Issuu

CONTENTS 14

07 07 This is the fastest growing sport in the world. Can it take root in Pakistan? 11 A policy abyss Ammar H. Khan

14 14 Time of Death: Pakistan’s Super-App Dream 16 How inflation killed Retailistan

19 19 Productive policies or PR fluff — How useful were the interim government’s IT initiatives?

Profit

23 Need raw materials? Zaraye hopes you’ll turn to them

This is the fastest growing sport in the world. Can it take root in Pakistan? Legends Arena in Karachi bet big on introducing padel to Pakistan – and the reaction speaks for itself

By Nisma Riaz

ahangir Khan, the legendary Pakistani squash player, has put his money on this one sport. And no, it is not squash. It is not cricket either. Instead, as soon as one steps through the gates of Legends Arena, a commercial sports facility owned by Khan in Karachi, they are immediately greeted by an unusual court, encased in transparent walls and a bright blue floor. Inside the see-through enclosure, players of different skill levels and ages manoeuvre in an almost choreographed manner, eyes rapidly following the movement of a yellow bouncy tennis ball, while the squeaking of sneakers resounds through the glass walls. At first glance, one would assume it is a doubles game

SPORTS

of tennis, only to realise the court is less than half the size of a tennis court, and the rackets look more like enlarged table tennis bats. So, what is this new game, and why does it have sports enthusiasts so addicted to it? Welcome to the world of padel tennis. It stands as the world's fastest-growing sport, with over 25 million players as of 2023, across 110 countries. And by some estimations, it will in time overtake all sports other than football. And that includes Pakistan. The country has all but one sport that is played seriously here as of today. But could a sport like padel challenge cricket’s monopoly? The Legends Arena, where padel is offered, has only been operational since August 2023, but enthusiasm for the game has surged since then. Its chief executive officer (CEO), Talal Shah Khan, can’t help but be optimistic: “I think padel is going

to blow out of proportion. I foresee, in the next two years, we should be having about 50 to 60 courts in the city. It might be crossing the 100 mark in the country in the next few years.” Could he be right? Profit explores.

What is padel?

irst, the basics: how does one play the game? Padel is a modern four-player racket sport, essentially a fusion of tennis and squash. It originated in the mid-1900s, specifically in Mexico in 1969. It then went to Argentina, and eventually established its central hub in Spain around 1974. In that country, it is the most popular sport after football. Padel courts are enclosed and about one-third the size of a tennis court, with walls

The stadium was made with the idea of having a padel court. Initially the idea was to have about four padel courts but since we were coming to the market for the first time, we started with two and based on the reaction, we are now jumping it up from two to five padel courts Talal Shah Khan, CEO of Legends Arena

surrounding the playing area. It is typically played in doubles, with two players on each team, making it a four person game. Padel follows the principles of tennis scoring, but the ball can be played off the walls, adding an extra layer of strategy. The game begins with an underhand serve, which is considerably easier than squash and tennis serves. The ball must bounce once on the ground before players can volley it off the walls. The duration of a match can vary depending on playing style and format, but a standard padel match can last between one to two hours. So, how did it get so popular? First, padel is a community sport, played by teams of two. The game’s ‘social’ aspect makes it different from a game like tennis, as friends and family can also join along to play. Particularly after the Covid-19 pandemic that isolated the world, people have naturally gravitated towards a more inclusive sport. Second, the barrier to entry skill-wise is much lower than, say, a sport like squash. People from various age groups and skill levels can play padel, which contributes to its widespread appeal. Khan agrees, saying the sport is easier to pick up than both tennis and squash. Nameer Shamsi, the head coach for padel at Legends Arena (and who also runs the Shamsi Tennis Academy Karachi) said, “The adrenaline rush from padel is way better than the one you get from playing tennis. It is a community sport, so the social aspect of it adds to its addictive nature.”

Where is it played?

t is Legends Arena that first brought commercial padel to Pakistan when it opened in August 2023. The stadium’s parent companies are TS Builders, a sports construction company started in 1983, and TS Sports, a sports facility management company. Both companies are headed by Jahangir Khan, who currently serves as the director and chairman of Total Sports. Talal Shah Khan, the CEO of Legends Arena is none other than Jahangir Khan’s son, and is now also serving as the CEO of TS Builders.

It was Talal Khan who first discovered padel five years ago while picking up the sport in Dubai. “As a lifelong tennis player, I found padel to be a sport that one can grasp within 10 minutes of playing,” he said. “The idea to introduce padel to Legends Arena stemmed from its success in Dubai, where it gained immense popularity. In the UAE, it has seen significant growth, with Dubai alone producing around 100 courts a month. The ruler of the UAE's enthusiasm for padel led to its inclusion in certain high-end hotel facilities, both outdoor and indoor, making it a hybrid of squash and tennis.” Khan thought, well, if it’s good enough for Dubai, it should be good enough for Karachi. TS Builders was already on a mission to create an international standard sporting facility in Pakistan, and had been mulling over the idea for at least four years. “Finally, we decided to go for it,” said Yousuf Ghaznavi, the chief marketing officer of Legends.“We chose a piece of land that had been barren for over 20 years – it used to be a hockey stadium, but it was mostly unused, only occasionally for carnivals or weddings.” That would be the previous hockey stadium located in the centre of Khadda Market, a commercial area located in DHA, Karachi. To be clear, padel is just one feature offered at the arena. Currently, the venue has four football fields, two indoor cricket fields, a multi-functional field for volleyball, a 330 metre jogging track, and a 100 metre sprint track. But introducing padel to a wider audience was always at the forefront of the company. Even though there were a few residential padel courts installed in Pakistan, there were still no commercial courts that could be accessed by everyone. “Initially the idea was to have about four padel courts but since we were coming to the market for the first time, we started with two,” said Khan. The arena now has three padel courts, and is considering increasing it to five courts based on the positive response of players. The Padel Academy runs between 7am to 10am every morning, where players can learn the sport, and has at least two to three sessions

booked per day. And the craze is spreading. In Karachi, another recreational and sports complex called Arena (no connection to Legends Arena), located in the heart of the city on Karsaz, has also opened one padel court. The Arena caters to a slightly less sporty and more leisurely demographic, offering a bowling alley and a ice skating rink – so for the complex to also introduce a padel court speaks volumes to what they think is a value-add. After being introduced in Karachi first, padel is now coming to other cities of Pakistan. Club Padel, located in Goldcrest Mall, DHA, Lahore has opened its doors just last week. Like Khan, Haider Muzaffar, the founder of Club Padel, picked up the sport while in Dubai. He said, “I started playing padel in Dubai towards the tail end of the pandemic and the idea to bring it to Pakistan came from there. I was running a cricket team by the name of Punjabi Legends in Dubai but I do not have any other sports background.” Club Padel, which is open to family and friends currently, hosts two padel courts, with another one being installed soon. Muzzafer told Profit that Club Padel is expected to expand to Islamabad soon.

The cost of padel

adel, to be clear, is an inherently expensive sport internationally. Both the initial investment to create a padel court is high, and the equipment required for the post is also somewhat expensive. This in turn increases the cost of booking a slot to play padel, globally. According to Khan, it takes up to Rs 15 million to build a padel court that meets international standards. Even if one were to source materials locally and build a ‘subpar’ court, it would still cost up to Rs 10 million. “The turf is perhaps the most expensive part of installing a padel court, compromising on which may affect not only the overall experience but also hurt the volume of bookings. The turf and glass, respectively cost one third of the overall cost of installation, amounting

So it’s expensive, yes but the cost also gets split between four people, which makes it Rs 1500 to Rs 2000 per person but not as much as go-karting. Plus the sport has tapped into a niche of people between 20 to 60 years of age, who have never seen a facility like this before Nameer Shamsi, Head Coach at Legends Arena

up to over Rs 3.3 million each. The remaining Rs 3.3 million would cover the fencing and lighting of the court,” explained Khan. The equipment also adds up. An average padel racket costs around Rs 30,000. Meanwhile, the padel balls are imported from Dubai – a pack of three costs Rs 4000. Rackets often break or crack during use, contributing to additional costs; padel balls only maintain an optimal performance for about six sets or four hours of gameplay. So, padel is expensive because its gear is expensive. Khan says that one pays over AED 200, or roughly Rs 15,000, for an hour-long slot in Dubai. Even if the supply of padel courts in Pakistan was to match its demand, the price would be close to Rs 5000 per hour. At Legends Arena, padel is currently priced at Rs 7000 per hour which comes to about Rs 1700 per head for an hour-long slot – which is still on the slightly expensive side by Pakistani standards. Khan says that they strive to make it affordable. “Our focus on manufacturing padel courts locally helps control costs, contributing to the affordability goal,” he said. The company’s management has a few

strategies up its sleeve to mitigate costs. First, it has focused on manufacturing padel courts locally in an effort to reduce costs from the onset. Then, the company partnered with the Spanish padel brand, Nox, in an effort to stop importing padel balls from Dubai. “With Nox, this cost [of padel equipment] will be reduced by 50%, ensuring durability and performance,” Khan explained. Perhaps the most important feature that Legends has incorporated is eliminating the need for memberships. In the city, most people who want to play team sports have to sign up to be a member of a club, where fees can be anywhere from Rs 2 million to 10 million. Exclusive clubs like Karachi Gymkhana charge up to 1 crore for a membership, making it a significant financial commitment. Additionally, existing club members often face challenges when inviting guests. Instead, Legends Arena is entirely membership free, and offers a pay-per-hour model. Its system allows users to book hourly slots, from a minimum of one hour to a full day. It is this ease of access which company management believes will fuel interest, even if the sport is inherently pricey. “For those without club memberships, it’s a hassle to take on a new activity like this because there are member timings, accessibility issues, etc. Here you just have to book a slot, come and play,” said Shamsi. “So it’s expensive, yes but the cost also gets split between four people, which makes it Rs 1500 to Rs 2000 per person, but not as much as go-karting.” Besides, according to Shamsi, the price is worth it for the people who have never seen a facility like this before.

