the parcel to the customer in the city where it was to be delivered.
Allana tells us a portion of the funds is going to be utilised towards strengthening the middle-mile through the B2B trucking platform, which had earlier been in pilot phase and would now commence towards a commercial launch.
With the middle-mile is going to come market expansion in terms of having a presence in other cities through cost-effective first-mile hubs, but not the large consumer-facing ones. “The expansion into the new cities is focused on offices that are the dark store equivalents of a hub. It is a pure first-mile hub and distribution centre combined in one whereby operations are being run, pickups are being handled and deliveries are being done. So it is not a client-facing point; it is more for our internal operations,” Allana says.
Allana says that they have been adding new cities like Gujranwala, Rahim Yar Khan, Bahawalpur and Sukkur, and with the proceeds that have arrived, they would be expanding to more cities like Quetta.
“The short to mid-term goal is to build exciting products that help us achieve end to end eCommerce logistics that we had. Our funds will also be going towards enhancing products for Instagram and Facebook sellers and how to get them enabled a lot quicker and faster,” he says.
What do investors say?
Ali Mukhtar, General Partner at FGV, said: “We are excited to join Rider’s journey towards building a tech-driven end-to-end logistics solution for Pakistan and the region. Rider’s belief that ‘technology moves everything’ has already raised the bar on delivery lead times, cash repayment cycles and delivery success rates in Pakistan’s logistics industry. With so many customer-centric and problem-solving solutions on the horizon, we cannot wait to see how far Rider’s tech offerings will go in supporting Pakistan’s e-commerce growth ambitions.”
Jay Lim, Venture Partner at Global Founders Capital, said: “GFC believes that Pakistan’s startup scene is primed to grow rapidly in the next few years, especially within the commerce space. We have invested in a number of founders in Pakistan recently and will invest in more in the coming year. Founders like Salman from Rider will play one of the most important roles in developing last-mile logistics as well as the entire logistic infrastructure necessary to propel Pakistan’s commerce forward”
