Aamer Khattak started his grocery store 20 years ago when he was just 17, with a small amount of capital, a small location and big dreams of achieving financial security.
Today, his Khattak General Store is twice the size of its original size, a cornerstone of his neighborhood in the Pakistani capital, Islamabad, and supports his household of 15.
But when the coronavirus pandemic hit Pakistan in February, he suddenly faced new costs, declining demand and limited opening hours during severe lockdowns introduced in March and April.
“The load [of the losses] fell on our store, ”he says, recalling those months. “We had to meet ours [household] spending on food and drink, so the effect was huge on the business.
“We lacked stock because we did not have the money. When you do not have the money, you can not have the same variety. ”
Khattak struggled to make ends meet as the monthly profit from the store, usually around $ 450, fell by nearly 30 percent.
But despite the leap, Khattak’s business has survived. His strategy? Taking orders over the phone from longtime customers in his neighborhood and giving them credit when they needed it.
But others in the grocery industry have opted for a completely higher technological approach that has enabled them not only to survive the pandemic, but thrive.
As severe lockdowns took hold across the country in the first half of 2020, Pakistani technology entrepreneurs say they saw grocery orders made online and through mobile apps skyrocketing and achieved in days the kind of growth they had expected for three years.
The question that many of them are now asking is: Will it last?
“We have seen a clear increase in people becoming more comfortable using tech and online services,” said Misbah Naqvi, co-founder and partner of i2i Ventures, a venture capital fund for Pakistani tech startups still in its early stages.
“This has been a challenge in the past, with good solutions being offered, but adoption has been slow,” Naqvi told Al Jazeera.
Pakistan’s grocery store, estimated by insiders from the tech industry to be more than $ 50 billion. In revenue annually, is dominated by so-called ‘karyana’ stores, like Khattaks. These are small shops, often no larger than a hole in the wall that accommodate the basic things of the household such as flour, rice, sugar, legumes, etc.
In recent years, however, several new players have entered the online grocery market in hopes of taking advantage of the fact that no large nationwide grocery chain has emerged – such as Tesco in the UK or Walmart in the US – in Pakistan to take the majority of Market.
“Companies that already existed in the last few years saw a big uptick,” says Naqvi. “Companies like GrocerApp, 24Seven, and Mandi Express – we saw a huge increase because people started looking at the convenience factor as a decision about how they made decisions about getting groceries. [during the lockdowns]. ”
In total, technology companies in the grocery delivery room have collected at least DKK 11.7 million. $ In financing from investors in five separate deals by 2020, making it the second largest tech investor sector in the country, according to i2is research.
The growth in the early part of the year was stratospheric, which in turn led to its own set of problems.
Accelerating the sector
“Lahore went on lockdown on March 23. In March, April and May, our business jumped 50 to 70 percent month-on-month, ”said Ahmad Saeed, CEO and co-founder of GrocerApp, which supplies products to the eastern city of Lahore and to Islamabad.
Before the pandemic, Saeed says, the app’s orders grew by a steady 20 percent per month.
“I think the pandemic has pushed e-commerce years forward – the shift that would take millions of dollars of investors, the pandemic has pushed it a lot,” he says.
Initially, when shutdowns often took effect with little warning, Saeed says his business struggled to meet demand.
“We realized that in order to meet this demand, we need to cut back on the fundamentals of our supply,” he says. “We realized that in the pandemic, people would realize that it was okay if we did not have all the varieties of different products, but we had to make sure that we did not run out of the basics.”
GrocerApp also limited the size of orders with basics such as flour, rice and other necessities to prevent possible storage of customers.
Today, the app is back at full strength after expanding its operations to keep up with the growing demand. It now offers more than 4,000 products in Lahore. The company expanded to accommodate Islamabad in September, and Saeed says it has also seen strong growth.
“We launched Islamabad on September 1, and in three months, Islamabad has been scaled to the point that it took Lahore two and a half years to get to,” he says.
Jarrar Shah, CEO and founder of 24Seven, a rival to GrocerApp, which also serves Lahore, said his business faced similar challenges in the early days of the pandemic.
To take advantage of the increase in demand and to ensure that his company fulfilled all his orders, he changed his business model from being a digital marketplace for other stores to opening his own warehouse and executing almost all of his orders himself.
