The Digital Logistics Landscape of Pakistan in 2021
Pakistan’s logistics industry is an amalgamation of old-school paperwork and a relatively advanced digitized supply chain management suite, with the former being the overall market leader until the end of first quarter of 2020, when the world was facing an abrupt twist of fate, in the form of Coronavirus spreading like wildfire throughout the world.
Pakistan is an agrarian country by trade, with a major share of its GDP comprising of agricultural trade (19.34% in 2019–20*), followed by the industrial sector, of which Manufacturing and Mining & Quarry are the leading subsets. According to the Pakistan Bureau of Statistics, Pakistan’s logistics and transport sector contribute 22.3% of the service sector, while it takes part in 10% of the nation’s GDP. With the initiation of lockdown closing all the plants and factories, the overall focus of the economy shifted to the services sector, most prominently the supply chain and logistics sector.
The first wave and the closure of businesses saw a huge transformation to e-commerce, which was still thriving to go mainstream at the time, and was mainly focused on the luxury, fashion or food. Convenience, trade and retail have had a long way to go, but the lockdown raised a question on the capability development of the digitization of these sectors, which was demanding years of projected developments to be deployed in days. The clear divide between urban and rural buying had to be diminished and users both jobless or employed needed buying with lesser costs and quicker delivery timelines. Moreover, the B2B commerce and distribution faced a challenge of transforming the processes and the mindset from the paper-dependent “khata” entries to a digitized sales & distribution and inventory management ecosystem.
Companies, therefore, did all at their disposal, from complete revamps of the entire supply chains to makeshift catalyzing of supporting existing processes. What they did and how successful they were, is going to be discussed below:
1. Hyperlocal/Quick Commerce
With the traditional shopping avenues closed full time or opening to a very limited time with very little footfall, consumers were in dire need of receiving goods in earliest possible times with greater convenience. Conventional courier and logistics structure is simply unable to fulfill such surge and responsiveness as the fastest delivery mode is the next day/overnight delivery. Thus, the ball came in the court of the on-demand delivery startups, ride hailing companies and in some cases, suppliers & manufacturers building their own logistics arm, to a move which is now known as hyperlocal delivery and quick commerce.
With Foodpanda introducing us to the concept of dark stores through Pandamart, Airlift pivoting completely from a digital mass transit services startup to a grocery and convenience delivery platform Airlift Express, just months after raising the country’s largest Series A investment, the arena was set for the faster and responsive last mile experience, with both the startups committing to a 30-minute delivery lead time. Enter Careem and Uber, with Careem Now supporting food delivery and the later coming up with Uber Connect, a peer to peer package delivery service throughout Pakistan, and with a $13M investment raised in a series B round, Bykea launched Bykea Shop to enable purchasing from the neighborhood and Bykea Cash to provide cash receiving and disbursement to vendors and customers, and receiving at-home ATM services, leveraging their 30,000 strong fleet. This opens a new avenue of convenience buying and offering deliveries, taking the worry of retail stores being unavailable in regular timings and providing a personalized and efficient e-tail experience.
Not only that, but CPG brands are also entering this landscape. Unilever Pakistan and VentureDive launched Munchies, a snacks and munching products delivery app, and National Foods Limited partnered with Brandverse to launch Madeeasy for their product line. Not only that, many other grocery and convenience delivery startups are entering the market with nearby buying features as well as warehousing prowess is giving the consumers a healthy range of options to purchase groceries and daily use items.
2. Peer-to-Peer Deliveries
With the pandemic spreading in full swing, many businesses were shutdown facing heavy losses, which caused a great surge in unemployment among all sorts of management tiers. Due to recent rise in shared/gig economy startups in Pakistan, especially with the likes of on-demand delivery startups like Foodpanda, Cheetay and Swyft Logistics, Careem, Bykea, Batoor and with the recent increase of grocery & convenience delivery startups like GrocerApp, Airlift Express, Fowrry, OctoberNow, OK Click n Collect, MedznMore, Dawaai, Dvago Pharmacy, 24Seven.pk and with hypermarts like Naheed, Carrefour, Metro and Chase brands (Chase Value, Chase, Chaseup, Chase Plus) joining the bandwagon introduced lots of openings and opportunities for people to work either as peers or with people managers (Operations, Supply & Demand Management etc.). With these startups came a great amount of investment opportunity (around $59.45M) into an avenue which was considered near to impossible a few years back. Although, many people are just joining it to survive the economic collapse, but after enjoying the taste of this thriving industry and seeing how it helps people to have flexible working opportunities with much support and guidance from the Operations and Supply side, people are accepting this new area and referring to their fellow peers and colleagues, not only as part of the delivery force, but also as end users.
