The Exchanges

Q Man, that is insane in terms of the reduced wastage. I had no idea that like, 350 bips less than traditional. That's insane. Usman, before we dive on, I'd love to hear your thoughts on this. And how important is F&V to you and, and, uh, Airlift in Pakistan?

A F&V is extremely important to us. Obviously it's the anchor category, uh, Harry. So, uh, you know, I think it brings, it, it really anchors customers to our platform. It is extremely important. We've actually built out similar to what others are sharing, similar to what, building on to what Ralph has shared. We've filled out a whole supply chain for fresh, right? Where we procure directly from farmers and, and, you know, deliver that all the way to customers to our own internal supply chain, a vertically integrated supply chain that does all of that. But in terms of procurement efficiency, you know, I think there's kind of, uh, three, three things that drive that, and this is probably building on top of what others have already shared, right? Like, uh, purchasing from local producers is extremely important. Who you buy from makes a huge difference in terms of procurement efficiency. It reduces the distribution costs for suppliers. It reduces the, the procurement cost for, for airlift. Um, the second thing is obviously distribution centers, right? So enabling a consolidated model. So specifically the metric we track is the quantity per shipment. Uh, that is an extremely important metric in, in terms of procurement efficiency, because the larger the delivery, the lower the distribution cost and the better the rate that you get from suppliers. And the third thing is what basically…

AI assessment note: “F&V is extremely important to us. Obviously it's the anchor category”

Q I totally agree with you in terms of changing the naming around it. Uh, Usman, at what point do we see these businesses becoming free cash flow machines?

A I think it really depends on how you build a business and what order density specifically is required to achieve cash flow positive, right? So if you're doing, you know, kind of ultra fast delivery, low AOV, right? Like you need a bit more order density and maybe, you know, you can, you can, you can get there, uh, you know, in, in, in a bit more time, uh, versus, you know, I think if you're doing a kind of 30 minute delivery, high AOV, broad selection, right? Like maybe you get there faster. Uh, because you, you don't need very, very high levels of order density. You don't need to deliver a 100,000 orders a day from a given city to get to, you know. So I think, uh, that will, how fast you get to free cash flow will depend on two factors. One is the market kind of dynamics developed versus emerging cost structures, cost efficiencies. And second is, uh, the, what order density is required based on your business model for us specifically, Harry, we're looking at free cash flow across all markets across the country. Uh, in our, in our first market in, in Pakistan, uh, sometime between Q four and Q one, um, within the next six or nine months.

AI assessment note: “sometime between Q four and Q one, um, within the next six or nine months.”

Q Man, that is insane in terms of the reduced wastage. I had no idea that like, 350 bips less than traditional. That's insane. Usman, before we dive on, I'd love to hear your thoughts on this. And how important is F&V to you and, and, uh, Airlift in Pakistan?

A F&V is extremely important to us. Obviously it's the anchor category, uh, Harry. So, uh, you know, I think it brings, it, it really anchors customers to our platform. It is extremely important. We've actually built out similar to what others are sharing, similar to what, building on to what Ralph has shared. We've filled out a whole supply chain for fresh, right? Where we procure directly from farmers and, and, you know, deliver that all the way to customers to our own internal supply chain, a vertically integrated supply chain that does all of that. But in terms of procurement efficiency, you know, I think there's kind of, uh, three, three things that drive that, and this is probably building on top of what others have already shared, right? Like, uh, purchasing from local producers is extremely important. Who you buy from makes a huge difference in terms of procurement efficiency. It reduces the distribution costs for suppliers. It reduces the, the procurement cost for, for airlift. Um, the second thing is obviously distribution centers, right? So enabling a consolidated model. So specifically the metric we track is the quantity per shipment. Uh, that is an extremely important metric in, in terms of procurement efficiency, because the larger the delivery, the lower the distribution cost and the better the rate that you get from suppliers. And the third thing is what basically…

AI assessment note: “F&V is extremely important to us. Obviously it's the anchor category”

Q Usman, what are your thoughts before we move on on this one? What are the picking and packing costs that like, and what are the delivery costs that like for you, and how do they compare in your mind to some of the bigger players that I mentioned?