The response to padel

o, have Pakistanis caught on to padel? To get a sense of the sport’s popularity, one can look at the numbers. The average footfall at Legends is around 500800 people a day, with the number increasing on weekends. Padel's popularity in Pakistan is evident through events like tournaments.

According to Khan, “The response has been overwhelming, with team slots for tournaments filling up within minutes of announcements. For instance, a recent tournament garnered entries from 48 teams within 30 minutes. Another upcoming tournament has already closed one category, with high demand for women's categories as well,” Ghaznavi pointed out that of the three currently functional padel courts at Legends, each one is booked for a minimum of six hours everyday, so a total of at least 18 hours a day. Each court has four people playing at once, so at any given time the total number of padel players at legends is 12 people. This means that out of the 500-800 people visiting Legends Arena everyday, at least 70-100 people are there to play padel. The padel courts at the stadium are functional 22 hours a day. “So we start at 7 am, we close at 5 am the next day and we resume after two hours. On the weekends it's sometimes 24 hours as well,” added Khan. Clearly, the demand for padel, at least for those who have discovered it in Karachi, is massive. Shamsi added, “Because tennis and squash are already quite popular sports, padel is like a shashka but at the same time the craze for it is intense because it's also doubles, with four people playing at once, making it a social sport. So, it will keep picking.” “It is also quite feasible because in the space of one tennis court you can have two padel courts. If you take the example of go-karting, it won’t be as accessible as padel is because you have to drive all the way to the end of Korangi, so you will do it once or twice and then give up because of not just how expensive it is but also comes with several logistical challenges,” Shamsi said, concluding his point.

Players of padel

rofit spoke to some frequent padel players at the Legends Arena, in hopes to unpack the sentiments that make these people return to play. Mustafa, a regular at Legends, told Profit,

SPORTS

“I learnt about padel through a friend, who has been coming to Legends to play padel since the stadium opened back in August 2023. It started from a small group of two to three players, but has now grown to a 35-member Whatsapp group chat, where we coordinate days and decide how many slots to book.” continuing to share, “I have been a squash, table tennis and tennis player since childhood, so a new racket sport was quite intriguing.” Mustafa added that the appeal of padel and its instant addiction comes from its easy nature, whereby it is quite beginner-friendly. “There are more courts coming, I know there is one in Rahat being built, along with others at Zamzama and Gymkhana. Some others are partnering with universities to build courts, so by next December you can expect 30 to 40 padel courts in Karachi. It’s like hotpot and chai dhabas, once the idea is proven as a success, many others start jumping on the bandwagon,” Mustafa shared, highlighting that padel is already growing and on the track to become mainstream soon. Muzaffar believes that padel has the potential to be even bigger than squash, considering the growing fad for racket sports. “Anything that makes money, invites investment and padel has the potential to reach the level of cricket.” He gave the example of a market similar to Pakistan’s, “Egypt has a similar economy to ours and there has been an influx of padel courts there, to the point that you don't have to travel too far from your neighbourhood to find a court.” Profit caught Abdul Moiz Jafferi, litigation lawyer and an avid enjoyer of padel, right before his padel match at Legends. He shared, “Tennis is a game where you can take as many lessons as you may but the moment you step into the court and start playing it, you realise how bad a player you are. The service takes a phenomenal amount of skill, to keep a rally going takes great skill too, so people tend to

get discouraged.” Jafferi first heard about padel from his brother in law, and played it in Dubai. “I played padel the first time and I was hooked because there is a low barrier to entry and I realised you can hold your own quite quickly, unlike tennis. Moreover, it is a social sport with four, sometimes eight people playing in teams that are rotating and it is also familiar given that it’s a racket sport, so it was a very easy hook for me,” Jafferi elucidated. Lastly, Jafferi added, “There are two stats that always wow me about padel. First, it is the fastest growing sport in the world at the moment. But the biggest stat for me is that all expert opinion holds that padel will stop at being the second most popular sport in the world after football. Not regionally, but globally padel is expected to beat all other mainstream sports, with the exception of football.” A padel player at Legends told Profit that his kids come to the stadium for football training, while he and his wife play padel and some of his friends use the track at Legends for running, making it a social affair. He noted that the best thing about visiting the stadium is that it feels like Ramadan all year round because people only tend to get active and pick up evening activities during the month of Ramadan.

But does padel have the potential to become a mainstream sport in Pakistan?

ny discussion about padel’s popularity will have to inevitably call into question its price to play. Sports like cricket or football can be played in your home, or in the streets, with minimal and inexpensive gear. Not so for sports like padel. Even Ghaznavi agreed with the notion that the

niche for padel – at the moment – is similar to that of pilates i.e. it is a cool new activity that people spend lots of money on. But because it is so addictive, it is becoming a growing hobby among certain affluent social classes. Still that may mean that padel will remain exclusively popular in that class alone, and would be largely inaccessible for any other classes. Still, there is some silver lining. Remember that there are very few courts that exist in Karachi at the moment. But as the number of padel courts in the country increases, the game might become slightly more affordable. That’s because the price of playing padel is expected to go down as the supply starts meeting the demand. When asked if padel will become more affordable, Khan said, "It would. It would," twice to emphasise his point. He added, "Because right now, there's a very limited number of courts—actually, there are no courts.” This is expected to change. The company said that they are exploring the idea of creating dedicated padel centres in multiple locations, envisioning the Legends Padel Edition, which as the name suggests would be a facility specifically designed for playing padel, with 25 to 30 courts across various cities in the next one or two years. All other racket sports have a setup and a federation. Despite it being less than a year for padel to be introduced in Pakistan, the popularity of the sport is evident in the fact that there are already discussions of making a Padel Federation in the country, which is likely to take it beyond just being a commercial sport. Ghaznavi is optimistic, noting that the two most utilised facilities at the Legends Arena are padel and cricket. That in itself says something, as cricket is perhaps Pakistan’s national obsession. If the demand for padel at Legends is similar to that of cricket, then it is safe to say that it might be becoming a fast growing sport in Pakistan after all. n

SPORTS

OPINION

Ammar H. Khan A policy abyss

the country can remove itself from a low-growth trap has led to a situation where political parties do not have anything to offer. The political leadership is still stuck in the 1990s, and has yet to enter the twenty-first century. None of the akistan is stuck in a low-growth trap. The population is political parties have any dedicated economic or social policy growing at a rate of 2.5 percent per annum, while economic wings. In absence of such discourse even within political growth remains sluggish, and doesn’t even cover population parties, any political party that is able to make a government growth rate. At least 40 percent of children aged under five in does not have any plan to fix any problem. the country are stunted, while there are more than 20 million It then takes a few months, or quarters to do fire-fightchildren out of school. Inflation continues to erode purchasing, get into an inevitable program with the IMF, and then ing power, with price levels having more than doubled in the last five maybe start delivering. By the time any elected government years. Productive capacity of the country continues to diminish, while gets to a point where it can start enacting sound long-term consumption makes up almost 100 percent of total GDP, largely financed policy, it is already too late, considering the way demoby foreign-currency denominated imports. cratic governments are transitioned out. Absence of policy Electricity consumption per capita has remained flat in the last five direction at political party level eventually leads to reactive years, while electricity is simply not affordable for either households, or decision making by the government, wherein now the elected industries to generate economically competitive products. As the popugovernment remains beholden to vested interests of those lation grows, and productive capacity dwindles, national output remains operating the system. Due to the same, the ability to develop largely a function of import-driven consumption, rather than investments, policies with a long-term orientation remains absent, further or exports. A lopsided economic model that can only generate growth strengthening the status quo. given availability of foreign currency, mostly through external debt, fundIn absence of any policy thought, or long-term oriened by a mix of multilateral institutions, and friendly countries, who may tation towards a consistent policy framework, the bureaualso be fed up with never ending demand for rollovers, and more debt. cracy continues to operate with the philosophy of kicking Economic growth is beholden to the availability of external debt – in the the can down the road – and the same has been happening absence of which growth crashes to below population growth levels, for decades at this point. Eventually the road gets rocky, wiping out incomes, and purchasing power in the process. and that rocky road leads to the end of a cliff. The country Despite deterioration on most economic, and social indicators, the is on the rocky road right now, the can doesn’t have much political parties competing in the general elections have little to offer in more distance to cover. If the bureaucracy, and the political terms of any policy guidance, or plans that can pull the country out of the leadership continues to kick the can down the road, it will low-growth trap. The manifestos by all major, and even minor political eventually lead to the end of the cliff. parties are a collection of wish lists, with no plan on how those wishes Policy inaction, and inability to take decisions contincan be brought to fruition. If wishes were horses, our political parties ues to succumb to the population of this country to abject would be unicorns – but we are effectively stuck with a collection of misery, and it is only going to get worse. Policies developed geriatrics with nothing to offer in terms of a coherent economic plan, or have a pro-rich tilt, largely to serve vested interests of a few policy framework. thousand households, rather than the millions of households Absence of a coherent economic plan, and absolutely no focus on that exist in the country. Absence of a long-term sustainable development of a policy framework that can provide guidance on how policy framework will continue to serve interests of the prorich tilt, while pushing everyone else over the cliff into an abyss. It is time that political leadership, or the shadow leadership that exists understands that we cannot kick the can down the road anymore. The country does The writer is an not have much time left. The demographic dividend will become a demographic liability, and today’s independent problems will compound to become much bigger existential problems. We can either work towards a macroeconomist and country that exists for everyone, and makes everyone healthy and prosperous, or we can work towards energy analyst. serving the interests of a few thousand rent-seeking households. n

COMMENT

The top three contenders of superapps in Pakistan have come a long way since they started on this road. How are they faring?

