There is a crisis in Pakistani stores. Though it’s the country’s second-largest economic driver, retail is hampered by antiquated practices at the vast majority of its 3 million establishments. SnappRetail, however, is confident it can alter that. The financial technology startup has announced today that it has raised $2.5 million in pre-seed funding round to help it develop a product it believes has the potential to increase retailers’ revenue by as much as 50 percent.
According to Adeel Rasheed, CEO, and co-founder of SnappRetail, “it’s like the 1950s — everything still depends on pen and paper.” It’s been my experience that most store owners “run their businesses instinctively, exactly the way they’ve always done it;” that is, they have no idea which products are their best sellers or when stock needs to be reordered.
As a result, these stores aren’t making as much money as they could be. They often run out of high-demand items, causing customers to shop elsewhere or wait longer for their orders. Because of this, they are often forced to carry inventory that has low demand. And they can’t put together a sensible strategy for expansion that has any chance of success.
Rasheed also brings up the issue of payments. Surprisingly, less than one percent of Pakistani merchants accept debit or credit card payments; the figure is even lower in the grocery industry, at around two percent. In contrast, they’re cash-only.
SnappRetail provides solutions to these issues in the form of a suite of modern hardware for retailers to adopt in order to fully embrace digitalization. Thanks to POS systems and barcode scanners, businesses can monitor sales, and inventory levels, and most importantly, accept card payments.
Rasheed elaborates, “We have to change the whole way they operate.” To effectively address these concerns, business owners must be assisted in forming new routines that make use of digital tools second nature.
It’s an unusual value proposition for a fintech start-up, built on the provision of hardware rather than the software-as-a-service business model that currently dominates the fund-raising scene. However, the background of Rasheed and his co-founders, who have long career histories working in senior roles with consumer goods companies such as Unilever and L’Oreal, as well as experience in start-ups, appears to have convinced investors to back them.
Rasheed recognizes that growing SnappRetail’s revenue to significant levels will take time. The company does not charge merchants anything up front, and it only asks for a nominal rental fee of $7 per month for the hardware it rents out to them at the moment.
This monthly fee is expected to increase as the company reaches critical mass and proves its worth to retailers. Its creators anticipate that the majority of revenue will come from agreements with other companies eager to collaborate with SnappRetail’s retail customers now that they have the technology to do so. Already, it’s allowing stores to provide services like mobile phone top-ups, and it foresees future partners providing services like working capital to expanding stores. In addition, it will receive fees for processing digital transactions.
It’s unclear, however, whether or not we’ll ever reach critical mass. The company, which launched a year ago, is initially targeting stores in the city of Karachi. It hopes to have signed up 1,000 stores there by the end of the year. However, Rasheed and his co-founders think SnappRetail can now expand across the country and, in the not-too-distant future, serve as many as 300,000 retailers.
According to the firm, the advantages are crystal clear for stores that are willing to invest in training and make the transition to digital tools for the first time. Traditional retailers can increase their profit margins and overall sales with the help of a “micro-enterprise system for end-to-end shop operations,” as Rasheed puts it. Micro-retailers, who are struggling to compete with modern supermarkets due to poor management, insufficient funds, and disorganized storefronts, can use this to their advantage.
Potential benefits may be substantial. Rasheed estimates that retailers could boost their revenue by 30–50% with the help of SnappRetail’s hardware and that they could boost their profit margins by as much as 100%. After the company has proven itself in Pakistan, he thinks it can expand to neighboring Bangladesh, Sri Lanka, and many African nations where retailers face similar challenges.
The pitch has certainly resonated with the company’s investors. Antler and Century Oak Capital join Zayn Capital’s BitRate Fund in leading today’s pre-seed round, which is one of the largest funding rounds of its kind in Pakistan. According to Faisal Aftab, general partner, and co-founder at Zayn BitRate Fund, “[this is] a proven concept globally, and there is no doubt SnappRetail has the right approach to solving the essential problem of the retailer.”