A Yeah, so we're currently doing between three and four percent on picking costs, and we're doing, what, six to seven percent on delivery costs. So our total comes down to about 10 to 10.5% for delivery and picking inclusive. We're planning to get this to about seven percent by the end of the year, but I do believe, Harry, that that is really an output metric, and the input metric here, right, is actually your labor efficiency and your capacity planning and your order density, right? So, for example, we could have extremely poor labor efficiency, Uh, and we could have so much order density that we, you know, come out really good on picking costs, right? And so I think the question really is how do we measure labor efficiency? How do we measure capacity planning? And the way, you know, Airlift does that is we define labor efficiency as the hourly output in terms of orders picked. Um, and, and we define capacity planning as the average idle time for a worker, uh, in a, in a given day. Uh, and so those are the two input variables that we really obsess over. And then, you know, if If you get those right, the outputs will follow over time.

AI assessment note: “doing between three and four percent on picking costs, and we're doing, what, six to seven”

Q We've said AOV multiple times here. Usman, I want to dive to you. Um, again, we're being open with our numbers here. What are the AOVs? How have they changed over time?

A Yeah, great. Um, so one of the big things, you know, on the economic profile, right, of our Q-commerce platform, there's two kind of broad areas here that we obsess a lot about, right? One is the operating efficiency and the cost efficiency. The other part is the AOV. Uh, and as, you know, Ralph rightfully pointed out, Uh, average order value is an incredibly, incredibly high impact driver of the P&L. And so for like in the month of January, so we've had a lot of exchange rate devaluations, valuations, shifts in, in, in, in Pakistan. But as of January of this year, our average order value was about nine dollars and 20 cents. On average in Pakistan, the, the AOV for, for QCommerce, right, for Delivery Hero and some of these other players is actually around six dollars. The average for India is about five dollars and 70 cents, just based on, you know, what I'm reading on, on TechCrunch and others probably can add more, more perspective here. But, and the reason we have a higher order value is because of our assortment advantage and because of our mothership warehouses and our distribution center network that enables us to replenish our dark stores in a really efficient way, which in turn enables us to have a larger assortment of SKUs. Um, so that, that's actually one of the big reasons for why, you know, we, we, uh, you know, are marching toward free cash flow very, very quickly.…

AI assessment note: “our average order value was about nine dollars and 20 cents.”

Q Usman, what are your thoughts before we move on on this one? What are the picking and packing costs that like, and what are the delivery costs that like for you, and how do they compare in your mind to some of the bigger players that I mentioned?

A Yeah, so we're currently doing between three and four percent on picking costs, and we're doing, what, six to seven percent on delivery costs. So our total comes down to about 10 to 10.5% for delivery and picking inclusive. We're planning to get this to about seven percent by the end of the year, but I do believe, Harry, that that is really an output metric, and the input metric here, right, is actually your labor efficiency and your capacity planning and your order density, right? So, for example, we could have extremely poor labor efficiency, Uh, and we could have so much order density that we, you know, come out really good on picking costs, right? And so I think the question really is how do we measure labor efficiency? How do we measure capacity planning? And the way, you know, Airlift does that is we define labor efficiency as the hourly output in terms of orders picked. Um, and, and we define capacity planning as the average idle time for a worker, uh, in a, in a given day. Uh, and so those are the two input variables that we really obsess over. And then, you know, if If you get those right, the outputs will follow over time.

AI assessment note: “between three and four percent on picking costs, and we're doing, what, six to seven percent”

Q We've said AOV multiple times here. Usman, I want to dive to you. Um, again, we're being open with our numbers here. What are the AOVs? How have they changed over time?

