Disclosure: AFN’s parent company AgFunder is an investor in Retailo.
Unlike in Europe and North America, grocery shopping in much of Asia and the Middle East doesn’t typically revolve around big-brand supermarket chains stocking everything under the sun.
Instead, your average grocery shop will probably require visits or calls to several separate, small businesses, each independently run and focused on selling a single category such as dairy, meat, or fruits and vegetables.
While the supermarket chains have their own extensive supply chain and logistics capabilities, these smaller ‘mom and pop’ businesses have to handle their own procurement. This typically means multiple, regular trips to different cash-and-carry outlets or farm distributors – costing vendors both money and time.
Riyadh-based Retailo was launched in early 2020 — in the midst of the Covid-19 pandemic — to bring some much-needed financial and logistical efficiency to this highly fragmented supply chain. Founded by Talha Ansari, Muhammad Nowkhaiz, and Wahaj Ahmed — former execs from regional ride-hailing giant Careem, which was acquired by Uber for $3.1 billion last year — it’s building an online B2B marketplace to help merchants connect with suppliers and get the best deals on inventory for their stores.
After raising $2.3 million in pre-seed funding last October, Retailo closed a $6.7 million seed round in May this year to expand its operations in Saudi Arabia and Pakistan before launching in other regional markets. Abercross Holdings and Shorooq Partners co-led the round, with AgFunder, Arzan Venture Capital, and several family offices and angel investors also participating.
AFN recently chatted with co-founder Ansari (TA) about the company’s backstory, its recent funding round, and its plans for the future.
AFN: How does Retailo work – and how does your tech and model solve the problem you are addressing?
TA: To understand the significance of our technology, it’s important to understand the context in which we are operating. In our region, even today, modern [retail] trading is very small.
There is a huge population with a sizeable middle class, which for its convenience relies on kiryanas [local ‘mom and pop’ stores]. Big supermarkets are still not as common as they are in, for example, the US. Instead, every neighborhood has its own separate milk, vegetable, grocery, and electronics store. The majority of these store owners visit wholesale markets on their own to purchase their supplies. They hire their own transportation and negotiate on their own. This has its opportunity cost as often they have to shut their shops for their trips to the wholesale market. They also have limited cash on hand and can only afford a maximum of a week’s supplies. So if some stock finishes up in a store during the week, the store owner ends up missing out on providing the service to the end user. Further, in this model, most store owners do not have the ability to scale their shop. Most of their credit capacity is availed in purchasing inventory for a week.
Distributors exist in the system but they too do not want to bear the logistics costs of distributing goods to several neighborhoods as their margins are very limited. They mostly dump everything in the wholesale markets, where these kiryana owners visit and purchase their inventory. By comparison, bigger marts can receive inventory from distributors and sometimes from brands directly, making the playing field uneven for the smaller stores.
Under our model, retailers don’t have to wait for credit, or for markets to open. They can literally order from anywhere. They have zero reason for waiting for the week to re-stock as we have eliminated their credit as well as transportation dependency.
Brands can also improve their demand planning as, through us, they can directly engage with their retailers. Additionally, goods are never sitting stagnant at one place. They are constantly moving in a very transparent manner. Our technology and aggregation allows us to transport these goods at maximum efficiency.
By digitalizing retail, we can truly impact the GDP of the region that we are serving. Investment and net exports in this region are minimal; our GDP is mainly based on agriculture and manufacturing, both of which have retail at the center.
AFN: How is Retailo differentiated from other platforms providing similar services?
TA: I always answer this question by first putting it in context. This problem is such a massive and diverse opportunity that each player in this space is approaching it in a different way. For example, Kapitus functions by giving credit to the wholesalers who can then pass it on to retailers. Sary initially worked with big marts and wholesalers. Udaan provides delivery, but doesn’t get involved in buying and selling. Bazaar offers a reseller model [but has] also launched Easy Khata, through which they are trying to solve the accounting problems of retailers. So all these players are distracted some way or another.
Our core focus is on digitalizing the supply chain, streamlining it. It has three legs: the marketplace, in which every supplier should have access to the market through a smart phone; the logistics – we do last mile delivery; and credit deployment, which at this moment no-one does, but we are already piloting it.
We are digitalizing the entire supply chain by solving the problem of cash, digitalizing the payment method, improving efficiency of logistics, creating visibility for buyers and sellers, and also involving suppliers.