By Taimoor Hassan

ech Titans the world over look at WeChat and see the promised land. And why would they not? Launched in 2011 in China as a messaging service, WeChat took seven years to become the world’s largest standalone mobile app by 2018 with over 1 billion monthly active users. What set it apart even more than its massive user base was that the app didn’t have a single purpose. In fact, WeChat quickly became known as the “everything app” in China. From instant messaging to social media, ride hailing, and payments this one application housed everyday tech needs under one platform. It is no wonder that WeChat became such a Shining City On The Hill for techpreneurs everywhere. This was the world’s first ‘Super-App’ after all. The concept of a Super-App is pretty simple. Startups all over the world provide tech-powered solutions to everyday problems. To get people hooked onto this solution, startups often spend insane amounts of money on acquiring customers. But once an app has acquired these customers, if the startup wants to provide a different service, they will have to build a new app and acquire customers from scratch. The Super-App model proposes that we skip this step and simply integrate new functions onto existing apps with already acquired customers. Essentially a single platform to do everything. WeChat proved that this is possible.GoJek and Grab in Southeast Asia gave proof of concept beyond China as well. But the Super-Apps have remained elusive everywhere else. Western Tech Giants in particular have failed to capitalise on such an opportunity. Both Elon Musk, the CEO of X (formerly Twitter) and Mark Zuckerberg (founder of Facebook) have made their intentions known of creating superapps for the Western world. In India too, the Tata Group backed Tata Neu superapp has remained an underperformer, failing to gain traction since its launch in 2022. Despite this, dedicated platforms have held sway.

But interestingly enough one place has been receptive to the idea of Super-Apps: Pakistan. Perhaps it is because of the proximity to China where WeChat has proven itself a Gargantuan force. Maybe it is because the startup space in Pakistan has proven to be limited, and there is the chance of a single player controlling many different streams. For all we know it might just be a fad. What is undeniable is that there have been three very serious attempts in Pakistan to create a Super-App. All three have had vastly different starts and winding journeys. The first such effort was from Jazz, which launched Veon as a messaging app in 2016 and has since had a change in heart as well as strategy. Then there is Careem, one of Pakistan’s initial startup success stories that had enough of a customer base to be a Super-App contender but has since found itself in a spot of trouble. And finally there is Bykea, the original local competitor to Careem that is going through a shift of its own. How have these three attempts fared? And as we settle into 2024, where do Pakistan’s Super-App hopefuls stand? Are they still committed to the dream or has pragmatism planted its sobering roots? Profit looks at the fate of the Super-App dream in Pakistan.

The Jazz (super) apps ecosystem

his isn’t Jazz’s first rodeo. In 2016 the Telco had launched its own messaging app called Veo modelled on WeChat. But since then it seems that the folks over at Jazz have had a change of heart. You see Veon didn’t work. Jazz ventured into and busted its superapp before any of the technology companies in Pakistan had conceived the idea. But it turned out to be technology mostly that Jazz was not able to manage Veon and eventually shut it down. An ambitious experiment worth an estimated $100 million was aborted but the idea was never abandoned and Jazz seems to have risen up and gotten bigger and better. Jazz has doubled down on the idea that a superapp is very much for the Pakistani market, could be built here but doesn’t necessarily have to be a single app like WeChat where services ranging

COVER STORY

Super App by Careem will be like a virtual mall, where there will be two models – services owned and offered by Careem itself (ride hailing, food, same-day-delivery capped at Rs5,000, and payment from CareemPay), and other third parties on board offering any sort of services that need communication of the vendor to the customer base Zeeshan Baig, former CEO of Careem Pakistan

from eCommerce to financial services, food and entertainment are available. The conviction now is that one single app where all services are available is unachievable in Pakistan. Even though Aamer Ejaz, the chief digital officer at Jazz, says that the adoption of Veon was slow because of technological issues more than it being a flawed concept in the Pakistan market. “It will not work,” argues Aamer Ejaz, the chief digital officer at Jazz, spearheading the (super)apps ecosystem of the company. “The concept of a ‘SuperApp’—an all-encompassing platform meeting every user’s needs -is more conceptual than tangible - notably in terms of screen and application size,” he says. Instead, conviction at Jazz has now moved to creating “specialised superapps” that excel in specific domains by offering depth and quality within their niche. For instance JazzWorld offers account management for Jazz users besides faith and Bajao, an entertainment platform, making it a superapp in the self care category. Similarly, JazzCash extends beyond mere payment solutions to offer a suite of financial services, positioning itself as a SuperApp in financial services. “Every app has a main value proposition. For instance, Tamasha is emerging as a Super-

App in the entertainment arena by encompassing a broad spectrum of video content—from movies and TV shows to live sports—thereby catering to diverse entertainment preferences. This specialisation allows us to engage audiences with a rich, tailored experience,” Amer says. This approach underpins our belief that the true value of a SuperApp lies not in attempting to be a jack-of-all-trades but in mastering specific domains, thereby offering specialised and personalised services that resonate deeply with users. What exactly could be the problem in consolidating all of these services, and some more, onto a single app? After all, Jazz had thought about bringing it all to a single platform earlier. “Packing an array of services into one app not only challenges the user experience but also strains technical resources, making the pursuit somewhat unrealistic,” says Amer. Adding more services could be an expensive endeavour and these services might go unused. Amer says that as more features are added, ones that go down wouldn’t be used much. Because of the costs associated with adding such features, and then if they remain unused, it would bring down the overall feasibility of the app.

“The concept of a ‘SuperApp’—an all-encompassing platform meeting every user’s needs is more conceptual than tangible - notably in terms of screen and application size Aamer Ejaz, chief digital officer at Jazz

Bykea - not a superapp anymore

hile Jazz has created an ecosystem of apps that they consider are superapps in their respective categories, some startups have been flirting with the idea for a while now. Bykea is one. Bykea got its inspiration to become a superapp from the Indonesian superapp GoJek, and modelled into car hailing, deliveries and financial services, and consolidated all these services onto a single app. But eight years later, Bykea has scrapped all services but ride-hailing and is expanding its footprint in the same category. Not only has Muneeb now given up. The idea was that if Bykea could take its core mobility operations to a certain scale, it could convert these customers to do other services such as eCommerce, food delivery, financial services and more, just like GoJek. In fact, from the get-go, Bykea had been ideated not as a singular regular ride-hailing app but as a superapp that would provide other services such as financial services, mart and deliveries besides the core ride-hailing. Today, all other services have been scrapped and the company is planning to focus only on ride-hailing services, introducing new products in the ride-hailing category. So why the change of heart at Bykea? The answer is Bykea’s learnings of the Pakistani market where achieving a certain scale in ride-hailing so that providing other services is viable is unachievable. If ride-hailing is limited to three or four big cities and can not be expanded to other cities, the scale then is not enough, given also that there is competition from other companies such as Careem and Uber in ride-hailing in big cities, that making a superapp would make sense. “Why are superapps even interesting? Because when you have a lot of traffic on a platform, you could get people to use multiple other services and so that you don’t have to spend money on acquisition of new users,” Muneeb Maayr, the founder and CEO of Bykea, said.

Why are superapps even interesting? Because when you have a lot of traffic on a platform, you could get people to use multiple other services and so that you don’t have to spend money on acquisition of new users Muneeb Maayr, founder and CEO of Bykea

The diverse demographics of the country also make certain services unfeasible. Muneeb explains that for instance JazzCash and EasyPaisa have multi million users of their services, positioning them well to offer other services such as eCommerce or food delivery, but they wouldn’t be able to power through it because their core customers in financial services are not the ones who would be an enticing market for say food delivery services. “JazzCash and EasyPaisa have been the best poised to be superapps. But because they only pander to an audience of people who are largely unbanked, there is no overlap in the traffic of JazzCash and EasyPaisa and food delivery,” explains Muneeb. Something similar is in the case of Bykea. People who prefer bike-hailing would most likely not be the ones who would pay bills through an app and wouldn’t be the ones to shop online on Bykea mart. Offering services where such a mismatch exists, is not going to work. This would also be a waste of money, already short for Pakistani startups. Funding is one of the factors that Muneeb believes has impeded the growth of superapp in Pakistan. The South Asian country hasn’t been a market that would attract big amounts in venture capital funding to pay out for a GoJek style superapp. In 2019 alone, the Indonesia-based GoJek raised over $1 billion in funding and has raised over $6 billion since its inception and has scaled the superapp to over 40 million users in Southeast Asian countries. On the other hand, since 2019, Pakistan has cumulatively raised less than $800 million in VC funding. “If you look at Southeast Asia, Gojek and Grab (another superapp) didn’t do wonders. After ride hailing, they just raised so much money that they outfunded competitors like foodpanda in other verticals,” Muneeb says. “What that basically means is that they funded more capital than a foodpanda equivalent in that market and hence stole the food delivery business. They also outspent many others who were in payments. I think the digital adoption that has happened there has happened at the behest of burning billions of dollars.” While all of the aforementioned problems

outline why creating a superapp in Pakistan is difficult, it also hints at the inability to create a Southeast Asia style or a China style superapp in the future. “Whether this opportunity to create a superapp continues to exist is questionable. No one has that much traffic to begin with,” says Muneeb, explaining further that superapps don’t look attractive anymore either because of the cutdown in valuations. GoTo Group, which owns GoJek, had lost about 70% of its $28 billion valuation by December 2022, after its IPO in April of the same year. It has since been focused on cutting losses and improving profitability.

