How A MENA Last-Mile Delivery Company Drove Success In A Country With No Postal Codes Yalla Fel Sekka co-founders shares how they dealt with economic instability, local competition for talent, and the fact that Egypt doesn't have postal codes.
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This article was co-written with Khashayar Mahdavi, co-founder, Yalla Fel Sekka (YFS).
Demand for last-mile delivery is predicted to grow 78% globally by 2030, and emerging markets are at the front of the line to offer the service. But they also face some of the biggest obstacles. In our home country of Egypt, we launched our startup, Yalla Fel Sekka (YFS), in 2020, seeking to transform last-mile delivery for businesses there. Along the way, we've had to deal with economic instability, local competition for talent, and the fact that Egypt doesn't have postal codes.
But emerging market entrepreneurs are known for their perseverance, and we overcame those issues. We now deliver 10,000 orders per day, and we became gross margin positive just 18 months after setting up. We did so by responding to difficulties with creative solutions that have helped our company be more resilient and plant roots in a booming industry.
Being an entrepreneur in any location has its unique hurdles, but we as emerging market entrepreneurs pride ourselves on our innovative responses, that not only serve us, but also lay down a more solid foundation for other startups looking to enter the ecosystem. Here's a primer on four of the challenges we hit in Egypt- and, perhaps more importantly, how we got past them:
1/ COMPETING WITH OTHER ECOSYSTEMS FOR TALENT
Getting a company up and running in Egypt is relatively straightforward. The country ranked number one for foreign direct investment in the Africa region in 2021, and nearly 20% of all active tech startups on the continent are based here. Swvl emerged in Egypt and is now listed in Nasdaq, Fawry is the country's first unicorn, and Egyptian startups like Brimore and Homzmart have garnered significant buzz. There are also a number of local venture capitalists and accelerators here that have been actively building a landscape to support small businesses. Most of the funding is private, and it includes local corporate investors who participate in seed rounds. Just earlier this year, three of Egypt's biggest banks launched a US$85 million fund for fintech startups. On top of that, Egypt has a multilingual talent pool that is highly educated and highly skilled in tech work.
The problem, however, is that the caliber of workers means many people want to start their own business or earn higher salaries by moving to Silicon Valley or Dubai. At YFS, we handled that possibility with a small and agile business strategy. Before we fundraised, we took care to keep our team small. Rather than spending huge amounts to bring people on board at the beginning, we centered on proving our concept. Once we did that and began raising capital, we were able to attract more talent.
As you grow, your valuation increases- and as that figure goes up, you can raise even bigger amounts, and attract top candidates who expect higher salaries. Naturally, this will change over time as the ecosystem consolidates, and talent will want to stay for reasons other than wages. But for now, Egypt's startup space is in its infancy, and entrepreneurs have to navigate the pull of competing markets.
2/ OPERATING IN A COUNTRY WITH NO POSTAL CODES
Egypt doesn't use postal codes in its addresses, and yet, our startup is still able to successfully send 10,000 orders throughout the country on a daily basis. We're able to do so because there's a high level of internet penetration and smartphone use here, so we can accurately find addresses via geolocation. Moreover, we communicate with end users to confirm exactly where they are. If we have a new client, our drivers always call before they depart to pinpoint the destination.
That said, we don't bombard clients with calls and messages. We have a very detailed and well-maintained database that we refer to for information. Whenever a customer's first delivery is completed, we add the geolocation to the database, so drivers automatically have it to hand for future journeys. Our drivers are also each assigned a specific neighborhood to operate in. Cairo is a big city, with 20 million inhabitants, so rather than overwhelm drivers with the different pockets, each has their own district that they become extremely familiar with- meaning more efficient, customer-friendly delivery.
3/ "OUTTECHING" THE COMPETITION
Technology is a powerful tool to carve out your space in a market. Just look at the taxi sector. Native taxi services had no tech, no algorithms, then in comes Uber, and it leaps over competitors. The convenience of Uber's technology -including Uber's translation offering to help passengers communicate with drivers, and a ratings system that keeps drivers and passengers in check- all made ridesharing easy and appealing. That one disruptor pushed the whole sector to innovate.
In Egypt, e-commerce is the most populated startup sector, and as the startup scene evolves here, we knew that we needed to get ahead of our competition from day one. In this crowded space, we focused on deep tech as our defining edge. We had a machine learning model that was more advanced than others in our vertical, and that helped us optimize productivity- a key success metric in last-mile delivery.
4/ DEALING WITH ECONOMIC INSTABILITY AND A CASH-BASED ECONOMY
The Egyptian pound was recently devalued by 14%, sparking price and wage instability. As a growing company in the country, how do you absorb these shocks? You start by making sure that inflation risks are accounted for in your contract with your clients. Your contract should state that if inflation rises by X%, you may adjust your service fee by Y%. Give yourself legroom for inflation, and if prices have to change, make it a smooth, automatic process for customers.
Having said that, you don't want to pass the full pain point onto customers. Make an effort to improve productivity by changing the way you offer your service- for example, by improving your tech and automation to compensate for the price hike.
Egypt is also a heavily cash-based economy. Our drivers get paid in cash, and transport cash to drop-off at points all over the country. But we're working towards digitalization to make the whole process safer and more streamlined for everyone involved. We set up digital wallets for our drivers, who are often unbanked. We hope to eventually help them set up bank accounts, which should in turn help the people within our circles of influence become better integrated with the financial system.
Until then, it's important that companies in similar conditions have a top-notch reconciliation process. We have our own personal system for tracking payments, cash deposits, and automating and monitoring the reconciliation process, so there's no missing cash at the end of the day. It's time-consuming, but is essential for operations.
Our takeaways from Egypt can aid startups in other places as they prepare to expand internationally. All the factors -competition, Legislation and economic uncertainties- force entrepreneurs to constantly adjust and be on their toes, and more so than within countries where there is less competition, instability, and clearer legislation. And having prepared for harsher conditions, you'll be ready for any weather.