Our focus in on becoming the largest digitalizing distribution agent, while others are focused on wholesale, big marts, and accounting. Our evolution will be in backward integration; we have already done the forward integration, but in the future we will be integrating with the farmer, so farmers will eventually be able to sell to us.
AFN: Were you inspired by business models offering similar services in other parts of the world?
TA: The honest answer is that as an entrepreneur or someone with a curious mind, whenever an idea passes in front of you, the first thing that you do is Google if someone is already doing it or not. That’s when we learnt about Udaan in India, the oldest and the most mature player in their operations. Yes, we learnt a lot from them and their model. But in many ways, while we could relate with their problem, we could not use the same solution. We had to customize the solution to the needs of our own markets. Though I think, what Udaan has achieved in the last four years in terms of impact – that’s what we are also aiming to achieve.
AFN: How did your time at Careem inspire what you’re doing at Retailo? What did you learn from the experience?
TA: There is a two-part answer to this question. Careem inspired our current work at Retailo, both emotionally and functionally.
Emotionally, Careem pushed us into solving problems that we felt had an impact on lives of many. At Careem, we were enabling safe commuting for women both in Saudi and Pakistan; we were creating jobs and providing opportunities to those who had been left out. Additionally, transportation infrastructure is generally bad in this part of the world and an improved commute meant improved business activity. Careem therefore quickly became part of the DNA of the society and it allowed us to contribute to any good cause we wanted. For example, we were able to carry out a very effective blood donation drive in Lahore using the network and the model that we had built.
Functionally, it has helped us in the sense that the founders of Retailo were already operating in the region due to Careem. We were interacting already with a lot of retailers and food and grocery stores. It was during our interactions with them that we understood that, at Careem, we were barely scratching the surface. From their tax filing to accounting, procurement, warehouse management, and transportation, we realized that no-one has ever tried to solve the problems of the retail industry. We were also re-assured that they were already using their mobile phone, not only for entertainment, but also for receiving orders. We realized there was a bigger problem that we could solve. That is what led us to build Retailo. The fact that Careem let us operate at a regional level, also led us to look at the problem at a regional level. The inspiration of Retailo stems from what we were doing at Careem – but the problem that we are trying to solve is much more complex and intricate.
AFN: Why did you and your co-founders launch Retailo?
TA: Covid-19 was a shock for everyone. The industries we are operating in were struggling. People around us were losing their jobs and there was a lot of uncertainty. However, I and the other co-founders have always believed that a crisis can lead to opportunity as there is always a problem to be solved. The pandemic provided the problem we wanted to solve. The traditional supply chain broke and this sector was struggling.
There was also a personal element; six or seven people around us had lost their jobs and we wanted to help them, and decided the best way was to build our own business and hire them – which formed the core team. So we saw an opportunity to help people.
We pooled in our funds for a basic application and got going. Of course, with the lockdown things were hard, air travel was not possible, markets were closed, and even road movement was tough. But we were addressing a need and our product yielded good numbers. We knew we were on the right track and our purpose was aligned with our belief in the system and the size of the opportunity.
Generally speaking, the business environment was quite bad. Everyone was stunned by Covid-19 and no one knew what the future held. However, we had a product and started talking to people. Investors were surprised by our growth. Pretty soon we were talking to investors who saw the growth we had achieved and that’s when things really took off. They heard our story, saw that we were passionate about the model, and realized that there was a huge opportunity. We were able to get the investment we wanted and things have been scaling since then.
AFN: Was the fundraising process challenging? Was it affected by Covid-19?
TA: It was not challenging at all. We were lucky to have found a lot of people who understood this space, and realized how big of an opportunity this is. Further, when they looked at what we have achieved in a short span of time, it was a validation of the opportunity. We truly had a lot of believers. So much so that we were oversubscribed and we deliberately chose investors who would be able to help us scale further in the future and whose vision aligned with ours.
AFN: How has Covid-19 impacted Retailo’s business more generally?
TA: It has had a very positive impact for our customers. Retailers can now carry out their business by taking less risks, as now they can stock up without having to leave their shops. In terms of impact on our operations, the second wave and the third wave [of Covid-19] has obviously affected our employees. In the distribution business, someone always has to be on the ground and therefore some of us were affected by the virus despite great precautions, but with great hustle and conviction we have been able to pull it off. The lockdowns and early closures of shops also affected our operations, but we have been dynamic in our strategy and have taken it up as a challenge.