Careem - The Everything App

hile Bykea has its reasons not to continue on the superapp road, ride-hailing company Careem still continues to believe in the idea of creating a superapp for the Pakistani market. Just like Muneeb Maayr, Careem founder Mudassir Sheikha had been vocal about creating a superapp for Pakistan with its eventual launch in June 2020. The idea is the same: if Careem has an app for ride-hailing services, it could be used to offer other services as well. Some of the features it had planned to launch for the Pakistani market included food delivery and digital payments. “Super App by Careem will be like a virtual mall, where there will be two models – services owned and offered by Careem itself (ride hailing, food, same-day-delivery capped at Rs5,000, and payment from CareemPay), and other third parties on board offering any sort of services that need communication of the vendor to the customer base,” Zeeshan Baig, former CEO of Careem Pakistan, had said in a June 2020 interview with Profit. “The third-party vendors [marketplace] will begin to unroll towards the end of the current year or early next year,” he added. The model never really panned out. Rather, in a plot twist Careem shuttered its food delivery service in 2022, about three years after its launch, and in August last year, the company

withdrew its licence for the electronic money institution, also shuttering plans for a digital wallet. This was done just a few months after a $400 million investment into Careem by e& to become a majority shareholder in Careem’s Super App alongside Uber and all three of Careem’s co-founders. Currently, the Careem Super App offers over a dozen services including food and grocery delivery, micro-mobility, a digital wallet and suite of fintech services, and additional third-party services such as home cleaning, car rental and laundry but in markets other than Pakistan. In Pakistan, Careem only offers ride-hailing and parcel delivery services. The company has not completely given up on its superapp ambitions for Pakistan, however. In a statement to Profit, Careem said that it was “expanding its Everything App in the UAE, KSA and Jordan before expanding across the wider region.” “The opportunity for an Everything App in our region is huge and we are just scratching the surface in the ways we can simplify lives and create earning opportunities on the app,” Careem’s statement read. Why does Careem think it can be a superapp? Because it has a strong presence in mobility, with as many as 12 million registered customers in Pakistan alone. The company also has digital payments functionality embedded in the app which allows it to collect cash through debit or credit cards. That is besides the strong technology core that enables it to deliver good user experience. “Importantly, we are a local brand that understands the specific challenges that people in this region face every day,” Careem said in a statement. “As we scale the Everything App platform to provide more services to more people across the region, we remain steadfastly focused on the quality and reliability of the experience of customers to ensure that they can easily save time and access value across multiple different services. Pakistan faces its own unique challenges with growing digital services, such as the pricing of global tech infrastructure being impacted by currency devaluations.” n

COVER STORY

How inflation killed Retailistan

Inflation is biting and it’s taking a chunk out of the retail industry

By Zain Naeem

et’s cut to the chase. Inflation has gotten pretty bad in the past couple of years. For a litany of reasons prices have soared at double-digit inflation rates while wages have remained largely stagnant. This coupled with high unemployment because of an economic slowdown has meant the purchasing power of the families has fallen. So what happens, dear reader, when people can’t buy things anymore? When they can’t afford as much as they once could? The answer is simple. People are still going to buy food, pay for utilities, and send their kids to school. Sure, they might get cheaper off-brand alternatives for groceries, or not turn their ACs on in the summer, or even send their children to more affordable schools but they won’t stop these expenses. Or at least they would be the last to go. The first line of spending that is cut are luxury items. And since larger luxury items like cars and electronics are infrequent purchases as it is, the real effect that is immediately felt is in the retail sector. . This phenomenon is actually visibly seen all around us. Malls used to hold sales for a couple of weeks a season in order to boost their sales at the end of the season. What is seen now is sales which are lasting months on end with no sign of ending. Just how much has the retail sector suffered due to the economic downturn and is there an end in sight?

Shrinking purchasing power

akistan seems to be one country which has tried to sustain itself with little to no foresight and planning. After decades of fiscal mismanagement and external debt, the country has finally had to face its final reckoning. This came in the form of high inflation and depreciating currency leading to shrinking of the purchasing power of the people. The worrying fact for many families is that there are few signs that inflation is going to abate any time soon. All these signs point towards the slowdown in the economy which will persist

in 2024 and there might even be a contraction registered for FY 2024. At the end of 2022, 26% households were earning more than US $10,000 which is expected to fall to 19% by the end of 2027. Even though this seems like a small number,it would mean that 2.59 million households or around 16 million people will fall below the threshold of $10,000 in the coming years. All these fancy numbers mean that the consumer spending and ability to purchase products will fall.

Wages are sticky

t is a known fact that wages in Pakistan are sticky. Sticky wages are an economic concept describing how wages adjust slowly to changes in labor market conditions.As these wages are agreeably sticky downwards, employers are cautious before they increase wages as they are cognizant of the fact that there will be no revision downwards when it is time to cut their costs. Due to this, it is unlikely for a breadwinner to see a rise in wages on a regular basis. In normal circumstances, this is not going to be problematic. As long as inflation stays low, the wages will be ample enough to cover all the necessary expenses. Since the height of 2014, inflation had been on a downward trend for Pakistan. Inflation rate touched a low of less than 3% in 2018 and was within a manageable range from 2014 till 2019. The story after 2019, however, has been problematic to say the least. Due to increasing oil prices and devaluation of the currency, inflation was in double digits for 3 of the last 4 years and the rate touched a high of almost 30% at the end of 2023. The State Bank actually revised its projected inflation for the next fiscal year to be around 23 to 25% which was previously expected to be around 20 to 22%. Figures on a year on year basis came at 28.3% for January 2024.

Where the rubber meets the road

n order to put this into context, consider a family of five where the household income is around Rs 5 lakhs. In total, Pakistan has 3.7 crore households out of which more than

half earn an average household income of Rs 5 lakhs. For many in the country, there has been little change over the level of wages since 2018. This means that they were earning around the same amount they are right now. Taking a survey of a family of five, the basic costs associated with the household are groceries, education, fuel expenses, utilities and domestic help. In 2018, groceries including meat and vegetables would have come to around 1.3 lakh for a family of 5. With 3 school going children, education would have been around 1.2 lakh as well for a private education. Fuel cost was Rs 100 per litre in 2018 so fuel would have cost around Rs. 30,000. Domestic help would have cost around Rs. 40,000 for 2 individuals helping. Utilities would have roughly cost Rs 50,000 on an average monthly basis. Even if eating out expenses are added to this, the total cost can be stretched to Rs 3.75 to 4 lakhs for the month. This would have left over 20% of the income which could be spent on retail based expenses. Clothes, shoes and other retail items could be bought by the family every month. The same family now sees that the income cannot cover some of the basic expenses. Groceries and meat costs have increased to Rs. 1.7 lakhs. Education expenses have increased to around Rs 1.5 lakhs. Fuel costs have increased almost three folds to around Rs. 80,000. Similarly, domestic help is now being given Rs 50,000 while utility bills have doubled since 2018 to around 1 lakh per month. These come to a total cost of around Rs. 550,000. Even if an increment is considered from 5 lakh to 6 lakh for the household, which is highly unlikely, the leftover income is barely enough to cover any sort of retail based purchase.

Industry feeling the pinch

ven the representatives from the retail sector acknowledge how the demand has been impacted. Many experts of the industry say that demand was on the rise till 2019 before the pandemic hit in March 2020. This led to a sharp decline in business and household incomes which did not recover till 2021. The industry did see a spike in 2021 due to demand being on hold and monetary expansion

Demand of goods sold by the tax-compliant organized retail sector has struggled due to taxes on this segment doubling over the past 4 years. Meanwhile, growth in the untaxed retail segment is very visible which indicates that the market is becoming increasingly lop-sided due to an unfair playing field Asfandyar Farrukh, Managing Director of Urban Brands and Co-Founder of Chainstore Association of Pakistan

in response to the pandemic. However, as the inflation has taken hold, there is no growth seen in the industry which has led to either compromising on the quality or placing discounts in order to stimulate demand. Another factor that has hit the retail industry is the tax compliance that they have to adhere to. “Demand of goods sold by the tax-compliant organized retail sector has struggled due to taxes on this segment doubling over the past 4 years. Meanwhile, growth in the untaxed retail segment is very visible which indicates that the market is becoming increasingly lop-sided due to an unfair playing field” states Asfandyar Farrukh, Managing Director of Urban Brands and Co-Founder of Chainstore Association of Pakistan. He further elaborates that since 2018, the industry has seen a discernible trend of falling demand which is due to inflation and economic slowdown. Even in these circumstances, one of the things that the industry can capitalize on is the unwavering loyalty of its consumers. This brand loyalty allows the brands to carry out shrink inflation by reducing pack sizes and have looked to use their brand name to pass on the cost onto the customers. Raheel Meghani, Chief Executive Officer at Diamond Super Market, says that “In the ever-changing landscape of the economy, supermarket chains find themselves at the forefront, grappling with the impacts of inflation and a

shifting consumer mindset. As the CEO of a supermarket chain with a presence in Karachi, I have witnessed firsthand the trends that have shaped our industry over the past few years.” Some feel that there is no considerable demand shrinkage in the conventional sense, however, the industry is price sensitive. “We have witnessed that buyers have opted not to entirely refrain from retail purchases. Instead, they have reduced their basket size and opted for small ticket items to accommodate their shrinking buying power.” opines Mehvish Waliany, Chief Operating Officer at Alkaram Studio. Waliany also feels that as organized retailers are looking to cut down their prices, they are seeing a movement of customers who used to go towards unorganized retail and are now choosing more organized retailers. Similarly, individuals who do not generate formal taxable salary income have also stayed immune from the shrinkage in their purchasing power. As this income is turned towards retailers, they see steady turnover in terms of their sales.

