Pakistan-based hybrid fintech and logistics startup PostEx is gearing up for a major disruption in the e-commerce sector in Saudi Arabia and the UAE with its hybrid upfront payment solutions and delivery services to online merchants.
The venture, which closed a $7.3 million Series A funding round last week, will commence with Saudi Arabia as its launching pad for entry into the GCC region, followed by the UAE – its two leading markets for e-commerce.
PostEx provides e-commerce merchants with up-front-payments for cash-on-delivery orders, underpinned by its logistics network which delivers products to customers.
“Both Saudi Arabia and the UAE, while embracing digital payments to a greater extent than Pakistan – 6-7 percent vs 1-2 percent – still have room to grow their e-commerce sectors, creating opportunities for PostEx to disrupt those markets,” Omer Khan, Founder and CEO of PostEx, told Arabian Business.
He said while his company will be eyeing a significant chunk of the e-commerce financing and logistics businesses in Saudi Arabia, it will mainly be targeting e-commerce financing in the UAE as the country already has a well-developed logistics industry.
“Initially, PostEx will be targeting Saudi Arabia and the UAE as priority markets for expansion into the GCC, using the proceeds of our $7.3 million pre-Series A fundraise,” the company top executive said.
Khan in fact revealed that the company has already launched a pilot programme in Saudi Arabia with several online merchants, collaborating with local financing partners to assess the needs of Saudi e-commerce players.
“The formal market entry [into Saudi Arabia] is slated for the near future. As for the UAE, we plan to take a softer approach until our presence in Saudi Arabia is firmly established,” he said.
Khan said while the startup’s logistics network is open to all e-commerce merchants, its financing solution is only provided to businesses which use the company’s logistics solution – a risk-mitigating strategy to keep non-performing loans to just a tiny fraction of the overall exposure.
Huge market size and growth potential weighed in for zeroing in on Saudi Arabia
The PostEx founder said Saudi Arabia’s scale, impressive growth, and private sector diversification initiatives made it an obvious choice for an initial entry to the GCC.
Additionally, e-commerce merchants in the market typically struggle to access capital, with traditional financial institutions unwilling to provide funding due to merchants’ lack of infrastructure, he said.
“Similar to Pakistan, this is where PostEx’s hybrid fintech and logistics offering will add value to merchants – providing twin solutions which overcome cash flow challenges – critical for scaling – and also logistic challenges,” Khan said.
The huge growth potential for e-commerce in Saudi Arabia and the UAE also played a major factor in PostEx deciding on the GCC region for its maiden international outing.
Citing market studies, Khan said Saudi Arabia’s ecommerce market, currently estimated to be worth over $14 billion, is a fast-growing sector, with a projected annual CAGR of over 11 percent until 2029, resulting in a nearly $25 billion market.
The UAE e-commerce market, with the advantages of its smaller population and a high level of comfort with digital payments, is projected to reach $10.5 billion by 2029, from the estimated nearly $7 billion this year, he said.
“These two markets are the standout performers for ecommerce within the wider GCC, capturing approximately 75 percent of the total market value between them,” the PostEx top executive said, reasoning its decision to choose the region for its first expansion outside Pakistan.
PostEx’s unique hybrid model to help it to standout in Saudi, UAE markets
Khan said while there are existing players in both markets, the company’s hybrid solution will make it unique in both Saudi Arabia and the UAE.
PostEx’s solution of offering financing embedded with a logistics solution meets the needs of e-commerce merchants, particularly in Saudi Arabia and UAE, he said.
“Current players typically offer revenue-based financing models; they don’t control the flow of goods or have full visibility into the operations of eCommerce merchants.
“As a result, they are less equipped to help merchants overcome cash-flow challenges as effectively as PostEx,” he said.
The company’s business model envisages it typically extending financing of 60-70 percent of the merchant’s order value, with the remainder provided once it delivers the product and receives the cash from the recipient.
The PostEx founder also said there are several similarities – and also differences – between Pakistan and the GCC markets.
“While e-commerce merchants’ needs for financing remain constant across markets, there are differences in the logistics needs.
He said while the company expects the UAE market to see greater value from financing as opposed to logistics, as the country’s logistics sector is already mature with established players; in contrast to Saudi Arabia, where the logistics need is greater.
The PostEx founder also said they will be looking to partner with companies in Saudi Arabia and the UAE for achieving faster growth in those markets.
“Yes, we are certainly open to partnership in both markets. However, we prefer to only partner with companies with the same mindset – it has to be a good fit to be effective,” he said.
Khan also said the company will also be open to investment from the Middle East region for meeting its aggressive growth plans in the region.
He also pointed out that the company’s latest funding round has several investors from the region.
“The lead investor in our $7.3 million pre-Series A fundraise, Conjunction Capital, is based in Dubai, while Dash Ventures is based in Jordan and Sanabil500 is based in Saudi Arabia,” Khan said.
PostEx, which currently has 15,000 e-commerce merchants using the platform, hopes to see this number going up several notches once it enters Saudi Arabia and the UAE.
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