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How Rocket Internet is Getting Into Pakistan On the Ground Floor (INTERVIEW)

Rocket Internet in Pakistan - strategy

Germany’s Samwer brothers, the duo behind the startup dynamo that is Rocket Internet, love unformed markets where they can get in early and perhaps lead from the front. Pakistan definitely fits that bill. Rocket Internet now has five of its startups operating in Pakistan after very quiet roll-outs of EasyTaxi Pakistan and Zamudi at the beginning of this month.

The five ventures in Pakistan are clothing e-store Daraz.pk, the Amazon/eBay marketplace style Azmalo.pk, property portal Zamudi.pk, and also localised service versions of EasyTaxi and Foodpanda. To find out how these are being run and how they might expand in Pakistan, we spoke with Ahmed Khan, who founded Azmalo and is the CEO of that site as well as Zamudi and Easytaxi Pakistan.

Ahmed was drafted by Rocket based on his background at McKinsey and P&G since the Samwer crew believe, he explains, that consultants “make passionate entrepreneurs”; thereafter his role was expanded to cover Zamudi and the local Easytaxi as well. He reckons “Pakistan is on the cusp” of really embracing digital and is happy that they’re in early. He adds:

As they say, it is always good to get in the ground floor. […] As business rises it becomes more expensive to enter a market – economics 101. If you have first-mover advantage not only can you dictate terms for pricing but also the direction of the market. The question should be why have more people not come yet?

E-stores vs online services

Rocket’s five startups in the country cover a mix of e-shopping and online services. “To gain trust and initial traction, the services play a very good part,” says Ahmed of Foodpanda’s food deliveries and Zamudi’s property listings. Though they’ll inevitably serve a “niche market,” they’re a good complement to the broader shopping potential of the e-commerce sites:

It is easier for people to trust services rather than an outright purchase and that’s where the difference lies. Given the lack of trust that was apparent in the initial stages with online business, providing a service such as delivering food or ordering a taxi is undertaken more often than say purchasing clothes. The regular interaction with our services then will speed up the rate of adoption to e-businesses.

Pakistan’s tech infrastructure is growing fairly slowly, with 125 million mobile subscribers at the last count. More importantly for Rocket Internet’s ventures, 15 million of those phone owners are on the mobile web.

EasyTaxi aiming at 100 Lahore cabbies soon

Rocket Internet in Pakistan - EasyTaxi Lahore

Of course, Ahmed and his team have done their homework on these numbers, and they estimate that there are five to six million smartphones in Pakistan with around a million in Lahore alone. Lahore is the focus for Easytaxi’s launch in the country, but Easytaxi relies on apps for Android and iPhone, so it’s important to know the size of that prospective user-base.

Ahmed sees a huge rise in smartphone usage in the country soon as Android devices get even cheaper and the EasyTaxi Pakistan team is confident of attracting repeat customers in that city:

It’s the repeat purchase cycle that we want. It is great to have a huge mass but having the loyalty of let’s say one million customers is as good as it gets and that’s the aim.

EasyTaxi’s service is a bit limited for now with 30 taxi drivers using it at present, and times are limited to 9am to 6pm until after Eid. But the service is keen to expand quickly:

We have around 30 drivers on our roster at this point with more than a 100 planned in the next three months. As teething problems go away the roll out will get quicker and more effective. We look at the condition of the car, the drivers capability and the area he has been working in. Providing an excellent service right from day one is key to adoption and retaining customers.

Ahmed insists that EasyTaxi can be flexible if it turns out the city’s smartphone users are not biting. He says, “If we feel no traction in the app, we can switch to an SMS and phone-call model as an add-on. But with the 3G license auction on the horizon, hopefully it won’t be necessary.”

Tempting Pakistani shoppers online

Rocket Internet in Pakistan - Azmalo

Azmalo, which Ahmed founded, popped up earlier this year as an online shopping store open to all merchants, like Taobao or eBay’s marketplace. It already has some venture capital funding (along with EasyTaxi, Foodpanda, and Daraz) to spur its growth. Ahmed sees the attraction for shoppers in comparing prices between all the merchants on the platform and picking out some useful discounts. The site has both fixed prices and auctions.

We’re told that many of the Azmalo sellers do not have a traditional brick-and-mortar business, and so, as we saw with Taobao’s boom in China in the past decade, it’s a chance for regular folks to become online shopkeepers, either full-time or as a paying hobby.

(See also: Foodpanda is Rocket Internet’s Play At Food Delivery in Asia)

Ahmed says that low prices can win out against the concerns of Pakistan’s new netizens about e-commerce:

Low prices and more variety encourage users. If we can overcome the trust barrier that people have towards online shopping, the potential is immense.

Healthy rivalry

Foodpanda already operates in four cities in the nation: Islamabad, Karachi, Lahore, and Rawalpindi. As for the online service that Ahmed runs, the property listings site Zamudi, it’s focusing on three of those for now – Islamabad, Karachi, Lahore – as it grows its catalog of apartments, villas, land, and commercial properties. As you’d expect, it’s free for people to browse and use, and monetizes from charging agents to list on the site.

Of course, Rocket’s shopping-oriented Pakistani ventures have a few rivals already on the scene, such as Label’s eStore for women’s clothing, Shophive for general goods and gadgets, and Just4Girls for make-up and skincare. So there are other online businesses in at the ground floor in Pakistan.

But Rocket Internet has the financial clout and professionalism to shake up those already present and drag the country’s nascent web market into the 21st century. Hopefully such a strong presence by one firm won’t be off-putting to Pakistani entrepreneurs with ideas for online services or e-commerce in the nation.

(Editing by Anh-Minh Do)


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