Trend for the last five years

The future is certainly challenging. In these hard times retailers need to roll up their sleeves and they should be ready to introduce changes into their business Salman Bashir, Chief Executive Officer at Chase Up

n terms of revenues and volumes, most of the industry has seen stagnation as their revenues have not grown in the past couple of years. As retail prices rise by

40 to 50% due to inflation and taxation, the customers are still spending the same amount on retail as they are constricted to increase it. “In real terms, our revenues and volumes have remained stagnant over the past couple of years while retail prices have had to go up by 40-50% due to inflation and tax hikes, especially sales tax and income taxes for us compliant Tier-1 retailers. In addition, the sale of undocumented/smuggled goods has been at an all-time high over the past few years primarily because of pressure on businesses to sell cheaper goods by evading duties and taxes” adds Farrukh.There has been a drive to increase tax based revenues in recent years which has led to retailers being asked to comply with additional taxation based measures. According to an estimate, 20% of revenues generated by the retail sector go to the Government while the average for the country is half of that. This puts the formal sector of the economy at a huge disadvantage as retailers outside the purview of tax are able to keep lower prices. The other side of the coin is the grocery and supermarket industry which has largely been unaffected by this trend. Meghani says that “the supermarket sector has proven to be recession-resilient, with consumers adapting to economic uncertainties by adjusting the quantity of their purchases. The challenge lies in managing the delicate balance between increasing turnover and decreasing quantities sold.” Similarly, Salman Bashir, Chief Executive Officer at Chase Up states that “since we are discounters therefore the falling of demand is not an issue with us. In fact in hard times like these discounters fare better than many others. However those retail chains that operate in the mid to high price ranges are definitely complaining about the falling demand. Customers are extremely wary of the prices due to high electricity tariffs and fuel prices in particular”. One fact that has developed over this period of time is that retailers are looking to place discounts on apparel and footwear brands that they see as catering to the mass market while trying to keep their luxury brands priced at the same levels. This has been done in order to stim-

RETAIL

In the ever-changing landscape of the economy, supermarket chains find themselves at the forefront, grappling with the impacts of inflation and a shifting consumer mindset. As the CEO of a supermarket chain with a presence in Karachi, I have witnessed firsthand the trends that have shaped our industry over the past few years Raheel Meghani, Chief Executive Officer at Diamond Supermarket

ulate demand for brands which are seen as more accessible and affordable while brands which are seen as luxury are kept at a higher price. ”Our apparel and footwear brands have had to discount merchandise almost every month in order to stimulate demand just to keep our heads above water while our luxury leather brand has refrained from doing so.” says Farrukh.

Short term solutions

he companies are also looking to make themselves lean in these challenging times. Brands have had to carry out an introspective move where they have decided to cut down on capital intensive measures like expanding into new stores or hold large inventories. This cuts down on the cost of production for the time being and also makes sure that these products will not have to be sold at a discount once they are produced. Once demand will rebound, these avenues can be considered by the brands for the future. Companies have actually seen visually how demand has fallen in the past few years. Farrukh states how the footfall in his stores has decreased by at least 10 to 15% as customers are looking for discounts and sales. “Due to this pattern, our main strategy has been to improve our product quality and service offerings so that the customer gets better value for money but we still have to discount from time

to time to achieve viable revenues.” Waliany agrees with this sentiment saying that footfall to their stores has decreased but discounts and sales do lead to increase in customers visiting their stores. Meghani also states that his supermarket chain has been proactive in carrying out weekly price-offs at his stores in order to remain competitive and strike a balance between profitability and affordability. Bashir runs a company which positions itself as a discount retailer and states that even though his sales have not been impacted, there is still a decrease in people visiting the stores. Goods like apparel have seen a rise in their price points which means it is difficult to attract customers relating to these products. Customers are actively looking for discounts in order to carry out these purchases and the retailers who are willing to place these discounts are seeing a rise in their sales only.

Future expectations

he industry sees that the uncertainty and economic downturn will continue for the time being as there is little chance of demand increasing. Due to inflation and tax burden, incomes of people have decreased and sales are expected to be stagnant till the end of 2024. In such an atmosphere, the retailers who are able to meet the customer needs and expectations will see

better revenues which will be achieved with discounts in the near future. The doom and gloom doesn’t just end there. With record high interest rates, Farrukh says that “the multi-faceted cost of doing business is expected to rise further which means that net margins will stay badly impacted therefore additional investments remain at a standstill. For us, it actually makes much more financial sense to just put money in the bank every year to earn a higher profit but that doesn’t create jobs or fuel business growth.” At this point, companies are expecting the macroeconomic situation to persist with little optimism in terms of purchasing power improving. In the face of such challenges, they are looking to position themselves in a better manner to adapt to the situation and strike a balance between being resilient and affordable for the customers. Bashir outright says that “the future is certainly challenging. In these hard times retailers need to roll up their sleeves and they should be ready to introduce changes into their business.” Industry experts feel that consumer purchasing power can be induced by decreasing local and global inflation. As interest rates are high and international prices have an impact on inflation, these two have to be controlled in order to provide some purchasing power back to the customers. Most of the industry feels that the situation will improve in the second half of FY 2024-2025. n

We have witnessed that buyers have opted not to entirely refrain from retail purchases. Instead, they have reduced their basket size and opted for small ticket items to accommodate their shrinking buying power Mehvish Waliany, Chief Operating Officer at Alkaram Studio

RETAIL

Productive policies or PR fluff —

How useful were the interim government’s IT initiatives?

The interim IT minister claims large successes in five different areas. Profit looks at how much is real and how much is posturing By Nisma Riaz

here has been a not so silent revolution in Pakistan. It is now impossible to go on any social media platform, turn on any TV channel or look at any newspaper, without the mention of one man; Umar Saif. He has ensured that every minute detail of the ministry of science and technology’s activities is delivered to audiences instantly. The last time this ministry was relevant was when Fawad Chaudhry, then minister, had gone to war with the Ruet-e-Hilal committee.

TECH

The technological breakthrough being debated at the time was whether the moon sighting for Eid was to be done using a telescope or GPS. Needless to say we have come a long way since then. This time around, the ministry has captured everyone’s attention for something worthwhile: several initiatives that aim to transform Pakistan’s IT industry. Umar Saif is perhaps the most proactive IT minister Pakistan has seen in a long time, while this caretaker government has also been the most empowered one yet in the country’s history. But what are these initiatives that everyone, more importantly Dr Saif himself,

cannot stop talking about and will they enable Pakistan’s IT industry to prosper the way Dr Saif promises? Well, to answer the first question, the initiatives include policy reforms and programs for startups, IT firms, freelancers and telecoms. Profit explores the utility and potential of these initiatives.

Startups

r. Saif has introduced the Pakistan Startup Fund (PSF), a Rs 2 billion initiative, managed by Ignite and aimed at nurturing Pakistan’s emerging startup ecosystem. This move fol-

My concerns are twofold. Firstly, the fund would fail to act as catalytic capital as there are limited funding rounds happening, especially as local venture capitalists struggle to raise capital and foreign ones are now less active Aman Nasir, partner at Sarmayacar Ventures

lows the previous Pakistan Tehreek-e-Insaf (PTI) government’s announcement of a Rs1 billion startup fund, with plans for management by the National Investment Trust Limited (NITL). However, the earlier fund never materialised and was not formally launched. Dr. Saif’s PSF is a renewed effort to bolster the startup ecosystem, distinct from the previously proposed fund, and seeks to provide substantial support for the growth of startups in Pakistan. On face value, this seems like a great initiative, however, experts from the industry have both their reservations and doubts regarding the newly installed startup fund. According to Aman Nasir, Partner at Sarmayacar Ventures, “The startup fund initiative is a welcome development because at least the government is thinking about the venture ecosystem. It offers a 30% grant funding for rounds involving VCs; the details are a bit hazy right now as to who qualifies for the grant.” Nasir says that the criteria for qualifying rounds is unclear, raising concerns about its ability to inject additional capital into ventures. “The requirement for VCs to participate may limit the number to around 15 to 20 active VCs in Pakistan.” “My concerns are twofold. Firstly, the fund would fail to act as catalytic capital as there are limited funding rounds happening, especially as local venture capitalists struggle to raise capital and foreign ones are now less active,” Nasir said. Moving onto his second concern, Nasir highlighted that grant funding encourages the wrong behaviours and breeds laziness. “Grant funding, unless for specific purposes, is not valued in the same manner as equity capital and can result in the wrong behaviours misguided experimentation and inappropriate pricing, that hinder the development of viable business models. There are instances of companies reliant on grants that struggle to create commercially viable propositions,” Nasir explained. This may be because the absence of investors waiting for returns becomes a demotivator for startups to reach profitability

quickly. While this may be true, sources believe that one reason why the government decided to grant equity free capital can be because when equity is involved, several other regulatory bodies such as the National Accountability Bureau (NAB) and the Federal Investigation Agency (FIA) start periodically inquiring about returns. While others seem to believe that this is yet another subsidy, aimed at incentivising VCs to invest in the country. Nasir relayed that instead of rushing into announcements, they could have continued working on the proposals and given final approval to the incoming government. “This way, there’s a smoother transition. About 30% of the work could have been done to reach the end state, and the next government could handle the rest. It’s a more practical approach rather than a rushed, term-based one.”

