At almost every corner or block in a Middle East and North Africa (Mena) city stands a baqala, or small grocer, typically independent, offering the neighbourhood a basic array of fruits and vegetables and household products. These baqalas constitute the backbone of fast moving consumer goods (FMCG) retail in the region, outnumbering hypermarkets and large supermarket chains. But despite their prominence, the product sourcing process is a logistical nightmare for these small sellers given the fragmented supply chain and underserved infrastructure. This lack of infrastructure also creates problems for the FMCG suppliers and manufacturers, who struggle to distribute their goods to these baqalas as a result.
The first wave of innovation and disruption in the grocery space came in the form of e-grocery. Startups like GetBaqala in Bahrain and elgrocer in the UAE gave these baqalas a chance to establish an online presence, aggregating them on one platform to allow consumers to purchase goods through an app or website. Now, a second wave of innovation is spreading in e-grocery - digitising the procurement and distribution process for the baqala.
One startup looking to digitise this phase of the grocery journey is Morocco-based Chari, which aims to streamline the distribution and product buying process by connecting baqalas and other small retailers with their suppliers on one platform. Co-founded by Ismael Belkhayat and Sophia Alj in 2020, Chari offers these small retailers a one-stop-shop, where they can find and purchase everything they need and have it delivered in less than 24 hours thanks to a string of warehouses that it has built in close proximity to the retailers.
Other startups operating similar models in the region include Egypt’s Capiter and Maxab, Saudi’s Sary and Retailo and the UAE’s DXBUY and Spylr Global. This segment of B2B e-commerce startups focused on procurement for small retailers has so far this year raised in excess of $141.5 million across 18 deals (eight of which were based in Egypt). Accounting for almost 40 per cent of this amount is Egypt’s MaxAb which has raised $55 million this year and acquired Moroccan competitor Waystocap.
Last month, Chari raised $5 million after completing US-based Y Combinator’s accelerator programme and has set about offering the 200,000 or so baqalas in Morocco its services while also enabling suppliers and distributors easier access to them.
“[Suppliers] live in a nightmare to distribute their products to all these small shops,” says Belkhayat. “They have to go through a lot of middlemen that we call wholesalers [who] are also scattered.”
There are about 10,000 of these small wholesalers, individuals with a car, who buy the products and distribute them to their 20 or so clients, effectively operating like “a mobile supermarket” according to Belkhayat. Their methods of selling have not changed much over the years. Prices vary from one to another, there is no advertising on their part and their logistics can be haphazard. Invoicing is also rare.
Chari’s solution cuts out these wholesalers and tries to ease the challenges that all the parties in the process face. For the retailers, they can gain access to stock with an invoice and the ability to track their deliveries. For the FMCG suppliers, they are given actional insights into their customer’s purchasing patterns - what they’re buying, which day of the week and in which neighbourhoods. It currently serves more than 6,000 small retailers and works with 50 suppliers.
By using technologies like route optimisation and warehousing management software, the startup helps drive down logistics costs. "A normal distributor usually charges up to 20 per cent margin because their logistics costs up to 15 per cent which is huge. They have to pay for the cars and the drivers since the routing is not really optimised, they do a few drops per day [and] cover 10 to 15 clients per day. In our case, our logistics costs less than 5 per cent," says Belkhayat.
As demand for warehousing and fulfilment services rises, Chari’s current struggle is keeping up with this demand.
“We have 10,000 stores on the waiting list, and we are currently working to expand our warehouses to cover bigger regions," he says.
Yet despite this rapid pace of growth, and the digitising that is taking place in this sector, retailer habits are difficult to change.
“Many of our users use the app as a catalogue. They see the prices on the catalogue and they decide what they want to buy and instead of buying on the app, they open WhatsApp, and they send us a voice message explaining to us what they want,” says Belkhayat.
Chari employs 60 people whose job is to listen to these Whatsapp voice notes and calls and make the orders on the app on behalf of the baqalas. The company also regularly dispatches on-ground sales representatives with the sole purpose of educating small sellers on how to use the app. This particular challenge is a lot less common in Tunisia, where Chari also operates and where there is greater digital awareness of similar tech solutions.
Easing fintech adoption
Another major challenge for Chari is the ongoing prevalence of cash on delivery among the small retailers and so encouraging greater adoption of fintech remains a large part of Chari’s core focus, according to Belkhayat.
"Early on, we started with cash on delivery and then we thought maybe we could let these clients use digital wallets and give them an additional 1 per cent discount every time they use it," he says. But topping up the digital wallets still required Chari to send a representative to collect the cash in order to top up the wallet so while retailers took advantage of the wallet and the discount, Chari was still handling cash - just a step earlier in the purchasing process.
So in July this year, Chari acquired its compatriot fintech and credit app Karni, which enables shop owners to take stock of their finances instead of using a notebook. Karni currently serves 40,000 retailers in Morocco and through its technology and network, Chari is looking to facilitate micro-lending for retailers by enabling a buy now pay later (BNPL) feature.
The Moroccan startup landscape has witnessed encouraging signs of progress with investors increasingly becoming interested in backing startups. So far in 2021, startups in the North African country have raised more than $16 million across 18 deals. Chari, which has closed three rounds so far this year, plans to raise as much as $20 million for its upcoming Series A.
For Chari, raising funding was a process fraught with pitfalls. Belkhayat explains that it was difficult for them at the early stages of Chari's founding to convince both local and international VCs to invest in Chari, attributing this to the fact the B2B sector in Morocco has not gained much popularity among the tech community prior to Covid-19.
"As the size of the market grows, so do we,” he says. “VCs who came in at the beginning of our journey have had their investment in less than a year multiplied by 10. They haven't done an exit or anything but at least in their books, the value of the investment went up 15 times in 18 months.”