an interview with Ahmad Khan- CEO at Cheetay Logistics
Ahmad Khan, CEO of Cheetay.pk, a last mile e-commerce start-up based in Lahore. Ahmad was previously the head of Rocket Internet in Pakistan where he spearheaded, established and successfully launched some of its well-known ventures such as Kaymu.pk, Daraz.pk, EasyTaxi.pk, Carmudi.pk and Lamudi.pk. He is a big force in transforming the nascent landscape of the e-commerce industry in Pakistan and Cheetay.pk has seen phenomenal growth so far. Ahmed is a LUMS and Cambridge alumni and has also worked for top-tier firms including McKinsey and Procter & Gamble. We discuss the e-commerce industry in Pakistan and the growth story behind Cheetay.pk.
NUT: Let’s us begin with a general outlook of the e-commerce industry in Pakistan. What do you estimate the size to be?
Ahmad Khan: Well, that’s a tough question to answer, because there is no hard data as such. We have done some estimates and they point to sales crossing the Rs 120 billion ($1 billion) mark by year-end. Till now there have been sales worth Rs 65.3 billion in 2018.The market is growing faster than expected as earlier reports predicted that the market would hit the $1 billion mark by 2020 but it’s likely to achieve this figure by 2018.
NUT: What has the growth of the industry been like?
Ahmad Khan: The growth has been pretty phenomenal, and it has been almost doubling every year on a regular basis. Our business for example, has been quadrupling every year while the bigger players like Daraz and Careem have doubled as well.
NUT: So tell us about Cheetay, how did it come about?
Ahmad Khan: When I was at Rocket Internet, the two challenges we faced were logistics and payments. When that journey ended, the idea was that in Pakistan, if we wanted e-commerce to flourish, we needed to solve these two problems. So Cheetay came about as a solution to fulfillment and payments. We’ve actually coined the term “now commerce.” The idea behind Cheetay is not only fulfillment, but instant fulfillment.
NUT: What are your target markets?
Ahmad Khan: Well, we started with food, the reason being, it’s something you want instantly. For example, you would be willing to wait a few days for a phone or some other product, but food is something that has to be delivered instantly. Our target market is very Pakistan focused, and what we are going to do is expand in geography. We are considering expanding to Islamabad and other cities in the next few months.
Right now, we are operating out of Lahore only. Our strength and growth will come from different cities, as well as different verticals. So we started with food, experimented with beauty and health care products, and now we’re looking at books and groceries as well.
NUT: Who is your main competition right now?
Ahmad Khan: In food delivery our main competition is Foodpanda, but now Careem and Uber Eats have entered the space as well. As we grow into multi-category, our competition will be with Daraz and Yayvo.
NUT: Right now, how much of your sales are still based on food?
Ahmad Khan: About 90 percent. The rest is from other deliveries we do, in fields like healthcare and beauty.
NUT: In terms of gross merchandise value, what number do you go up to on an annual basis?
Ahmad Khan: On average we get around 600 orders a day, and our ticket price is Rs 1000. While a year back we were on about 150 orders a day.
NUT: Where do you see this in the next 5 years?
Ahmad Khan: In the next five years, we want to be at a 100,000 orders a day operating in multiple geographies and verticals. We want to increase our ticket size over time, to something around 20 dollars, as we increase our categories.
NUT: Based only on Lahore’s food market, how much of the delivery business is shared between you, and Foodpanda?
Ahmad Khan: We do not have any exact numbers, but we can be anywhere from 20-30% of the market in Lahore and remaining is Foodpanda.
NUT: Let’s talk about financing. What type of investment did you start off with?
Ahmad Khan: We started off with seed capital of USD750,000. After about a year, we went into the market and raised USD1-1.1 million.
NUT: How many customers have you served so far? And how many employees do you have.
Ahmad Khan: About 160,000 is the approximate number. We have close to 200 employees currently, including about 30 managers, with the rest being riders, and rider admins, as well as support staff.
NUT: Based on your experience so far in e-commerce, what are the most critical success factors that are needed for an online marketplace or startup like yourself to succeed?
Ahmad Khan: That is something that on which the verdict is still out. However, amongst the most important factors is getting your business model right. Back when I was in Rocket, the focus was only on the number of gross orders. Now at Cheetay, our focus is on profit and revenue.
We understand that we need to scale, and that we are losing money. But on a per unit basis, on what we call the path to profitability, our unit economics has to be good, and only then can you break even.
We have a enormous focus on customer satisfaction; we have an 85% on time delivery rate, and a 90% fulfillment rate.
The challenge that most people in Pakistan face, is that they are unable to raise consistent capital, nor is it easy to find investors patient enough to wait long enough for a company to become profitable. Another challenge most players face is finding talent. The founders are always very committed, as well as the CEOs and partners but looking around for talent is difficult. It’s no secret that the best talent wants to go work for top-tier firms. So whatever amount of people is left, go to work with startups. Our company has been blessed and very lucky to find the right talent, and keep our people motivated. In short these are two things are critical for start-ups to become successful; capital and then human capital.
NUT: What are your thoughts on mobile payment solutions?
Ahmad Khan: This is the second part of the Cheetay mandate is solving the payment problems. The State Bank of Pakistan is still is unsure of what it wants to do with digital payments. So for us, an E-Commerce business, the lack of payment solutions is a huge challenge. Cash on delivery (CoD) is good, but there are also some restrictions. Credit card penetration is extremely low, as is debit card penetration. So I really feel that if someone can come up with a good digital wallet it will be a huge win.
NUT: What are the steps that are needed to be taken by the government to promote the e-Commerce space?
Ahmad Khan: The government does not have the concepts behind e-commerce and digital businesses. Just a few days ago, they’re imposing an advance income tax on international transactions on payment by credit cards. We use Google and Facebook for our marketing and we have no way to pay them, except via credit card. This new tax really cuts into our profits, as we have to make payments of thousands of dollars for these advertisements.Setting up a company and corporate structure is hard. We have investors from abroad, and we cannot even issue them equity in Pakistan. In fact, we’ve been waiting on our first round of investors to be cleared for almost two years now. This discourages foreign investment.
Then there is the tax structure which needs to facilitate start-ups and give them incentives. These are all hindrances, and there is no actual support from the government.
NUT: AliBaba has recently entered the e-commerce space in Pakistan. Can we expect more international players to enter?
Ahmad Khan: When one player comes and the market gets bigger, other companies follow. Take India for example. FlipKart was pretty big, but Amazon still went in there and other companies like Jabong, Myntra and Snapdeal entered as well. It all boils down to money; if it can be made, other people will come in. The minute the Pakistani market is big enough, everyone will want to come in and get a piece of it.
NUT: Is there any advice you have for aspiring entrepreneurs who would like to start off in the e-commerce space?
Ahmad Khan: It’s tough. There are diverse problems and lots of them. The mantra has changed over the years. Now the idea is not as important as the execution.
Another thing everyone should learn and understand is data. Data is becoming more and more powerful, and your decision-making needs to be a lot more analytics based. So to solve the problem, you need to structure it. I feel that a lot of start-ups do not structure their problems properly. Until you phrase and structure the problem properly, you can’t really solve it.