Pakistani retailers have a problem. Although retail is the country’s second most important industry, the vast majority of the 3 million companies struggle with outdated business methods and processes – and miss out on growth as a result. But SnappRetail thinks it could change that. The fintech start-up is today announcing a $2.5 million pre-seed financing round to help the company build a business that it believes could enable retailers to increase their revenues by as much as 50%. to let grow.
“It’s like the 1950s — everything still depends on pen and paper,” said Adeel Rasheed, industry CEO and co-founder of SnappRetail. “Most retail business owners have no way of keeping track of which of their products are their best sellers, or when to restock; they run their business instinctively, in exactly the same way they always have.”
As a result, these retailers are not maximizing their sales. They run out of products their customers want most, prompting them to move elsewhere or experiencing delays until inventory can be replaced. They get stuck with products for which there is relatively little demand. And they are incapable of crafting a credible and coherent growth plan.
Payments are another issue Rasheed points out. Remarkably, less than 1% of Pakistani merchants can accept debit or credit card payments; in the food sector, the figure is more likely to be 0.2%. Instead, they only accept cash.
SnappRetail’s answer to these problems is to offer retailers a suite of new hardware to digitize their business. Point-of-sale machines and barcode scanners are finally enabling retailers to track what customers are buying, what inventory levels are left in the store and – crucially – to accept card payments.
“We need to change the whole way they work,” Rasheed adds. “The key is to solve their most basic problems — that means helping store owners change their habits so that digital working becomes automatic.”
It’s an unusual value proposition for a fintech start-up, built on delivering hardware rather than the software-as-a-service business model that currently dominates the fundraising scene. However, the background of Rasheed and his co-founders, who have long careers in senior positions at consumer goods companies such as Unilever and L’Oreal, and experience with start-ups, seem to have convinced investors to back them up.
Rasheed admits it will take time to build substantial revenue for SnappRetail. The company does not charge for supplying hardware to retailers and is currently charging a token rental fee of just $7 per month for its equipment.
As it builds critical mass and proves its value to retailers, the company expects to be able to increase that monthly amount. But the founders believe the bulk of revenue will ultimately come from partnership agreements with companies looking to partner with their retail customers – thanks to SnappRetail’s technology. It has already started enabling retailers to offer top-ups for mobile phones, for example, but sees future partners offering services such as providing working capital to retailers looking to grow. It will also earn commissions on digital payments made through its equipment.
The big question is whether critical mass is feasible. Founded last year, the company initially targeted retailers in one city, Karachi, and expects to have 1,000 stores signed up in the coming months. But Rasheed and his co-founders believe SnappRetail can now enter the entire country and expand its customer base to 300,000 retailers in the medium term.
For retailers willing to learn new skills and adopt digital tools for the first time, the benefits are very clear, the company says. “A micro-enterprise system for end-to-end retail operations helps traditional retailers increase margin and revenue,” said Rasheed. “And it helps micro-retailers who are losing out on growing modern supermarkets due to inefficient operations, inadequate cash flows and cluttered store displays to upgrade.”
The gains can be significant. Rasheed thinks SnappRetail’s hardware can help retailers increase sales by 30 to 50% — and increase margins on those sales by as much as 100%. He also believes that once the company has proven itself in Pakistan, it can take its technology to countries where retailers face similar challenges, such as nearby Bangladesh, Sri Lanka and many African countries.
The company’s investors are definitely buying the field. Today’s pre-seed round – one of the largest such funding rounds in Pakistan – is led by Zayn Capital’s BitRate Fund with participation from Antler and Century Oak Capital. “[This is] a globally proven concept, and there is no doubt that SnappRetail has the right approach to solve the retailer’s essential problem,” said Faisal Aftab, General Partner and Co-Founder of Zayn BitRate Fund.