“When [the Lahore lockdown] happened, we started this warehouse in a two week apartment, ”he says. “The establishment was initially very strict, the police were everywhere, they would not even let us deliver.”
The pandemic and lockdowns saw demand “shoot up” and the company had to adapt, he says.
“When COVID happened, our baselines changed a little bit. Where we thought it would take the country or ecosystem three or four years to get to where people used online and adopt it, COVID kind of brought the three-year thing overnight. ”
‘With your own hands’
But not everyone is convinced Pakistan’s boom in e-merchandise has come to stay.
Javed Anwar, manager of Sauda Sulf, one of the largest grocery stores in the F-11 district of Islamabad, says that although the company’s decision to launch a website and a Whatsapp-based grocery delivery service helped it survive, he is not convinced that it will lead to significant changes in customer behavior.
“People in Pakistan, they want to shop for themselves,” he says, sitting at a till in the store. “This tendency [of online shopping] is not here in Pakistan yet. [For] groceries, customers have a mentality that they themselves will buy it with their own hands. ”
Anwar says Sauda Sulf saw a peak of up to 250 orders a month through its website during the shutdown, but as restrictions were eased over the summer, those orders also dropped.
“By the time, [the apps] was very helpful. Since there was an emergency, get these services [that you needed],” he says. “[But] there is an interaction [with the customer], and you can not have that interaction online. ”
Internet access, or rather the lack of it, is another problem facing budding technology entrepreneurs in Pakistan, says Anwar. Even where broadband speeds are acceptable, many in the country lack the necessary digital literacy skills to feel comfortable ordering products online.
Pakistan, a country of 220 million people, has 169 million mobile phone subscribers and 87 million broadband Internet users, almost all of whom access the Internet through their mobile phones, according to official Pakistan Telecommunications Authority data.
E-commerce is a relatively new phenomenon in Pakistan, estimated at an estimated $ 2.1 billion, excl. Travel, in consumer sales in 2019, according to digital research firm DataReportal.
Of this amount, $ 185 million was spent. On food and personal care last year, DataReportals figures show.
Those who run karyana stores in the neighborhood say they do not think their place in society – due to the easy access to them, established forms of consumer behavior and limited digital literacy – can be easily replaced.
“Rich people use it,” says Manzoor Ahmed, a worker at a karyana store in Islamabad. “Today is the age of the Internet. They order everything online. But poor people like us, we come to stores. ”
GrocerApp and 24Seven both reported that sales initially increased in high-income areas, but they have also seen a recent increase in middle-income neighborhoods as customers are drawn to lower prices and a wider range of products compared to small physical stores.
Nevertheless, tech entrepreneurs say they do not want to replace karyana stores and that there is plenty of room for everyone.
‘Not a winner who takes all the space’
“Groceries are the largest retail market in all countries,” says Shah from 24Seven. “It’s not a winner who takes all the space.”
Shah says that even if e-commerce grocery platforms capture only a small fraction of the estimated $ 50 billion market, that would be enough to sustain highly profitable businesses.
“Ultimately, what size e-commerce will be, even if it is three to five percent [of the overall grocery market], it will be a large number, ”he says. “And we think it’s very likely that it will happen in the next three to five years.”
Saeed from GrocerApp agrees with this assessment.
“E-commerce will never end the general trade, but e-commerce will have a large share of the market,” he says.
“I do not think the largest e-grocery player will capture even 10 percent of the market. But the market is large enough to sustain several large companies or even a large number of players. ”
For Khattak to get up from the counter to store the shelves in his Khattak General Store, that would be fine because he says he has no plans to expand operations to incorporate an app.
“Our store is not so affected by this because people in this neighborhood, we have such a relationship with them that even if they call us without an app, we get [what they need] to them or if they have any problems in the house [with payment], well [cater to that] too, ”he says.
“We meet these people every day. We do not change, nor do they, so we see each other all the time. Luckily we have spent a long time here, everyone knows us. ”
This article is part of Al Jazeera Digital’s ongoing series, which profiles small businesses around the globe that have survived market disruptions from COVID-19 as well as economic challenges unique to their countries. Click to read about small businesses in Tehran, Beirut, Mumbai and the central English city Wigston in the United Kingdom.
Asad Hashim is Al Jazera’s digital correspondent in Pakistan. He tweets @AsadHashim.