In a brief conversation with Future Startup, Chaldal co-founder and CEO, Waseem Alim, offers us a glimpse into what’s happening at the leading grocery commerce company of the country. We cover Chaldal’s state of operation after a period of steep growth, evolving operation, expansion, and growth plans and priorities for 2021.
On Chaldal’s state of operation
We are now focusing on multi-city. We have expanded to Narayanganj. We are in the process of expanding to Chittagong. We are focusing on B2B. Our collaboration with WFP in Rohingya Camp has been a huge unforeseen growth for us. We are looking into these large-scale enterprise projects. We have gained some experience in this segment.
In commodities, we are working closely with mills and similar large manufacturers. As a result, we are getting better visibility in the supply chain. In all these areas, we are seeing there is room for improvements. In many of these areas, we are seeing we could use software to improve the overall productivity.
We are focusing on improving our supply chain, which is increasingly becoming critical for us. We are also paying a lot of attention to product quality and service. Product quality, on-time delivery, and service - these things remain a priority. We are obsessed with service quality. We used to be happy with 90% in the past. Our goal now is 99.9%. We want to offer a perfect product to our customers.
The long-term sustainability of the business is one of the priorities. Staying cash-flow positive. Not over hiring. Remaining frugal and thrifty as an organization. We probably never did that. We have always been a frugal company when it comes to spending. We have been able to build an efficient operation. We are intentionally under-resourced almost all the time.
This year, as we aggressively expand outside Dhaka and since we are convinced with our value proposition, we will be starting investing in more traditional marketing activities. Not just online, not just focused on numbers, we will be doing broad-based marketing activities.
All the senior leadership in the company are convinced that now is the time to start thinking about a new country. The company has matured and is structured. We are seeing a difference in investment and culture in the country, which I think are net positive for us as well as for the ecosystem.
From last December to now, we have seen some 200%+ growth. The business has become three times what we used to do.
We are focusing more on sustainable growth -- genuinely delivering value to customers. We don't want to collect goods from the market and sell them at a discount. We are dealing with customers where we could offer them real value. There is a deeper and deeper product focus.
On sustainable growth as a priority
Sustainable growth means every order needs to make sense. We should not be taking investors' money and giving it to customers. It needs to be that the value customers are paying should cover us as a business. It should pay our salary, help us build an excellent product, invest in technology, and so on. We are convinced that we are delivering some value to our customers.
At the same time, we are focused on delivering value at a cheaper cost. Cost optimization remains a priority: for our customers as well as for ourselves.
Sustainability is not, as Warren Buffet says, you can always get infinite revenue if you sell a 1000 bucks note at 900 bucks. You can get all the revenue you want but that’s not sustainable growth. We want growth that makes sense. Not growth for the sake of growth. This is why we are focusing on large-scale projects. Overall the company focus is on that kind of thing.
We have realized that we have a lot of work to do in customer acquisition. We are probably now reaching the limits of how fast you can acquire customers with word of mouth. We will have to boost in this area.
The new cities are going to be interesting. The results in Narayanganj have been better than our expectations. We are doing over 300 orders per day in Narayanganj. We did not expect this number within a month of launch. Narayanganj may generate over a thousand orders a month in the next two-three months if we could provide good service to people. That is the focus - providing value and excellent service to our customers.
On expanding to Chittagong
We have already signed up for two warehouses in Chittagong. We are signing up a third one. Our target launch is February 21st. We already have a team. We are having more people. We are going to launch pretty quickly in Chittagong. We will cover the whole city of Chittagong.
The last time when we spoke you were doing some tk. 150 crore or so in annual revenue.
This year we are expecting tk. 350-400 crore in revenue.
On revenue and numbers
Operationally we have been positive for a while. But the overall business is not positive as yet because we continue to invest in different things. We don't capitalize on the investment. Everything that we put in tech is negative for now. Overall, every warehouse we have put in, these are operationally positive.
On Chaldal’s micro-warehouse expansion
In Dhaka and Narayanganj, we have a total of 17 warehouses. In Chittagong, we will have 3 warehouses. Within the next few weeks, we will have 20 warehouses.
We have other warehouses for other operations. We have a separate warehouse for our perishable goods and vegetable network.
You work with WFP and you now have some experience in enterprise business. Do you have a strategy there?
That business is there. Our goal is to improve the service as much as possible and to serve properly. That’s the priority.
On pandemic gains and sustainability of the pandemic ecommerce growth
Customers who came in the middle of the pandemic, continue to use our service. What might have happened is that probably they were buying everything from us before but now probably buy a little less.
Our customer number has been growing. The average spending on Chaldal has probably dipped a bit as we come out of the pandemic. People were probably buying everything they needed from us during the pandemic but they probably don’t. Hence average spend at the family level has come down since the pandemic has eased. There certainly were panic buying which I realize.
