Dhaka, the capital of Bangladesh, is one of the densest cities in the world. Since real estate is at a premium, stores are often tiny and carry very limited inventory. Chaldal‘s goal is to give customers the experience of shopping in a big-box store with a huge selection.
Backed by Y Combinator and 500 Startups, Chaldal currently stocks over 4,000 products in its two warehouses, which it delivers in about an hour, and hopes to become the “Amazon Fresh of Dhaka.”
The company, which is currently averaging about 150 deliveries a day, plans to add at least six more warehouses to cover all of Dhaka before potentially expanding into other Bangladeshi cities.
Chaldal was founded by Waseem Alim, Tejas Viswanath, and Zia Ashraf in 2013. After working in product development for Wikinvest and SigFig, Alim began exploring the possibility of launching a startup in his home country. He was galvanized by the collapse of a garment factory near Dhaka that killed more than 1,100 workers.
“That jarred me and made me think, if capital is being invested in a way where people have to work inside a mousetrap, then I want to see what it takes to really make a living in Bangladesh,” he says.
Consumers in Dhaka often purchase small amounts of groceries, regardless of their income level, because shops don’t have a lot of stock. Chaldal’s current business model centers around warehouses that are relatively small (about 5,000 to 7,000 square feet each), but still enable it to carry much more items than brick-and-mortar retailers. It uses a cloud-based inventory system that allows users to see what items are available in real-time.
At first, Chaldal tried a model similar to hyperlocal grocery startups in India such as Grofers and PepperTap, which meant picking up items from local stores instead of carrying its own stock. The lack of control over inventory, however, turned off customers.
“If someone orders two liters of Coke and the store only has one liter, there is no way for you to tell the customer that,” says Alim. “We found a lot of customers did not come back.”
Chaldal switched to its current model in March. Since many customers order ingredients for meals right before they start cooking, Chaldal also began providing on-demand delivery.
“When we started this service back in November 2013, we were doing next-day delivery and that just doesn’t cut it for people,” says Alim.
“When you want something, you want it really fast, and the culture in the subcontinent is to get a very small inventory of cooking supplies, unlike in the U.S. where you buy bulk items like a ton of toilet paper. Most people don’t have cars and you just go and buy four eggs, literally, not even a dozen eggs.”
Unlike Instacart in the U.S., Chaldal doesn’t charge a premium for convenience. Instead, it competes with brick-and-mortar stores by buying directly from wholesalers and offering lower prices.
Grocery margins are too slim to support huge discounts, but most of Chaldal’s prices are about 1 to 2 percent lower than other stores and it plans to increase that to 5 percent as it scales up to woo customers.
“Instacart charges you extra because they are competing with huge retail infrastructure like Wal-mart, but we think we can improve the infrastructure and deliver at a lower price,” says Alim.
Chaldal’s most popular categories include pet food, since many animal owners usually have to travel out of their neighborhoods to specialty stores, and baby supplies ordered by busy new parents.
In addition to traditional retailers, Chaldal’s competitors include Direct Fresh and Meenabazaar. Direct Fresh, however, sells organic produce and other premium food, while Meenabazaar is run by a grocery store chain.
Alim believes Chaldal will scale up more quickly than other online grocery sellers by keeping its warehouses small and strategically placed throughout Dhaka to reach as many consumers as possible. The company is currently able to provide about 8 to 10 percent of Dhaka’s residents with one-hour deliveries, but hopes to cover the entire city by the end of this year.
“Once we really understand Dhaka, the other cities will be fairly easy,” says Alim. “The market here is already very big, so we don’t need to expand to other cities in order to get bigger challenges. In Dhaka, groceries are probably a $4 to $5 billion market per year, so if we provide cheaper prices, more variety, and better quality, there is no reason why we shouldn’t be one of the biggest retailers in the city, if not the biggest.”