Freelancers

here were nearly three million freelancers in Pakistan in 2022, a number that has only grown since then. These individuals heavily contribute to the IT exports of the country. In order to assist freelancers, the minister has introduced two main initiatives. The first one is a proposal to build 10,000 E-rozgaar centres, which are essentially workspaces equipped with infrastructure, such as high-speed internet, computers and desks. “The announcement of 10,000 E-rozgar centres is favourable for optics, yet I consider this as an unrealistic target,” says Nasir. So, the absence of a comprehensive strategy for the touted 10,000 centres seems to be a mere exaggeration. Nasir says that we don’t need more real estate, “There is a predominant focus on constructing elaborate structures like E-rozgar centres, NASTPs and NICs. Genuine progress requires a shift away from prioritising real estate and towards significant investments in human capital development and the intangibles.” Freelancers, by nature, don’t require the physical space of an office. If you provide

them with digital infrastructure, connectivity, broadband access, and the necessary skills development, they can work from home, a warehouse, or even a café with just a laptop. One would not mind working from a fancy E-rozgaar centre, however, with the country’s handicapped public transport infrastructure and extremely long travel times for even short distances, how would one conveniently access these centres, especially female freelancers, many of whom face mobility constraints? So, certain cultural barriers have not been accounted for when devising this plan. Seemingly a good initiative, the E-rozgaar centres may still be impractical when there is an incessant lack of necessary human resources. Nasir advocates for a more nuanced approach, asking for the facilitation of freelancers by providing them with connectivity, broadband access, and skill development, which will eliminate the need for extensive centres. “The program is a good step, but what I would have liked is a redesign/upgrade of the E-rozgar program. The skills needed today are different from five years ago, given the rapid developments in AI,” Nasir explained. He believes that the problem is, it’s intangible—you can’t cut ribbons for something you can’t touch. The focus seems to be on quick announcements but not on figuring out if these are the best options. “They’re working within constraints instead of thinking about the best end result and designing it without those constraints,” he shared. According to Nasir, the E-rozgaar initiative, originally carried out in collaboration with UNDP, has been quite effective. It offers valuable basic skills in graphic design, web development, and e-commerce to freelancers. It’s a commendable program that has the potential to be valuable if its design is carefully considered and executed correctly. Another initiative introduced for freelancers was the PayPal remittances. This is a new pilot program that was set in motion this month, whereby freelancers

It was great teamwork between me and the Minister. It’s a great combination that we work so hard for the industry and are represented at the Global stage together Zohaib Khan, chairman of P@SHA

will have the added convenience of receiving their funds through the digital payment platform, PayPal. This will be done through a partnership with Payoneer. Using PayPal directly in Pakistan is not possible due to concerns related to the exchange control regime and money laundering. Despite partnership approaches, PayPal does not currently accept transactions from Pakistan. However, sources reveal that a new player, Elevate, an Egyptian startup backed by Y-Combinator, has entered the Pakistani market. Elevate enables companies to hold their funds in an FDIC bank and charges a transparent and low foreign exchange processing (FXP) fee, only 1% of the transaction amount. This recent entrant presents a viable alternative to traditional payment platforms like PayPal. However, this initiative seems like a valuable first step to make international digital transactions smoother for freelancers.

IT Services Firms

he ministry has shown interest in making Pakistan a global tech destination and for that, the country’s IT services industry is receiving unprecedented attention by the government. Dr Saif, with the assistance of the Special Investment Facilitation Council, announced that IT companies can now retain 50% of their earnings in dollars. Previously, IT companies couldn’t hold U.S. dollars in Pakistan, but now they can hold up to 50% of their forex earnings. Experts believe that this is a commendable initiative, although some say that it would have been even better if the limit had been raised to a 100% retention rate. Currently, a significant amount of money earned by IT companies in Pakistan from services and products sold abroad is still kept outside the country. Pakistan’s actual IT exports are much higher than the reported $3 billion. Increasing the dollar retention limit to 100% could encourage more of this money to be retained within Pakistan, consequently improving the country’s forex situation. Despite being a step in the positive direction, the existing 50% limit has caused

issues for some businesses. Complaints have surfaced, such as in the case of Horizon Games, a startup in Peshawar. Meezan Bank, which was handling their transactions, made the process manual and cumbersome, leading to delays, with only two out of three payments being cleared after multiple physical visits, taking over two to three months. Nasir said, “Instances like these highlight the need for strict consequences for banks causing hurdles, with substantial fines to ensure compliance with minimum standards.” So, the initiative is a useful one, however, these manual checkings, involving entry points and transaction IDs, disrupt startups’ focus on business development, keeping them caught up in worrying about their finances. This raises questions about the implementation of these new initiatives. Another initiative announced by Dr Saif is the IT skills training for 200,000 university graduates. Even though they claim to train 2 lac individuals, the ministry hasn’t clarified its approach for achieving the target. While the Khyber Pakhtunkhwa Information Technology Board (KPITB) also has a program for 100,000 people, the success depends on the type of training provided. If it involves basic digital literacy or short courses, it might work for a larger scale, but for advanced skills like web development and programming, it’s wiser to begin with a smaller, pilot program, ensure its effectiveness, and then expand. The key is to have a targeted program that prioritises quality over quantity. While the goal of reaching 200,000 is feasible, it’s crucial to focus on the design and not just aim for numbers. Nasir told Profit, “I’ve met with individuals ranging from university students to founders in Peshawar and remote areas, and realised there are specific skills and programs needed. While there continues to be a lot of overlap between federal and provincial initiatives, there’s a distinct need for targeted courses, especially in programming languages like JavaScript and PHP, and starting from an early age. In the gaming sector, skills in 3D modelling using Blender and UI/UX modelling are generally lacking.”

More importantly, teaching coding from an early age and shifting from outdated computer classes is crucial. Nasir says that the current gap between the skills taught in schools and the demands of the private sector leads to 40,000 unfilled IT vacancies due to unemployable graduates lacking the right mindset, technical skills, and soft skills. Creating IT centres and belatedly training graduates alone won’t address this mismatch. Rather a greater focus on early education and a carefully designed curriculum is what the country really requires. We cannot gauge the utility of these training programs, without more transparency regarding the courses. Moreover, it is too soon to say what to expect, however, time will tell whether this was a valuable initiative or another one of the government’s misguided programs. Speaking of Dr Saif’s IT initiatives, Chairman of P@SHA Zohaib Khan told Profit, “It was great teamwork between me and the Minister. It’s a great combination that we work so hard for the industry and are represented at the Global stage together,” while failing to share any details regarding the program and how exactly they plan on implementing it.

Telecom

astly, the interim IT minister introduced a number of ambitious new policies and initiatives for the telecom sector. The first one is 5G spectrum availability. A telecom expert from one of the leading telcos in the country informed Profit that initially, policy makers failed to fully grasp the significance, but in 2014, they introduced 3G and 4G simultaneously. Although 3G was nearly obsolete, 4G had already established a thriving ecosystem globally and Pakistan, late to the scene, caught up by rolling out both technologies to bridge the gap in 2014. However, the award process for spectrum was primarily revenue-driven, lacking consideration for the operators’ business

TECH

Judging initiatives started in a short time will not be a good idea. Better to assess 6-12 months down the road to see if any results are achieved from the announced initiatives Aamir Ibrahim, Jazz CEO

sense. Auctions in 2014, 2016, and 2017 were expensive with limited success and spectrum availability remained insufficient due to high base prices and minimal operator interest. They said, “The solution lies in offering spectrum on attractive terms, aligning with operators’ business interests to enhance connectivity and bridge the technological gap.” Finally, in 2023, the government, recognizing the need for change, began actively discussing modifications to the spectrum auction policy under the current caretaker minister and PTA chairman to attract increased investments in Pakistan. “The spectrum reserve price per megahertz must decrease significantly, ideally to 10% of the 2021 failed auction price of $30 million per megahertz, making it no more than $3 million for a better 5G experience. Additionally, de-dollarizing spectrum pricing is essential, as businesses shouldn’t bear the entire risk of currency devaluation. Charging fair prices in Pakistani rupees, reflecting the country’s economic reality, is a reasonable request,” our source informed. Another issue with the 5G spectrum is that of availability of devices that can catch or support 5G signals. “Even if 5G spectrum was made available in the country, we don’t have the handsets to support it. Less than 1% of handsets (smartphones and other devices) in Pakistan support 5G due to high taxes, hindering accessibility for the general public. To create a 5G ecosystem, reducing import duties or establishing local manufacturing for affordable 5G handsets is crucial,” the expert explained. The second initiative was a national policy for high speed Internet fibre across pakistan. Again, this is a policy that has been long overdue. Profit learnt that the current policy for high-speed internet fibre in Pakistan involves connecting towers via fibre for efficient data transmission in a 5G environment. However, less than 10% of towers are fibre-connected, lagging behind countries like Bangladesh and India. The challenge lies in expensive fibre right-of-way charges, hindering widespread adoption. Profit’s source said, “Various

authorities impose exorbitant rates for laying fibre and we need to prioritise national interests. The decentralisation of fibre rightof-way decisions to local bodies, post the 18th amendment, leads to varied rates and profit-driven practices, impeding the implementation of the national policy.” So, despite attempts by the ministry, local bodies resist the national policy, viewing telecom as a lucrative opportunity. The enforcement of the national policy in Pakistan faces legal and constitutional hurdles due to the 18th amendment, creating challenges for its widespread implementation. Therefore, along with national policy for fibre, the country first needs the amendment to align with national priorities and ensure accountability and enforcement of the policy for high-speed internet infrastructure. That being said, our source highlighted the effectiveness of such initiatives only becomes clear once the implementation stage has reached so we will have to wait and see how well or unwell the outcome is. Similarly, Jazz CEO Aamir Ibrahim said, “Judging initiatives started in a short time will not be a good idea. Better to assess 6-12 months down the road to see if any results are achieved from the announced initiatives.” Then comes the National Space Policy. Pakistan has been lagging behind in this space, pun intended. Finally having a national space policy is a significant step forward. The same source explained, “I read about Elon Musk’s company and John Deere, the largest U.S. tractor manufacturer and how they’re developing AI-driven autonomous tractors and harvesters connected through Elon Musk’s satellite system. In Pakistan, having space policy can open the country to a whole new world of opportunities with satellite-based applications in agriculture, mining, shipping, and more. While Starlink’s broadband may be expensive for now, the national space policy is a positive step, though its success can only be determined by future outcomes.” Lastly, there were the telecom tribunals and telecom infrastructure sharing policy. The establishment of a tribunal, as belated as it is, is also crucial, especially in re-

solving disputes with the PTA. “Disputes are inevitable in our business, and the current legal process often hampers resolution. The Provision in the Act for Tribunals, followed by recourse to the high court, is a necessary step. Tribunals are commonplace globally, addressing various issues like taxes and telecom.” So, this initiative by the caretaker government is a commendable one, and the industry is desperately awaiting its successful implementation. This is expected to offer an efficient alternative to legal proceedings for dispute resolution in the telecom sector. The final initiative is the telecom infrastructure sharing policy, first outlined in 2015 but actualised eight long years later and the interim government deserves credit for its release. This framework involves tower sharing, both passive infrastructure with antennas and backhaul, and active sharing, incorporating shared equipment, leading to more efficient and cost-effective infrastructure. This will enable reduction in bulky infrastructure and allow increased efficiency. It extends to spectral sharing, an anticipated step outlined in the policy. This resource sharing will also reduce the cost of services that telcos can extend to their customers. “Lower operational costs for telecom operators translate to better consumer choices, increased investment in network development, and improved user experience and coverage. The government’s assistance in reducing business costs, through measures such as sharing infrastructure and ensuring reliable electricity supply, will foster a positive impact on both operators and consumers alike,” the expert articulated. Dr Saif has done what no other IT minister could in less than four months. Of these dozen initiatives, some are not only extremely necessary but have also been quite delayed, while others seem to be simply for optics. As the saying goes, the proof of the pudding is in the eating, so we’ll just have to wait and see how Dr Saif’s plans to transform the sector pan out. n

TECH

Need raw materials?