These peers roam around your neighborhood on a route based around a short radius ( 4–5 kms average) and operate on either conventional dropshipping or the hyperlocal model, usually working flexibly for 6–8 hours. The startups however, encourage incentives and bonuses on delivering more and more deliveries which take more than the usual hours.
3. B2B E-commerce boom
The pandemic saw a massive increase in the demand of essentials and daily use items. Using the conventional distribution model would turn out to be very time consuming and hectic, since the order bookers majorly relied on word of mouth and paperwork, and the delivery would take days to come. Hence came the need for an ecosystem whereby retailers and mom & pop stores, called the Kiryana Stores in Pakistan, could order seamlessly in a jiffy and that would be received the very next day without any hassles.
With the advent of B2B e-commerce startups with a combined investment of $38.9M, the likes of Bazaar, Dastgyr, Tajir, Retailo and Jugnu are the most prominent ones, battling head-on with the distribution network in the country, which is as of now, doesn’t seem to take these emerging companies as a threat. So far, majority of these companies are in fact, leveraging the distribution network along with strategic partnerships with leading FMCG brands and logistics companies and offering other VAS to the end users.
The main challenge still being faced is the sourcing and the vertical integration of the last mile. With a lot of the sourcing to be done on the basis of a holistic demand forecast and not on a just-in-time principle. On the other hand, the last mile to be covered to cater tens of thousands of retailers in a single day is another uphill task to take care of. As of now, the B2B startups have been using 3PL services for intracity deliveries on a near to impossible yet sturdy rental model, which would only work better with a substantial increase in the delivery volume, and that would happen only by investing and partnering strategically rather than just cost cutting.
4. Revitalizing Trucking and Overland movements
Trucking has been a pain point for almost all of the SMEs and leading organizations in Pakistan since the independence, and it has been held up in terms of growth and innovation for the last 30–40 years. The primary factor for the laid-back development in the trucking and transportation sector is the fragmentation of transportation businesses into individual and family-held proprietors. According to sources, about 84% of the trucking industry comprises of individual truckers and/or family owned trucks (ranging from 1 to 5 trucks at maximum). This means that even the leading trucking and logistics companies in Pakistan have a dependency to avail the services of these truckers for extended 3PL services.
Another interesting factor to add is that these are unionized by transport and freight brokers, much of whom have created a joint monopoly based on the type of clientele. This means that a trucker in a way is bound by these brokers to work for the client or the company that they provide information of, and these truckers do not have direct access to work with industries and professionals. Furthermore, these brokers work on cash receipts with these truckers, referred to as “Bilty” or “بلٹی”, which is bought for a certain amount which is priced by the union of transporters on an on-spot basis daily. An interesting point to note here is that the corporate organizations mostly prefer invoicing cycles to ease the hassle of daily payments and pay on a fixed rate at a fixed time(which takes around 60–90 days to the day of movement on average), whereas the truckers are not able to sustain this cycle due to their living conditions and ever rising fuel costs, making the presence of these freight brokers and transport aggregators on the logistics marketplaces or Truck Addas necessary. These provide cash based financing to the corporate by fixating the transport through them, the term being known to the logistics industry as “buying the bilties”, on which they make good margins per vehicle per trip.