A Yeah, great. Um, so one of the big things, you know, on the economic profile, right, of our Q-commerce platform, there's two kind of broad areas here that we obsess a lot about, right? One is the operating efficiency and the cost efficiency. The other part is the AOV. Uh, and as, you know, Ralph rightfully pointed out, Uh, average order value is an incredibly, incredibly high impact driver of the P&L. And so for like in the month of January, so we've had a lot of exchange rate devaluations, valuations, shifts in, in, in, in Pakistan. But as of January of this year, our average order value was about nine dollars and 20 cents. On average in Pakistan, the, the AOV for, for QCommerce, right, for Delivery Hero and some of these other players is actually around six dollars. The average for India is about five dollars and 70 cents, just based on, you know, what I'm reading on, on TechCrunch and others probably can add more, more perspective here. But, and the reason we have a higher order value is because of our assortment advantage and because of our mothership warehouses and our distribution center network that enables us to replenish our dark stores in a really efficient way, which in turn enables us to have a larger assortment of SKUs. Um, so that, that's actually one of the big reasons for why, you know, we, we, uh, you know, are marching toward free cash flow very, very quickly.…

AI assessment note: “as of January of this year, our average order value was about nine dollars and 20 cents.”

Q there, Arid. I want to unpack each of those in the show today. I do want to start on a kind of more macro headline topic, being emerging markets bluntly. And when we look at emerging markets, And the operating models compared to Western markets. I want to touch on first the pros. I'm an optimist. Usman, what's the reason that emerging markets are the best place for quick commerce?

A We really like that question, uh, Harry. So just before I get into emerging markets, you know, what, uh, before starting Airlift, I spent a few years at DoorDash and their headquarters in San Francisco as part of the early team, but the biggest learnings for logistics, uh, businesses is, you know, the, the path to free cashflow and how quickly you can get there. Has a huge implication for how large of a business you're able to build in, in the next two decades. And, uh, the reason we're so excited about emerging markets in particular is because the path to free cash flow is actually extremely straightforward. Uh, and that's for two reasons, right? One is, um, you know, the, the cost efficiency of emerging markets is extremely low wager, uh, extremely low minimum wage, uh, costs. Uh, so that's one big driver for why emerging market businesses and Q-Commerce will get your productivity a lot faster. The other aspect there is that because of the environment in emerging markets, you're actually able to build an operating model that enables you to offer a stronger assortment. And through that, you're able to get a really strong AOV, which reduces your, your operating costs as a percentage of revenue. So I think it's those two factors combined that, you know, get us really excited about emerging markets.

AI assessment note: “the reason we're so excited about emerging markets in particular is because the path to free cash flow”

Q there, Arid. I want to unpack each of those in the show today. I do want to start on a kind of more macro headline topic, being emerging markets bluntly. And when we look at emerging markets, And the operating models compared to Western markets. I want to touch on first the pros. I'm an optimist. Usman, what's the reason that emerging markets are the best place for quick commerce?

A We really like that question, uh, Harry. So just before I get into emerging markets, you know, what, uh, before starting Airlift, I spent a few years at DoorDash and their headquarters in San Francisco as part of the early team, but the biggest learnings for logistics, uh, businesses is, you know, the, the path to free cashflow and how quickly you can get there. Has a huge implication for how large of a business you're able to build in, in the next two decades. And, uh, the reason we're so excited about emerging markets in particular is because the path to free cash flow is actually extremely straightforward. Uh, and that's for two reasons, right? One is, um, you know, the, the cost efficiency of emerging markets is extremely low wager, uh, extremely low minimum wage, uh, costs. Uh, so that's one big driver for why emerging market businesses and Q-Commerce will get your productivity a lot faster. The other aspect there is that because of the environment in emerging markets, you're actually able to build an operating model that enables you to offer a stronger assortment. And through that, you're able to get a really strong AOV, which reduces your, your operating costs as a percentage of revenue. So I think it's those two factors combined that, you know, get us really excited about emerging markets.