Zaraye

hopes you’ll turn to them The B2B platform connects raw material buyers and sellers, in a bid to help shake up the manufacturing sector in Pakistan By Nisma Riaz

hen speaking about Pakistan’s manufacturing sector, what with its family businesses, informal dealings and an inherited seth culture, tech is the last thing that comes to mind. We knew tech and startups were slowly taking over, with fintech, edutech, pharmatech, proptech and even agritech being introduced in Pakistan. Yet somehow, we still did not expect the old-school manufacturing sector to give into digitisation. Then in September 2021, Ahsan Ali Khan and Taha Iqbal Teli founded Zaraye, with the mission to turn the chaotic arath marketplace into a streamlined, sophisticated virtual mar-

B2B STARTUPS

ketplace for raw material buyers and sellers. Khan and Teli’s experience in the startup industry, combined with Teli’s familiarity with the manufacturing industry due to his family business, helped the co-founders not only identify gaps within the market, but also come up with a tech-based solution to the procurement problem. Zaraye’s core business is based on the marketplace side of the manufacturing industry, approaching problems in the industry relating to procurement. Khan told Profit, “We are inherently a source platform, we wanted to understand what our customer needs, first of all, specifically around sourcing work, and then how that affects the rest of their business.” As a B2B startup, Zaraye started by looking at what their customers’ profit and loss structure looked like. That is how they found

that about 60% to 65% of those costs were being allocated to procurement. This helped Khan and his colleagues to structure their software as a service (SaaS) offering around the marketplace. It even calls its multifunctional portal a ‘Zortal’. The startup raised $2.1 million in April 2022, backed by venture capital firm Tiger Global, and set off on a journey of rapid growth. It secured an additional undisclosed million-dollar funding in 2022, bringing the total to $3 million. The recent funding, not disclosed earlier, came at a higher valuation and was an extension of the pre-seed round. Profit was also informed that investors, including Tiger Global, remain actively engaged and are integral parts of Zaraye’s capital table. So, Zaraye found a modern tech-based solution to the very draconian problem of procurement. How did it achieve this?

The ease of integrating technology stems from their existing familiarity with smartphones, allowing for a step-by-step adoption of the Zaraye app. The company initially digitised post-order processes, such as order tracking, payment tracking, and contract signing, However, full app adoption faced challenges, given the market’s reliance on offline channels, emphasising the significance of relationships in this sector Ahsan Ali Khan, co-founder of Zaraye

Pakistan’s manufacturing industry and the procurement problem

o understand Zaraye’s core business model, one must take a look at the relatively orthodox industry that it is trying to disrupt. Khan shared that the manufacturing industry in Pakistan, excluding minerals and mining, contributes around $50 billion to the documented gross domestic product, according to reports by the Pakistan Credit Rating Agency. The sector represents approximately 19% to 20% of the overall economic output in the country. The actual market size is anticipated to be significantly larger, similar to the undocumented nature of the agriculture sector. A substantial portion of the Rs 7 trillion cash flow circulates through agriculture and manufacturing. Given the heavily cash-oriented nature of this market, estimates project the manufacturing sector's actual size to range between $150 billion to $200 billion. So, the total number of manufacturers in Pakistan is expected to be around 300,000 to 350,000, encompassing various sizes of players. So, why did the founders of Zaraye delve specifically into procurement of raw material within this industry? Khan says, “Around 65% of all costs are attributed to raw materials, varying depending on the specific category. The fundamental factor influencing what is manufactured, at what cost, and subsequently at what price, revolves around the choice and pricing of raw materials. Therefore, the key question becomes whether there is a significant problem to address in this market. If a substantial problem exists in a sizable market, it presents an excellent business opportunity.” So, the co-founders saw an opportunity in a fairly untapped market and took it.

According to Khan, there are two significant challenges. Firstly, due to considerable price volatility, the raw materials, although not commodities themselves, are inherently linked to commodities and exhibit commodity-like behaviour. For instance, polymer resin in the local market is influenced by changes in global crude oil prices, which fluctuate daily. The correlation is complex, involving factors like the dollar rate and local supply and demand. This volatility, approximately 3% to 5% influenced by these factors, is also observed in commodities like cotton yarn, tied to the U.S. cotton index, dollar rates, and local market dynamics. Prices in this market are highly dynamic, changing multiple times a day or on a daily, weekly, or occasional basis, dictated by market forces rather than fixed values. Secondly, manufacturers typically engage with several middlemen. Khan said, “Smaller and medium-sized players lack the same level of sophistication and structured procurement processes. In a market with numerous sellers, sometimes reaching into the thousands, these manufacturers are limited to communication with a small subset, typically four, five, six, or eight middlemen.” The core issue stems from the absence of a fixed price, allowing the market to determine daily prices. For instance, a product like plastic resin, which averages Rs 180 per pound, may be sold by different sellers at Rs 178 and Rs 179 per pound, creating a significant impact on the overall profit and loss due to its substantial contribution. The challenge, Khan believes, comes with how manufacturers or customers can efficiently discover real-time prices without a centralised, structured source of information. He explained, “This is where Zaraye plays a crucial role. It serves as a platform enabling manufacturers to swiftly and consistently discover real-time prices, ideally securing the best price possible through its reverse bidding mechanism. Zaraye achieves this by facilitating multiple groups of suppliers to bid for the orders placed by cus-

tomers, addressing the primary value problem.” Khan highlighted two major issues stemming from the fluctuating prices of raw materials, “Firstly, the absence of fixed prices leads to daily fluctuations, impacting manufacturers facing price variances for raw materials. This affects the profit and loss due to substantial material contributions.” He continued, “Secondly, the manufacturing industry's prolonged working capital cycles, ranging from 45 to 60 days, sometimes over 180 days, require capital injection or financing. However, SME financing in Pakistan is only 8-9%, challenging small businesses to access formal capital. Lack of creditworthiness pushes them to the informal market, where interest rates can exceed 60% APR.” Zaray addresses these challenges by collaborating closely with businesses to gain insights into their operations. This information helps structured financial institutions, including banks, tap into the untapped manufacturing market. This initiative provides manufacturers, especially SMEs, access to more affordable and structured loans. The goal is to address the longstanding issue of limited access to formal capital for family businesses, fostering their growth and competitiveness in the market. Bazaar, another leading B2B ecommerce, fintech and supply chain platform, that claims to serve over 5 million businesses, launched Bazaar Industrial in early 2023. This is an offering similar to that of Zaraye, addressing the challenges in raw material procurement across various sectors like chemicals, construction, and textiles. Acting as an aggregator, Bazaar says its industrial procurement arm is also focused on providing suppliers with market insights, access to a nationwide customer base, and expert sales support. Notable suppliers like Matco and Sabic have partnered with this platform, while for buyers, Bazaar Industrial offers competitive quotes, flexible payment options, and a range of raw materials, attracting interest from major players like Loads and Diamond Paints.

Unlike others, such as Bazaar technologies, Zaraye is operating in the lower tier markets where Zaraye helps manufacturers build their credit worthiness and build their credit profiles with NBFCs and Banks in the long term. Additionally Zaraye’s business model helps manufacturers connect with multitudes of suppliers across the country in real time to curate the best possible business deal for them.

Just how is Zaraye doing this?

han expounded that there are essentially three avenues through which a Zaraye customer can fund their inventory. “Firstly, it can be done through our own balance sheet, where we extend credit to these customers. Alternatively, customers can secure financing through the suppliers collaborating with Zaraye, provided they deem the customers creditworthy. In this process, we actively support the Know Your Customer (KYC) procedure. The third and primary focus revolves around engaging various financial institutions (FIs), banks, and non-banking financial companies (NBFCs) to participate in extending funds to these customers. Currently, we're working with an NBFC called InvoiceMate.” Hammad Khalid, proprietor at water accessories manufacturing company Aqua Pak, and a client of Zaraye told Profit, “In the market, rates for items experience quite a bit of fluctuation, exemplified by the pricing of pounds. For instance, if the rate for a certain commodity is 182 pounds per unit today, one might book raw material at this rate through a call. However, the challenge arises when someone else intervenes and offers a slightly higher rate, say 182.5 pounds per unit, leading to a transaction with them. This scenario, where deals are made on verbal agreements without any recorded evidence, has occurred frequently, even impacting my business. The absence of a documented record or means to contest such situations makes it challenging.” Khalid emphasised the advantages of digitisation are notable. With digital transactions, suppliers now lock in the agreed-upon rate when an order is placed. Regardless of when the goods are collected—whether on the same day, the next day, or weeks later—the locked rate ensures consistency. This system mitigates the risk associated with market fluctuations. While a decrease in market rates represents a loss, an increase becomes a benefit as the order is secured at the initially agreed-upon rate. Khalid was confident that the digitalization of transactions brings stability and certainty to the pricing of orders, minimising potential losses for buyers. Khalid also shared that, “Zaraye offers prices below their profit margins, which I

“Zaraye offers prices below their profit margins, which I observed firsthand during a recent purchase of a hundred bags. Comparing local sourcing with Zaraye, we found that Zaraye’s rates are consistently lower, even when matching import rates” Hammad Khalid, proprietor at Aqua Pak observed firsthand during a recent purchase of a hundred bags. Comparing local sourcing with Zaraye, we found that Zaraye’s rates are consistently lower, even when matching import rates. After our first order with Zaraye, my father who founded Aqua Pak recommended sticking with Zaraye. Now we have an ongoing partnership that has involved purchasing multiple containers since June.”

