Since launching Chaldal in 2013, Zia Ashraf and team Chaldal have successfully positioned it as a leader in the online grocery business in Bangladesh. It has widespread brand awareness in the market as a reliable online grocery store and has expanded to periphery product categories over the past few years. For instance, Chaldal now controls almost 8% market share of entire diaper market in Dhaka.
Since its last funding round, closed a few months ago, Chaldal has been on a roll. It has opened new warehouses in three different locations, taking its total warehouses to 8 in Dhaka. Expanded product categories. Its logistics offshoot Go Go Bangla sees a healthy growth and it sees a sharp growth in its number of daily orders.
We have been following Chaldal from the very beginning of its journey, we ran the first story on Chaldal in 2014, you may read all of our coverage on Chaldal here.
In this fascinating interview, Ruhul Kader sits down with Zia Ashraf, COO of Chaldal, to learn about the developments at Chaldal over the past few years and to pick his brain about the current state of Chaldal’s business, expansion, long-term strategy, what has contributed to its rapid growth, and the future of Chaldal and ecommerce and digital payment industry in Bangladesh and his lessons from the journey so far. Regardless of whether you are in the business of ecommerce or not, this is an intellectually empowering read.
We last covered Chaldal in 2016 when we interviewed your co-founder and CEO, Waseem Alim. A lot of things have changed since then. You've recently expanded product categories. Raised new investments. Increased your number of warehouses. Can you please give us an overview of Chaldal today? How big is the operation now?
In e-commerce, we are always in the process of expanding. It doesn't only depend on our investment preferences. Expansions are often occasioned by rising customer demands about a new product or service.
For example, currently, we don't provide services in the Jatrabari and Tongi area among a few other areas but every day we receive calls from customers in those areas asking why our service is unavailable in their locality. You can, therefore, see that we always have to plan for expansions.
We have around 300 people working at Chaldal. We have 8 warehouses including three new ones. We serve about 1500 orders per day on an average.
To put our growth into perspective, let me give you a square feet measurement of real estate that we occupy currently. When we started, we only had a 1,200 square feet premise. Now, our operation - including all our warehouses and the office - is more than 50,000 square feet in area.
Our logistics service is growing rapidly. We are adding new delivery vehicles regularly.
Since we feel that people's acceptance of our business is increasing, we also plan to collaborate with individual logistics service providers who already have a vehicle or a logistics system in place and allow them to use that to deliver our products and earn in the process. If we can pull it off, our efficiency will grow and delivery time will go down considerably.[su_divider top="no" divider_color="#adacab" link_color="#edde29" size="1"][/su_divider]
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We have focused on improving our retention rate. We have reached out to our old customers who might want to return because of our recently gained brand value or don't actually know about the changes we have made over the years and offered them value to return to us. Retention is at the core of growth.
You have launched a subscription service last year, how is it doing?
We have launched it last year. We did not promote the service yet. It is there but we are not pushing it. Hence. the response we have received is still nominal.
We are still working on the product end and there are areas where we need to improve the quality of the subscription service and resolve issues like payment methods, customer notifications, and so on.
The basic idea behind the subscription service is to cater to the recurring/regular needs of our customers. If, say, someone has an infant child and needs two packs of diapers every month, they can automate that for months as long as they want.
If a customer becomes our subscribers and provides us her/his information regarding regular needs, we would send him/her the said items on scheduled time every month or the day. Now there are contingencies as well because grocery is a not toothpaste or a cosmetic box. On the top of it, it is perishable. The feature is there and we are also working on it to make it even better.
How are you doing business-wise?
The thing is that we generally trade in narrow margins given that we deliver the products ourselves.
We have been experiencing a consistent growth. Our order quantity has grown significantly over the past months. But there is room for further growth for us and we are working on it.
To answer your question, in terms of number, we hope to break-even in the next couple of months.
What is your average basket-size?
Currently, our average basket-size is between $18-20 per order.
You have a logistics business called Go Go Bangla which apart from managing Chaldal logistics also offers the same service to other e-commerce businesses. How are you doing there?
Our logistics service is one of our strongest suits which we call Go Go Bangla. After a while, we have come to realize that Go Go Bangla has surplus capacity that we can offer to support other ecommerce companies who need logistic service. That’s how it started.
We have been providing logistical assistance to e-commerce businesses for a while now. We currently process around 600 orders per day for our ecommerce partners.
Grocery shopping or any shopping for that matter is a lifestyle. You can’t change a lifestyle overnight. But that’s what Chaldal is asking
Many brick and mortar super-shops who specialize in grocery have started to move into e-commerce. There are a few ecommerce companies as well who are offering grocery. The competition is evidently growing. How do you see this development?
We consider competition to be a prerequisite to growth. It drives innovation. It saves you from getting complacent.
We aren't concerned about the super-shops moving into the e-commerce space particularly because unlike us they won't invest their entire resource base into it, whereas our sole focus is ecommerce and that's is what we do all the time. This may look like a small difference but it is not.
In fact, I think more competition will play an important role in building the awareness in the market.
Dhaka is a city of almost 30 million people. And grocery is a huge market in Dhaka. The potential is practically infinite. You serve a very small percentage of this market, what’s happening here? What are the challenges for online grocery business?
You are absolutely right - grocery is a huge market in Dhaka and we serve a very small percentage of that market. If you go to Banani Bazar, the number of transactions they deal with per day is simply crazy.
We have a handful of challenges here. The lack of awareness is the first barrier. Over the years, Chaldal has been able to create brand awareness in the market. People now recognize Chaldal but we have a long way to go.