AI assessment note: “the reason we're so excited about emerging markets in particular is because the path to free cash flow”

Q Usman, hit me. What do you think? What are the biggest fuck me challenges with emerging markets?

A I might have a, have a unique perspective on this, but, you know, I think, um, if, if you look at, you know, the operating side of the business, right? I think, uh, you know, uh, we, we love what we're doing in emerging markets. We love what we're seeing. I think one of the biggest challenges here in emerging markets, and I think the, uh, makeup or the DNA of this forum is actually indicative of that or reflective of that. Is it takes a very, very special and unique sort of a team to build operating efficiency and excellence in these sort of businesses. And historically, uh, you know, a lot of that, you know, team build up, we've seen these kind of heavy logistics businesses come out of the US. We've seen these come out of Western Europe. We've seen these come out of, you know, some parts of Africa. We've seen these come out of East Asia in, in some ways with Grab and all of that. But I think you need kind of that acquired intelligence within the team to really obsess over, you know, low levels of detail on operating efficiency and how to build operational excellence and how to really, you know, define, measure, and, and, and build toward operating efficiency. And if you look at the group here, right, like my former experience was at DoorDash. Ralph obviously founded FoodPana, uh, which we now compete against, uh, here in, in Pakistan. And, uh, I did obviously, you know, has sp…

AI assessment note: “takes a very, very special and unique sort of a team to build operating efficiency”

Q Usman, hit me. What do you think? What are the biggest fuck me challenges with emerging markets?

A I might have a, have a unique perspective on this, but, you know, I think, um, if, if you look at, you know, the operating side of the business, right? I think, uh, you know, uh, we, we love what we're doing in emerging markets. We love what we're seeing. I think one of the biggest challenges here in emerging markets, and I think the, uh, makeup or the DNA of this forum is actually indicative of that or reflective of that. Is it takes a very, very special and unique sort of a team to build operating efficiency and excellence in these sort of businesses. And historically, uh, you know, a lot of that, you know, team build up, we've seen these kind of heavy logistics businesses come out of the US. We've seen these come out of Western Europe. We've seen these come out of, you know, some parts of Africa. We've seen these come out of East Asia in, in some ways with Grab and all of that. But I think you need kind of that acquired intelligence within the team to really obsess over, you know, low levels of detail on operating efficiency and how to build operational excellence and how to really, you know, define, measure, and, and, and build toward operating efficiency. And if you look at the group here, right, like my former experience was at DoorDash. Ralph obviously founded FoodPana, uh, which we now compete against, uh, here in, in Pakistan. And, uh, I did obviously, you know, has sp…

AI assessment note: “one of the biggest challenges here... it takes a very, very special and unique sort of a team”

Q I totally agree with you in terms of changing the naming around it. Uh, Usman, at what point do we see these businesses becoming free cash flow machines?

A I think it really depends on how you build a business and what order density specifically is required to achieve cash flow positive, right? So if you're doing, you know, kind of ultra fast delivery, low AOV, right? Like you need a bit more order density and maybe, you know, you can, you can, you can get there, uh, you know, in, in, in a bit more time, uh, versus, you know, I think if you're doing a kind of 30 minute delivery, high AOV, broad selection, right? Like maybe you get there faster. Uh, because you, you don't need very, very high levels of order density. You don't need to deliver a 100,000 orders a day from a given city to get to, you know. So I think, uh, that will, how fast you get to free cash flow will depend on two factors. One is the market kind of dynamics developed versus emerging cost structures, cost efficiencies. And second is, uh, the, what order density is required based on your business model for us specifically, Harry, we're looking at free cash flow across all markets across the country. Uh, in our, in our first market in, in Pakistan, uh, sometime between Q four and Q one, um, within the next six or nine months.

AI assessment note: “in Pakistan, uh, sometime between Q four and Q one, um, within the next six or nine months.”