What sets Zaraye apart from other ERPs?

f the offering sounds vaguely familiar, it is because it is: in Pakistan already many enterprise resource planning softwares, or ERPs, exist. So what distinguishes Zaraye from other similar product offerings in the market? Khan explained that the primary concern revolves around the movement of money and goods within this Pakistani market. Both money and goods follow separate, non-uniform tranches. “When someone places an order for, let's say, 100 units of product X, it doesn't imply a fixed delivery schedule. The distribution might vary, such as 10 units every Monday for the next 10 weeks, or a split of 50, 30, and 20 units over subsequent intervals. Many sourcing platforms do not accommodate this flexibility in delivery schedules, which is the first issue,” Khan identified. Similar global products like Zoho or Kodoo, which operate on subscription models with payments evenly divided into tranches, pose challenges for local customers. On the other hand, Zaraye’s software addresses this issue by allowing users to customise the breakdown of money recovery or receivables in any preferred denominations. Khan believes that this is a crucial insight often overlooked by most off-the-shelf SaaS offerings available in the market. Secondly, Khan pointed out, “There exists a significant gap in local market taxation, with variations in rates for both GST and withholding tax across industries like warehousing, polymers, and textiles. This inconsistency

extends to the withholding tax within each industry. The complexity intensifies during procurement for diverse industries, particularly manufacturing, compared to service or warehousing sectors. To address this, modularized and configurable taxation is crucial, allowing for breakdowns at the category level. Unfortunately, many existing products overlook this need, contributing to the incomplete digitization of manufacturing processes.” Understanding the complexity of the textile industry, particularly for exporters who receive a GST discount and subsequent reimbursement from the Federal Board of Revenue (FBR), is essential. However, tracking the financial flow within the intricate system of payments to and from the FBR is challenging. “Our system comprehensively addresses this issue and various other taxation modules associated with a manufacturer's interaction with the FBR, depending on their operational category. These challenges include addressing procurement, warehouse management systems, financial ledgers, and the nuanced interplay between taxation, scheduled payments, and goods delivery,” Khan concluded. Khan informed Profit that Zaraye distinguishes itself in the competitive landscape by adopting a structured approach to creditworthiness frameworks for customers, specifically targeting the lower economic strata within the manufacturing industry. Despite being categorised as the "bottom of the pyramid," these manufacturers possess access to technology, primarily smartphones with common apps like WhatsApp, Facebook, and TikTok. “The ease of integrating technology stems from their existing familiarity with smartphones, allowing for a step-by-step adoption of the Zaraye app. The company initially digitised post-order processes, such as order tracking, payment tracking, and contract signing,” Khan elucidated. He went on, “However, full app adoption faced challenges, given the market's reliance on offline channels, emphasising the significance of relationships in this sector. Zaraye employs on-ground sales teams to manage offline operations, recognizing the ongoing transition toward complete digitization in the Pakistani

B2B STARTUPS

market, which may take several years. The potential catalyst for a significant shift could be the eventual demonetization of Pakistan, as the market's heavy reliance on cash currently poses barriers to full digitization due to both insufficient incentives and inherent resistance.” Concerning the trucking industry, despite some commonalities in core operations and shared challenges in financing and fulfilment, the nuances in their problem-solving behaviours make the technologies less overlapping, shared Khan. “While there are opportunities for partnerships in financing and fulfilment, the intricacies of product design require a more nuanced approach. Despite certain overlaps in core problems, Zaraye and the trucking industry do not sufficiently align for mutual solution piggybacking,” he concluded. Now that we have established what Zaraye does and its utility for the procurement of raw materials, let’s consider the question we posed in the beginning.

How did Zaraye breakthrough the bureaucratic systems of a legacy industry?

here is a noticeable reluctance to embrace digitisation, as it often carries connotations of change, which is generally avoided in Pakistan. How does Zaraye manage digitization and tech integration in traditional industries like textiles and construction? Khan said, “Understanding the origin of certain rigid practices is crucial. In my perspective, some of these practices lack a solid foundation, especially when dealing with the dynamic tech sector. The tech ecosystem, being relatively new, exhibits volatility in policies, creating uncertainty about its presence and longevity in specific geographies.” He believes that in the realm of B2B operations, like Zaraye's engagement in purchasing services, selecting vendors becomes imperative. Stability in terms of value offerings and policies, along with the ability to consistently deliver services over an extended period, is paramount. The manufacturers in these markets have generational roots, making their livelihoods intricately tied to their established operational methods. “The challenge arises as our approach and appearance diverge significantly from the conventional market norms—be it in terms of age, operational methodologies, communication styles, or even dress codes. Convincing these long-standing manufacturers that we are a reliable, serious player in the market demands substantial effort. Their reluctance stems from concerns about the dependability and sustainability of our business model, particularly when

it involves a significant portion of their cost structure,” said Khan. He elaborated, “In our case, steering away from heavy discounting sets us apart. While promotions and discounts are sparingly offered, mainly to first-time users, we remain steadfast in our belief that heavy discounting fosters unsustainable behaviour in the B2B sector. Businesses, operating based on profitability and cash flow optimization, may initially be enticed but are likely to shift loyalty when discounts dwindle.” He is of the opinion that Zaraye recognises the competitive landscape and the challenges of sourcing raw materials profitably. Therefore, Zaraye’s strategy centres on creating value rather than relying on discount-driven market capture. Although this approach encountered resistance, it aligns with the scepticism prevalent in the market due to the lack of precedence for the tech industry to consistently deliver sustained value. Khan asserted that the friction in embracing technology in certain sectors arises from factors beyond scepticism, such as limited exposure to technology beyond communication and entertainment purposes. “Overcoming this requires establishing reliability in Zaraye’s services, paving the way for a potential shift in behaviour.” Khalid highlighted that change can be difficult but digitisation is not as unimaginable in the old school business of procurement. He emphasised that as newer generations are taking over family run businesses, they are many times also transforming these businesses to incorporate more tech and digital systems. “The younger generation is working towards digitising this platform, enhancing its appearance with the introduction of a dedicated application. With this digital shift, there is no need for manual record-keeping; transactions conducted over the phone are swiftly documented, eliminating the need for written records. Whether booking through a phone call or placing a digital order, the process remains the same. In the digital realm, orders generate PDF files, creating a comprehensive record of purchases, ensuring that all transactions are logged and easily retrievable.”

The possibility of achieving 10x growth

han says Zaraye has undergone remarkable expansion and diversification since April 2022. Initially centred on textiles, specifically cotton yarn, the company has broadened its operations into five distinct categories, including construction, iron steel, polymers, and timber. Originating in Karachi, Zaraye's operational footprint now spans four cities, delivering

products nationwide. “The comprehensive textile value chain, excluding the cotton part, now involves yarn, grey fabric, and finished products. Zaraye not only aids manufacturers in procurement but also generates additional demand for them, allowing them to focus on manufacturing operations worry-free. And a significant milestone in this journey was our partnership with Daraaz, where Zaraye serves as a major vendor for Daraaz's private label brands, emerging as the leading supplier for their apparel private labels,” Khan said. Zaraye’s top lines also reflect growth in scale, achieving an impressive 13 to 14 times the figures from April 2022. Despite economic challenges, the company has showcased growth in profitability. Zaraye anticipates reaching net profitability or breaking even within the next 15 to 16 months. The customer base has also witnessed substantial expansion, growing from around 300 to 400 customers to over 5000 registered buyers on the Zaraye platform. “70% of deals are conducted on credit, providing financial flexibility for buyers and bringing many into the formal backend channels. This strategic shift not only enhances our financial dynamics but also positions customers for increased business opportunities in the future,” Khan highlighted. Can the $3 million funding and the market's rigidity can adequately substantiate the possibility of achieving 10x growth? Khan highlighted the dynamics in achieving 10x growth, emphasising the significance of the base size. He said, “Growing from a smaller base is relatively easier than from a larger one. The Gross Merchandise Value metric, while useful for tracking market capture, is not a comprehensive indicator of value creation, especially in B2B markets dealing with high-value orders.” He continued to explain that in the B2B space, particularly in the raw material sector, orders' substantial value sizes make achieving incremental growth relatively less challenging. The transition from negative to positive gross profits is a significant accomplishment. Unlike B2C platforms, B2B startups address structural problems, requiring substantial changes rather than incremental optimisations. “Our growth is driven by structural fixes, such as efficient platform movement and securing significant deadlines for customers.” In Zaraye’s case, solving structural issues leads to aggressive upward growth, and Khan anticipates potential 10x growth in the future by addressing three to four priority structural fixes. The nature of Zaraye’s business, focusing on structural improvements rather than operational intensity, positions the startup for substantial and rapid growth in the B2B sector. n

B2B STARTUPS