Grocery shopping or any shopping for that matter is a lifestyle. You can’t change a lifestyle overnight. But that’s what Chaldal is asking – use digital as a medium for buying your grocery – and it is not something sufficiently popular among people who make these decisions in a household.
Most people still like to go to physical stores despite the fact that it is time-consuming or inconvenient sometimes. This is, in fact, a way of life. Those of us who are running e-commerce businesses are trying to bring changes to that lifestyle. This is going to take time.
It's easy for us to bring in young customers because they are used to digital technologies. But we can't do that so easily with senior citizens. It's a demographic matter and will take some time to become congenial.
How does your model work now?
Well, we directly work with over 120 suppliers such as Reckitt Benckiser, Unilever, Bashundhara, PRAN to small suppliers as well.
We collect products from these suppliers and put it in our warehouses, generally at the end of the day. These products are then delivered as ordered by customers the following day.
Our stores, which are warehouses, in fact, remain open 24 hours a day.
Many of the largest and most successful ecommerce businesses are aggregators in nature, they sell everything. And in many instances, it does make sense to be an aggregator because people will go to the one that offers a vast range of products. With grocery, we don’t have many similar successful examples yet but many companies are trying. How do you see that? Do you plan to expand to other categories?
Grocery is a sufficiently complex problem and is a huge business itself. We are yet to fully solve it. So you can see where our priority lies now. We have expanded into a few categories but these are mostly peripheral areas where we have an advantage and it fits well with our strategic priority.
If I talk about product categories, till now, we haven't included four specific types of products in our product portfolio: computer accessories, electronic appliances, cell phones and furniture.
At present, our model ensures one-hour delivery. Since we maintain the logistics, we can do that. We are also strictly concerned about quality. And there is no other way to do it in the grocery.
Now, for instance, if we want to start selling refrigerators, there might arise a number of issues. For one, we can't maintain our one-hour delivery time. With large products like refrigerators, ensuring quality would be a challenging job and we might have to take help from third-party logistics services. We will have to build new capabilities which we are not looking to build at this moment.
The number of your daily orders has now risen significantly which is almost 150% growth from what it was two years ago. Of course, you could have grown more? Then and again, what has contributed to this growth?
To maintain growth, we have employed a number of strategies. First, we have always tried to sync the rise in order quantity with the availability of products. If we don't have enough products available, we won't be able to serve the increasing number of orders ultimately resulting in a decline. That has helped.
We faced this challenge in the past. We now have a new Head of Growth whose key responsibility is to maintain this crucial synchronicity. He works with the Chaldal team as well as with customers to find opportunities and hiccups on our way to growth.
We have focused on improving our retention rate.
We have reached out to our old customers who might want to return because of our recently gained brand value or don't actually know about the changes we have made over the years and offered them value to return to us.
Retention is at the core of growth. This has helped grow our business significantly.
While customer acquisition remains a priority for us, we pay a lot more importance of retention. It is cheaper and effective to retain a customer than acquiring one.
What are the major challenges for Chaldal now?
Real estate proves to be a formidable challenge. It is an expensive affair in Bangladesh. Moreover, finding a suitable space is hard.
Local warehouse is one of the things that allow us to expand and better serve our customers. As our business grows, the demand for more warehouses grows as well. But as I mentioned, real estate is a tough nut to crack. This is something we are facing a challenge with.
The other challenge is logistics. Our order numbers have grown significantly over the past months which mean we now require more delivery personnel. But it is getting tougher to get enough people for several reasons. Moreover, using a motorbike for delivery remains a challenge for us, particularly when it is grocery, it is no easy chore.
What are your plans for the next couple of years?
One of the priorities is expansion beyond Dhaka. To start with, we are targeting Sylhet and Chittagong.
Do you have a timeline in mind for the said expansion?
Nothing concrete yet. Grocery is a complex business. It is not something you can just go and start delivering. It requires a lot of upfront investment before starting the real operation.
We are assessing these things and hopefully, we will be able to expand soon enough.
What percentage of your total payments is made via digital tools?
Right now, online payments account for around 20% of our total payments of which 5% is made through bKash and the rest through debit/credit cards.
What is your management philosophy?
From the day one, we have religiously tried to build a horizontal organization at Chaldal where everyone gets access. For instance, we are, I mean the senior management, available to almost everyone in the team. Everyone has access to us and it does not require almost any permission.
When you allow your people, particularly who work in junior positions, access to your senior people; it improves performance because it grows a sense of belonging and empowers people. That’s my style too. However, it is becoming challenging as the team grows but we want to keep it going as long as possible.
I feel good when I connect with people. I delegate a lot and empower people so that they can apply themselves and get things done.
Three pieces of advice you would give to your younger self.
If I could meet my younger self, the first thing I'd suggest him is to be friendlier with people. I’m a lot easy with people now but growing up I was not like this.
Secondly, I'd advise him to spend more time with family. At the end of the day, we do everything for our loved ones and at some point, things that we do become more important than the reasons for which we started doing it at the first place.
What are the characteristics of an ideal entrepreneur?
Focus is one of the things that come to my mind when I think of an ideal entrepreneur.
S/he doesn't concern herself with what other people say, rather invest full energy into getting his job done. Then comes the ability to take responsibility when you screw up and then move on to the next thing.
1) Interview by Ruhul Kader, Transcription by Rahatil Ashekan
2) Further reading on Chaldal here.
3) Cover photo credit: this video