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E-commerce companies may have flourished in recent years, but across emerging markets, inconsistent postal systems or the absence of physical addresses continue to stifle their efforts to deliver items to their customers in a timely manner.
"People talk about the boom in e-commerce all the time... but in order for e-commerce to boom in emerging markets, you really have to figure out the logistics part of it," said Joy Ajlouny, co-founder of Fetchr, a Dubai-based delivery app.
The shipping and logistics start-up is able to circumvent the GCC's postal issues by using the global positioning system (GPS) coordinates on a customer's mobile phone to accurately pinpoint the delivery location.
"We are building an on-demand logistics service that can cater to the whole ecommerce segment," explained Idriss Al Rifai, the company's co-founder and chief executive.
Fetchr provides businesses a number of different services, including same-day delivery and return; cash on delivery; inventory management; picking and packing; and international shipping, Al Rifai explained.
The start-up cofounders are no strangers to the frustrations in delivering products to customers in the region. Ajlouny founded Bonfaire, a fashion e-commerce start-up operating out of Silicon Valley that was eventually acquired by Moda Operandi. Al Rifai, meanwhile, was head of operations at the Dubai-based e-commerce company MarkaVIP before founding Fetchr. Both saw logistics as a major pain point in their industry.
It came as no surprise then that businesses were quick to recognize the benefits of Fetchr, which also caters to the needs of individuals planning to send or receive any item. The app allows users to take a picture of the item they wish to send, choose the delivery time and even track the delivery in real time.
Power of mobile
Ajlouny and Al Rifai believe that smartphones have become ubiquitous - a can't-do-without gadget in today's tech-savvy world. People carry their devices anywhere they go, which is why mobile phones are at the center of Fetchr's business model, as customers may wish to receive their parcel outside of their respective homes.
"Everyone lives on their phones, you use your phone to shop for everything and we want you to use your phone to ship everything, anywhere. That is the vision of our company," said Ajlouny.
The firm is expanding quickly with operations in the UAE, Saudi Arabia and Bahrain. "GCC is just the starting point. We are planning to be in about 12 markets by the end of next year," the co-founders said.
The lack of postal addresses is not exclusive to the GCC, explained Al Rifai, pointing out that retailers and e-commerce companies in Iran, India and Nigeria, to name a few, are facing a similar problem. "We want to expand where we can create the most value. Our clients are pushing us to go to these markets because they are facing the same issues," he added.
E-commerce's performance in the Middle East and North Africa has been staggering, with growth at around 40%, Al Rifai noted. Some markets, like Saudi Arabia, even posted a 70% growth. However, despite the high mobile penetration and the availability of 3G data, e-commerce still represents a small fraction of the retail industry.
"There is a huge margin for progression," Al Rifai stressed, adding that there is a growing trend in e-commerce companies to invest in mobile applications because the return is higher.
Data shows the potential for e-commerce to take-off in the region, according to Al Rifai, but a reliable logistics solution must first be put in place before this prospect can be realized.
Sellr
After noticing the strong potential of social media selling and how it is gaining traction in the region, the co-founders launched Sellr in January 2016 to enable people to sell their goods directly on social media with cash-on-delivery option.
"We're very excited about the potential of Sellr because it addresses a key gap in the market. Big e-commerce companies have their own drivers or have contracts and daily pickups from big shipping companies," said Ajlouny. "But small sellers looking to start and grow their business don't have anybody catering to them. It's exciting how social selling has the capability to change conventional e-commerce by empowering makers to sell directly to their target audiences. Sellr simplifies the process and is very intuitive."
Sellr allows vendors who sell their items on any social media platform to list their products and generate links for customers who want to buy their products. Fetchr picks up the item from the seller, delivers it to the customer, and collects cash on delivery. The seller can request to have the cash delivered back to them whenever they like. The system is enabled by Fetchr's logistical expertise and GPS technology, supported by Fetchr's fleet of drivers, and backed by Fetchr's team.
Challenges
Al Rifai said the main problem they faced in the initial stage of their business is limited budget. The costs of regulations and legal work involved in setting up and acquiring the licenses to operate can add up to a hefty sum. Attracting talent in Dubai on a shoe-string budget was also a major hurdle.
"Everyone wants to come to Dubai but to join a start-up with a start-up budget is a completely different story. Getting resources here with a tight budget is a nightmare," the co-founder added.
Beyond the early struggles, Al Rifai said scaling-up was personally the toughest issue he experienced, stressing the need to recruit the right people and ensuring legal matters are ironed out before embarking on new markets.
As regards funding, he said the momentum was building up in the region, especially for early stage start-ups. However, the main problem is Series A and B funding - startups that are reaching a level of maturity are now competing for the same pockets, which "are very narrow," he added.
After raising USD 1.5 million in seed funding in 2012-2013, Al Rifai said he began working towards Series A funding, but found "there was a big disconnect" in this sector.
Despite the difficulties of obtaining funding from Silicon Valley, the co-founders decided to go for the "homerun" and managed to close a Series A funding round worth USD 11 million led by US- based VC New Enterprise Associates.
Ajlouny noted that the investors recognized that they were pitching a solution to a problem that was not merely a local issue but rather had the potential to be adopted across other emerging markets.
"They saw a solution globally and I think that's why they invested in us; they saw incredible potential to solve a problem," she stressed.
© Accelerate SME 2016
