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What’s Fresh? Grocery Startups!

By Saad Ayub, Published: September 19, 2016

MIT Technology Review Pakistan catches up with two new grocery players in startup town.

What is driving an increasing number of entrepreneurs to pursue grocery related startups in Pakistan?

“Every house is a possible customer,” says Muhammad Nowkhaiz, founder of the milk, and fresh produce delivery startup Expressing a sentiment that is shared across the board with other grocery startups operating in Pakistan.

While the grocery business gains momentum globally, it isn’t surprising to see that it is finally getting its due traction here. CB-Insights,  the venture capital database reports show that by May 2016, grocery related startups had raised $429 million globally. In contrast,  meal delivery companies only raised $352 million during the same period. Last year, Instacart was named America’s largest grocery startup with a valuation of $2 billion. However, grocery delivery startups are older than you may think. They predate Facebook with the first wave of grocery startups tanking with the burst of the dotcom bubble in the early 2000s. Is the current wave of app and online grocers on their way to start an era where visiting the grocery store will become an activity of the past?

Present social trend states otherwise. There is a gradual progression with the adaptation of said startups but the majority of consumers are still inclined towards more traditional means of grocery shopping. Taza Daily, a startup that aims to change the pace at which the technological solution to grocery shopping is accepted is treading tactfully.  “We’re currently limiting our distribution clientele to the DHA Lahore Area,” adds Nowkhaiz citing the relatively higher technological literacy of the posh locality, further stating that orders received by other means besides website booking were also being entertained. With focus on dairy, tazadaily is looking to capture an existing market and growing towards offering a wider range of products. Founders Haider Ali Changazi, and Muhammad Nowkhaiz have set their base of operation at the Plan9 space hopeful of the large market waiting to be catered to.

On the other hand, Ali Wasim founder cart99.Pk states that delivery costs via motorcycles are very cheap, making it easier for the business to expand into a greater number of areas. Wasim initially received orders via whatsapp after advertising the business through flyers. Having been overwhelmed by the number of orders, he left his job in the finance industry to concentrate on this. Wasim believes that the present model of fresh produce dispatch to the consumer is heavily dependant on middle men; from vendors in the farmer’s market, to buyers in the field. “The room to cut logistical cost is great,” he says. The entrepreneur believes that fresh produce and grocery startups being able to purchase directly from the producers is the scale set for the ultimate success for business entities like his own.

Also Read: Building Pakistan’s First Truly Digital Cash Experience

Sabzi.Pk, the startup considered to be presently the biggest player in the online grocery business in Pakistan has had financial success through business to business transactions according to industry sources. The startup made news in July earlier this year after closing a seed funding deal at $7.5 million with a Pakistani retail conglomerate. With access to such financial resources, will create a space that makes it difficult for newcomers to survive in the sector?

Grocery and fresh produce has historically remained a personalized experience in Pakistan, with many mega retailers like Metro, and Hyperstar not entering the market up until the late 2000s. The change in the grocery landscape with startups is driven primarily by technological literacy. With internet usage growing exponentially in the country, the prospects for providing a basic need like grocery through tech are financially huge.

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  1. Arzish Azam said:

    Hate to break it but Nowkhaiz not every house is a possible customer, only those with Internet access are. Plan9 has previously graduated grocery delivery startups RabbitDrop which shut down. Even in India grocery delivery is a very difficult market because of low margin high velocity and market leaders shut down grocery delivery from their model due to various reasons. InstaCart cannot be compared in this case because Pakistan is an entirely different market and anyone who’s been to US knows that FMCGs work in a different way there. Even the grocery delivery startups that are surviving in India have extensive experience of offline grocery industry and supply chain.