Making grocery deliveries is hard on Saudi startups
Plenty of Saudi startups are trying to enter the online grocery shopping and delivery market, but they face many diverse challenges.
Todoorstep, a Saudi startup active in this field, was launched in October 2015 by three friends: Ammar Yousef, Abdullah AlGhamdi and Zuhair Makk. The startup showcases products from three to four shops in each city, through its different platforms (Android, iOS and web). It provides services on demand and makes money from adding a percentage of the order value paid by the user.
After choosing the products, the user adds them to his cart and sets the delivery date and location. Freelancers get the order and deliver it. The user can pay through the app or in cash upon delivery.
Challenges and solutions
Some Gulf markets, such as the UAE, have witnessed success stories in the online grocery business, unlike Saudi Arabia where the sector is still struggling.
“Merchants are hesitant towards listing their products online, especially since it does not look attractive in comparison to traditional sales methods that already make them billions of riyals,” said Yousef.
He explained that one of the methods that he can adopt to attract merchants is by “providing them with data gathered by the platform about the customers’ preferences and favorite products, so merchants can target them with specific discounts and promotions.”
In parallel, Yousef pointed out that companies willing to be this mediator selling groceries online, must focus on the user and provide him with “a great shopping experience.”
That is not easy either. A study published last year by Payfort, in cooperation with Todoorstep, shows that customers leave the platform and come back to actual shops if it fails to provide them with 90 percent of the products they seek, and if the offers provided are not tempting and adequate.
Todoorstep wants to overcome this challenge by focusing on the youth, which constitute up to 74 percent of grocery online shoppers, as per the study. Yousef added that this is done by allowing users to buy from multiple shops at the same time, and by providing same day delivery up to within the hour delivery. It is also secured by a large variety of products that currently exceed 12,000 items.
The platform’s services reached ten cities in the last four months including Riyadh, Mecca, Medina, in addition to other cities in the Eastern Province. It now has 100,000 registered users and 5,000 users paying either online or through COD (cash-on-delivery), according to Yousef.
However, the company’s expansion are accentuating challenges related to operation management. Yousef said that Todoorstep adopted a “learn from your mistake” strategy, which emphasizes enhancing the spending processes to make sure no money is lost on transactions.
In addition to that, the freelance shoppers may not have enough money for some orders. As a result, the team decided to allow money transfers to team members from a bank account, according to Yousef.
The Saudi entrepreneur would not disclose the number of shoppers and delivery staff they have at the moment. However, he said that Todoorstep hires them after a three-hour training program and that they are supervised by professional colleagues throughout ten orders.
A crowded market… but not online
Even though the Saudi retail market was valued at 76 billion Saudi riyals (US$20.3 billion) in 2015, the online grocery market did not exceed 430 million riyals (US$114 million dollars) in 2016, according to the study by Payfort and Todoorstep.
Despite that, the country is somehow active in the startups’ field. Though some closed their doors such as Dukaany, others have not yet given up, including the Todoorstep, Nana Direct, Salatty, SuperBasket and other projects on social media platforms.
Yousef said that his “type of startup requires early stage investments. However, investors are reluctant about the sector because of the startups’ high failure rates, and because they are used to retailers selling groceries.” He revealed that Todoorstep managed to received an investment of 720,000 riyals (US$192,000) from an angel investor he did not wish to disclose. Time will reveal the result of the capital injection.