On Chaldal’s monthly orders
We are delivering around 170,000 orders per month.
On Chaldal Payment Systems and Chaldal’s ambition with payments
See our payment initiative depends on us being able to secure permission from the Central Bank. If the Bangladesh Bank permits us, we think we will be able to get a payment system adopted similar to Paypal. Since we have a customer base, we will be using it as the springboard, similar to what Paypal did with eBay and got their initial customer base. Since we have a customer base at Chaldal, maybe we could build a service similar to Paypal in Bangladesh with Chaldal Payment System.
We hope that if the Central Bank allows us we will start playing a bit in this sector. It requires us to be a lot more mature as an organization. There are many issues related to security and infrastructure. It is a lot more responsibility. We are very geared up. We think we are ready for it. It is also a long play. Payment takes a while in any country to develop. It might be a good business in five years. But initially, it is just investment and building out the infrastructure. Once you build the infrastructure, then people will come and use you. In a market like the US, it took Paypal ten years to come to a stage. I don't know how long it would take us.
We have not got the regulatory permission as yet. We are working closely with the regulator. The Central Bank has sent us some queries, we have answered them. We are hopeful that the Bangladesh Bank will consider our application. We are in the process. We are on track. Let's hope for the best. It depends on the regulator. It is not really in our hands. Bangladesh Bank will assess and see if you are good enough. If we are good enough, we will be awarded permission. The Bangladesh Bank is reviewing the application. It is making progress and we are hopeful.
We are the ultimate convergence of the digital and offline world to that end.
On Chaldal’s burgeoning infrastructure and its strategic importance
We can use this very easily. It is very cheap for us to do a logistics business. Logistics is a huge play given the growth of Facebook commerce and similar digital e-commerce efforts.
Logistics and payments are two major challenges for every digital commerce player in the market. It is a huge opportunity.
It offers us moats that we are confident about. It makes our business much more than pure digital play. We are the ultimate convergence of the digital and offline world to that end.
On one-hour delivery
We are at 97% on-time delivery as of yesterday. We are delivering 1% of the orders ahead of time and 2% of the deliveries slightly late. Our delivery quality has never been better. We are at a peak in terms of customer satisfaction and delivery timing. We certainly have room for improvement. We are relentlessly working there.
On new competitions in the market
The grocery market is huge. It is a $40 billion market annually. I do not think we have much to fear yet. Because if new players enter this market, it will help educate the market. I honestly don't see that there will be only one player in grocery. There will always be some competition. Even with telcos, you have two-three telcos because customers have different needs and all that. We welcome any new competition.
It is also good to know that many players who are entering the space think our strategy has worked. When we said 8 years ago that micro-warehouse is the way to go, no one would believe us. Many people thought buying from shops and delivering to customers like Instacart would be better or it could be done with large warehouses. But it is good to see that giant companies like Delivery Hero, which is a company with over $33 billion market cap, think that ours is the right model to pursue. It is a validation of our business model.
On Chaldal Vegetable Network
We had to slow down Chaldal Vegetable Network during the COVID because a lot of smallholder retailers we used to work with went out of business. Many shut down operations. It has not fully recovered as yet. But it is also a high priority for the company. We aim to improve on perishable and Vegetable Network plays a critical role there.
On priorities for 2021
We want to do things maturely. We are serious about where we are investing our time and money. We are cognizant of the relative opportunity cost. We have so many opportunities before us. That's where we are struggling. We have a lot of opportunities that we can explore. I think we need to focus on one or two things that would make the difference because you can’t do a lot of things at once.
The path from here to a 10 billion dollar company is not simple. We have to make the right bets. We can't afford to take too many bets because then we lose time and focus. It is either we make it in the next three years or we don't. We have the energy but we have to be careful where we are investing our time. The main constraint is not money or access, the main constraint is our energy and willpower.
On Cookups investment
We started working on the deal in 2019. We started managing some of the business from the end of 2019. The acquisition was finally completed in 2020.
2020 was by far the best year for Cookups. I think they have seen more than 100% year-on-year growth. The business is still very small. It needs a logistics service to support it, which we are working on. If we can build the logistics service, then we can scale it up.
I'm hopeful about Cookups. It unlocks a lot of potential in the economy. There are these housewives who do excellent cooking but their potential is muted. I see an opportunity to unlock this through our work at Cookups.
On connecting Cookups's cooks with Chaldal supplies, a huge opportunity and one of the motivations of Chalda for getting into the vertical
Not completely but that is one of the plans. We have done that to some extent. But we have not explored it aggressively as yet.
The startup ecosystem is turning around. It seems like there are a lot of new activities happening. It is encouraging. We are getting activities in the venture capital space, especially on the early-stage investment side. I hope this will continue and accelerate in the coming days.