Adnan Shaffi is co-founder and CEO at PriceOye, which is a marketplace for consumer electronics. Prior to that, he was a co-founder and CEO at CupertinoTimes.com, a technology blog that was acquired by a US-based publishing firm in 2015. Before that, Adnan was co-founder and editor-in-chief at Chip Hazard, another technology blog that was acquired by a UK-based investment firm. Adnan has an MBA from the Karachi School of Business & Leadership (2015) and a Bachelor’s degree in Electrical and Electronics Engineering from the Bahria University (2011). Below are edited excerpts from BR Research’s recent conversation with the PriceOye CEO, focusing on the e-commerce firm as well as the broader marketplace.

BR Research: PriceOye started off as an e-commerce price-comparison platform, but now it has evolved into an e-commerce marketplace itself. How do you explain this transition?

Adnan Shaffi: The answer requires diving into a little bit of our background. Around the time we founded PriceOye back in 2015, our market research had told us that e-commerce was going to be a big phenomenon in Pakistan, but we did not have the kind of funds to go directly into setting up an e-commerce marketplace. So we decided to first go into a supporting function of e-commerce. And one of the biggest supporting functions for any e-commerce ecosystem is the ‘price comparison’ platform. Whenever competition starts, the first thing that gets noticed by the e-commerce industry is the existence of price comparison platforms. So we launched PriceOye in 2015 as a price comparison engine, where people visited our website, compared prices and then bought from the cheapest source. We were working with a majority of large e-commerce platforms in Pakistan.

How we moved into the core e-commerce marketplace segment has to do with our user feedback. The response that we kept hearing from many of our price-comparison website visitors was that they used our website to find low prices but when they ordered goods (e.g. mobile phones) from an e-commerce platform, they were delivered substandard products. Some users received refurbished handsets; others found their handsets already having Sim cards of foreign countries. Around the time when the PTA started pushing for type-approved mobile phones, we also heard a lot of complaints that e-commerce stores were selling mobile phones that were not registered with the regulator. At that time, we made a transformation from a price-comparison platform to a shopping intelligence platform, where we not only told the user where to buy a product from but also made it easy for them to sort out the clutter. We did that by de-listing certain platforms from our recommendations based on customer service feedback.

While we were on this transformative journey, we realized early last year that there was a bigger opportunity available as a lot of the existing e-commerce stores were unable to satisfy the customers of consumer electronics. We were pushed a lot by our users as well, who had had bad experience with other stores. It also helped that last year, we were already the second most-visited online shopping website in Pakistan for new products after Daraz (reference: www.similarweb.com), with over 2 million visits per month by unique users. So we thought that we already possessed a very large user base that really trusted our brand, so why not utilize this asset without doing a lot of marketing and burning cash on it. So in 2020, right before Covid-19 hit, we started fulfilling the orders for mobile phones.

BRR: After this transition, how would you define the core service offered by PriceOye?

AS: PriceOye is currently mostly a marketplace for consumer electronics. We currently only fulfil orders for mobile phones, but by the end of the year, we plan to expand our platform to include nine more consumer electronics categories. We are no longer a price-comparison platform, but we still do provide shopping intelligence by recommending to users which product would be ideal to their needs depending on their budget, desired features and the model of their current phone. Those recommendations have been very useful for our customers.

BRR: What is the business model of your consumer electronics online marketplace?

AS: As you know, there are numerous e-commerce models, and we considered many of them before deciding to enter the sector. We also spoke with a number of e-commerce founders in the region including India, Indonesia, and Malaysia – in fact, one of our co-founders, Adeel Shaffi, travelled to India to chat with one of these founders in order to better understand how different business models can operate in Pakistan. We also travelled to China twice to see how things were in the advanced e-commerce spaces.

The primary takeaway we received was that a "controlled marketplace" is the best business model for selling pricey or high-value goods like consumer electronics. Only official representatives of brands or their affiliates are permitted to sell on this type of marketplace. If you're selling a Samsung phone, for example, only Samsung Pakistan or their authorized representatives should be contacted. This is the key to help resolve the customer service-related issues in the Pakistani market. Therefore, considering there is a trust deficit in Pakistan’s e-commerce market, especially with respect to high-value items, we chose the controlled marketplace model instead of a pure marketplace model.

BRR: Don’t you face problems when brands are not officially represented in Pakistan?

AS: It is true that several international brands do not have Pakistani principals or affiliates. And, regardless of how high demand for such products may exist, we have chosen not to sell them in order to stay faithful to our business strategy. We didn't sell Apple products for a long time, but now that Apple Inc. has authorized an official distributor in Pakistan, we now sell it on our platform. All products sold on PriceOye come with a one-year official brand warrantee and have proper regulatory approvals. If those two criteria are not met, we don’t place such products on our platform.

BRR: Aren’t you missing out on a chunk of the marketplace by following what seems like an exclusive business model?

AS: It actually limits some products since we lose sales to brands that are not legally represented in Pakistan. Having said that, a number of consumer electronics, particularly well-known mobile phone brands, are now available in Pakistan, or we expect they will be available in the next few years due to the size of the market. Last year, the cell phone market alone was worth more than $1.5 billion. This is a huge market for us.

Given our local market expertise, we may also pitch to unrepresented brands to partner with us directly. E-commerce is an entirely new game, and establishing an online presence on your own as an OEM is quite difficult. As a result, they rely on players like PriceOye.

BRR: Consumer electronics is a bigger market than mobile phones alone. When are you expanding into other categories within consumer electronics?