This physical brokerage and lending business came to a decline as there was no marketplace open due to lockdowns, and price hike was surging rapidly due to increase in associated costs, which created a need for digital aggregators and P2P trucking platforms. Since March 2021, many startups have emerged in this place, with international investments coming in the form of Trukkin, Trella, Lorryz and OpenPort (which recently leveraged their transport management ecosystem into an open logistics marketplace), and local startups Trukkr, Truck It In, Truckload, Freightix, LoadOye, moveit.pk, TransGO logistics, Shyft striving hard for the market share with new faces of the industry vetereans as Daewoo Adda and TruckSher (started by former e2e logistics CEO Abid Butt). These freight-tech startups are redefining the Adda model, by partnering with leading fintech and tech-driven banks to provide supply chain modelled credit financing, and/or investing heavily through their own vendor management systems, as well as providing real-time tracking and simplifying transportation processes with data-driven insights and analytics, which would be loosely given only by the handful of leading logistics companies.
The dilemma here is that most of these local startups are newbies having extremely little background of the industry and just shoving a tech platform without knowing the intricate ins and outs of the adda ecosystem is hurting their growth. Not engaging and empowering the truckers directly to match their service levels with that of leading transport companies and not being able to tweak the payment model towards the shippers’ end is making these startups burn more money than expected. On the other hand, some of these startups have raised good amount of investments (TruckSher backed by Sarmayacar for an undisclosed investment, Truck It In raising $1.5M in one of the largest pre-seed rounds in Pakistan, Trukkin with $7M Series A round to expand operations in MENAP) and have shown good traction in the market for both individual and corporate shippers. The freight brokers and traditional transporters are seeing this meteoric change as a threat to their revenue streams as it enables a trucker to earn promising amounts from short hauls, long hauls and back hauls as per their convenience, and can get superior support both in terms of on-route services and aftersales.
In short, this avenue of digital digital is comparatively very nascent but is showing promising possibilities for near future as already in a year’s time the competition has grown and companies are trying and testing with their supply chains.
5. Legacy vs Digital Logistics
The logistics landscape has not only provided the avenue for new startups to emerge, but also an opportunity for existing companies to adapt and innovate at large. Logistics companies are now revamping their overall processes to go head-on with the challenges given by the coronavirus and the eventual lockdowns. With ever growing demand for deliveries and shrinking lead times, it has become inevitable for the companies to work on digital models to manage, monitor the fleet and provide transparency and visibility to both the consumers and the sellers.
With Pakistan starting regional transportation and logistics service to Uzbekistan through Afghanistan, of which TCS is a leading partner,
Amazon has also started to show interest into Pakistan by recently adding Pakistan into its sellers’ list and reportedly talking to Pakistan Post as its logistics partner in the country.
Lazada (Alibaba group) is also investing into Daraz by creating an ecosystem of logistics solution by empowering its own logistics arm (DEX) and a technology enabled 3PL network of logistics startups and service providers (Movex is a notable example as its technology platforms are powered by Daraz).
TRAX has emerged as a new leader among the e-commerce focused parcel delivery companies, with providing innovative services like Delivery/Return Intercept, Transparent packaging flyers, Pre-alerts for fraudulent customers at the time of booking, and other such services to offer at the disposal is a good sign that traditional logistics companies are adapting and adhering to the new normal of logistics. Other than that, it has partnered with e-commerce integrators and service providers to provide for its clientele a 360-degree e-commerce suite. Moreover, it is also offering its tech platforms (apps and web platforms) as SaaS solutions for logistics companies and startups to deploy at very nominal prices. TRAX is also offering turnkey logistics solutions for many e-commerce companies, Munchies, Foodpanda, Daraz, Carrefour, Khaadi are just a few to name of. Also, launched recently are cross-border e-commerce deliveries and retail e-commerce/Cash on Delivery services for SMEs and home grown businesses to enjoy greater service levels with convenient prices.
To summarize, Pakistan is recently seeing a huge traction in the global market especially at the converging point of MENA and APAC regions, and as one of the spearheads of the Chinese BRI plan in the form of CPEC channels, Pakistan’s logistics landscape offers a massive opportunity for global e-commerce giants like Amazon, Walmart, Tencent, and others, as a countrywide and regional e-commerce hub (potentially being a junction among MENA, APAC and Central Asia regions). What Pakistani logistics industry and the government has to work on is to enable more and more entrants by enhancing the digital and logistical infrastructures.
