How Markaz Built A New Marketplace For Pakistan’s Micro-Enterprises
At the height of the Covid-19 pandemic, the four founders of Pakistani start-up Markaz Technologies, noticed something going on around them. Like people all around the world, their friends and families were buying more products online than ever before; but crucially, they were purchasing from micro-enterprises via social media channels such as Facebook and Whatsapp, rather than the large ecommerce platforms.
The idea for Markaz, an online reselling platform that has just completed a $2.4m seed funding round, came from that experience, says Shoaib Khan, one of those founders. “My a-ha moment was when my mother told me she had bought some sheets through the Whatsapp account of a woman she had known for more than 10 years,” he recalls. Shoppers such as Khan’s mother were embracing ecommerce, but trust remained a huge issue; they wanted to buy from people they knew – or at least not from large and faceless corporations.
Khan and his co-founders, Fawad Hussain, Sameel Hayat and Umair Aslam, all of whom had worked in technology businesses in Pakistan and internationally, began looking into this phenomenon. They discovered a growing community of entrepreneurial traders who were buying goods from wholesalers and then reselling them to consumers via social media. These were small-scale businesses – often women looking to make extra money to support families, or to pay their way through education – but they had spotted a big opportunity.
Pakistan’s retail market is worth $170 billion a year, but only 2-3% of that is online, Markaz points out. And while the rapid penetration of smartphones promises to drive that figure up rapidly, consumers are cautious. “People in Pakistan don’t buy from shops, they buy from shopkeepers,” says Khan. When moving online, they want to maintain that human interaction, he argues.
Against that backdrop, Markaz is the founders’ solution to many of the problems that these resellers face as they seek to exploit the opportunity and grow their businesses. Often, sourcing high-quality products is difficult, with suppliers operating in different ways and visibility lacking. Cashflow can also be a problem, with resellers having to pay for inventory upfront even if they’re not selling it immediately. Logistics issues, including delivering to customers, make for additional headaches.
Markaz bypasses these difficulties by providing a platform on which multiple suppliers and resellers can connect. Resellers check out what is available, offer the goods for sale to their own customers, and then place their orders as and when they need to. Markaz takes care of the delivery, shipping the goods straight from the supplier to the reseller’s customer, and also manages payments.
“This parallel form of ecommerce through social media was growing fast but had a lot of inefficiencies like consistency of product quality, delivery times and payments,” says Khan. “Now these resellers can source wholesale products from across the country and sell them at a profit through their own social media stores on Whatsapp and Facebook without investing anything in inventory.”
It’s an idea that appears to be capturing people’s imagination. Markaz went live towards the end of last year and has been growing at an average rate of around 65% a month ever since. It has already on-boarded more than 2,000 resellers and around 25 suppliers.
Importantly, the business believes it is in a strong position to work with female entrepreneurs and micro-businesses based outside of Pakistan’s largest cities, constituencies which have often been overlooked. Consumers in semi-urban and rural locations are particularly likely to prefer purchasing from trusted sellers, Khan points out.
The company received an early boost with support from Y Combinator, the accelerator programme that works with early-stage businesses to provide modest amounts of capital as well as advice and connections. That vote of confidence, as well as Markaz’s strong growth, soon caught the eye of other investors.
Hence the company’s seed round, which is led by Indus Valley Capital, with the support of angel investors who include Kyane Kassiri of Suya Fund and executives from Careem, Deloitte, Amazon and Gojek.
“Markaz is building for all of Pakistan, with the ambition of enabling those in smaller cities and villages to source products directly from wholesalers and suppliers,” says Atif Awan, founder and managing partner at Indus Valley Capital. “They will create hundreds of thousands of micro-entrepreneurs along the way and bring them into the financial ecosystem, both of which will be truly transformative.”
The immediate priority for Markaz is to build out the supply side; the company hoped to add as many as 300 suppliers to the platform over the next 12 months. “We’re a technology business by design,” adds Khan. “Investment is going to help us improve our products and technology.”