AS: Our current concentration is on mobile phones, as this is the most popular category. We intend to have all consumer electronic products available on our platform by next year, and our objectives are being developed using a data-driven method. Some products, for example, have a seasonal demand, so it makes sense to debut freezers and air conditioners during the summer to capitalize on the peak demand. And during winters, products like electric heaters and microwave ovens witness increased demand. So we are going to be expanding further keeping seasonality and demand numbers in front of us.

BRR: Why limit sales to consumer electronics alone?

AS: We don’t want to become an everything-store – we want to be more like the Best Buy of Pakistan. The consumer electronics market is different from others, and therein lies our proposition. Traditionally, organized retail (supermarkets, etc.) has eaten into the market share of mom-and-pop stores, and organized retail is then taken over by modern retail channels (e.g. hypermarkets), which is then surpassed by e-commerce. This pattern can be seen in a number of markets around the globe.

In Pakistan, however, this trend is only being followed in grocery stores, not in consumer electronics. While you can still buy consumer electronics from mom-and-pop shops these days, there is no national supermarket that sells consumer electronics. Some private consumer electronics retailers offering durables in large cities have expanded regionally in recent years, but they lack a nationwide presence, and their prices and service quality vary by city. That is something we want to change – we want to be Pakistan's go-to consumer electronics store.

In essence, we are focused on consumer electronics since we have developed e-commerce domain knowledge, a grasp of price points, and a thorough understanding of customer behavior in this market sector. These are products that people keep for a long time. People change their phones every two years on the low end of the product replacement spectrum, but it takes roughly ten years to replace a TV and eight years to replace a refrigerator on the high end. Washing machines (4-5 years) and air conditioners (4 years) are in the middle.

BRR: You mentioned the ‘trust deficit’ earlier. Your platform is selling expensive items – would a major part of the market not be reluctant to order high-value goods online?

AS: When buying a Rs1 lac product online, there is a natural apprehension on the part of the customer, but this has changed with time. According to research, certain categories are known as "hook" categories. In India and China, for example, the first internet buy is always a fashion item or a mobile phone. If a person purchases a Rs2 lac mobile phone from PriceOye and is satisfied with the service, that person's faith in the platform will grow. This trust spreads to other categories as well. Our open-box delivery, which allows customers to try out products before spending cash, is another method we combat reluctance.

BRR: Dealing with products that carry a bigger price tag and require a higher level of consumer engagement, how have you defined your target market? And how do you reach out to them?

AS: Within the broader middle class, we are targeting a segment that is more educated and informed but has less time on their hand to make purchase decisions. The consumer persona that we have on our mind is someone who has finished the education, has just started working, knows what s/he needs, values quality of service, but who is short of time and opportunity to visit the offline market and shop for consumer electronic products. So they leave it to us to not only find products at best prices for them but also provide them the best user experience, such as delivering the product mush faster to them.

We don't spend significant amount money on marketing yet to reach out to potential users. All of our users found their way to the site through word-of-mouth or other organic means. We rely on our existing clients to suggest us to their friends and family, unlike other players that rely significantly on social media marketing or TV ads. And that's how we've progressed.

BRR: Who do you treat as direct competition?

AS: Right now, our biggest competition is the traditional retail market. Thanks to the volumes we are able to sell, none of the physical stores are able to offer the kind of pricing and service that we do. Their products are also expensive because of their overheads. When customers go to these physical stores, they are often told not to buy from online marketplaces or they will get faulty products. To counter that narrative, we have started offering open-box deliveries in a few cities, which means that you can get the product at your doorstep, open the box/packing, experience it and then pay for it.

BRR: Considering that PriceOye ventured into consumer electronics a month before the pandemic hit, how has the business been doing since?

AS: We started off selling mobile phones on March 1; by March 31 the country was in a lockdown, and we had no idea how this would go from there as courier deliveries were initially not allowed by the government. For a month and a half early on due to Covid-19, our business was at a standstill, but since then our business has been growing at a pace of over 40 percent month over month. In the latest quarter, we have been growing at 60 percent every month. Till date, PriceOye has served over 25 million unique users who visited our platform.

BRR: Selling big-ticket items, what kinds of risks are you exposed to, compared with other platforms that are selling all kinds of products?

AS: The basket size for a traditional marketplace is between Rs1,000 to Rs2,000 per order. On the other hand, an average order size for our platform is above Rs40,000. Therefore, managing the order value chain becomes a bit tricky. We treat everyone in our company as a partner instead of an employee, and this culture helps us stop a lot of potential leakages and we are able to provide a good customer experience while delivering these high-value products.

To avoid breakage or damage, we are extremely careful with how we pack the products and how our partners process the deliveries. The first 100 orders from our platform were delivered by the management team itself, to get a visibility on the whole chain. We have also been very particular and observant about how courier companies treat our parcels. In fact, some courier companies send their team members to see what SOPs we follow in the packing process, so that they can also teach other e-commerce players and stores.

BRR: Lastly, what kind of external investments have been made so far in this venture?

AS: We bootstrapped PriceOye for a long time since we believed we wouldn't require outside investment until it was absolutely necessary. However, we continued to receive term sheets from various investors. We kept running until we decided it was time to scale up and bring in some external partners. The goal in the initial phase was not to simply take money, but to find strategic partners.

We were able to attract like-minded, experienced investors to our seed-funding round. We received $450,000 in funding from Fatima Ventures, Artistic Ventures, and Kinetco in 2019. We teamed with this syndicate despite receiving higher valuations from other investors because we believed they had the enormous experience and capabilities that might help us develop faster, and we have never regretted that decision.