Centaur Stage Ep. 13 - Scaling a startup in the post-pandemic world with Rami Kahale
Centaur Stage is a weekly video series where we explore bold ideas about the future of work and learning. Each Thursday afternoon, on LinkedIn Live, at 2:30 PM UAE-time, Marilyn Zakhour, CEO & Founder of Cosmic Centaurs is joined by some incredible guests to share insights, opinions, and perspectives about the future of how we work and learn.
In this episode of Centaur Stage, Marilyn and Rami Khale, the CEO of Joi Gifts discuss his experience running and scaling an e-commerce business, how he worked on reaching profitability, and how he is approaching expansion into new markets, all in the midst of the global pandemic. Watch the full episode here.
About Rami Kahale
Rami Kahale is the CEO of Joi Gifts, the leading online gifting marketplace in MENA.
He has over 12 years of experience in the technology and finance sectors and previously held leadership roles in regional tech companies such as Careem, where he served as General Manager of Riyadh as well as KSA General Manager for Premium Categories.
Rami also spent 7+ years as an investment banker with regional banks including Samba and BMG, where he advised clients on various capital market transactions and M&A deals. He holds a bachelor’s degree from McGill University and an MBA from INSEAD.
He is passionate about building high-performing teams, fueling growth in purpose-driven organizations, and creating an awesome culture for colleagues, based on respect, humility, and an immense sense of ownership.
About the topic
Marilyn and Rami spoke about scaling a business amidst a global pandemic. It’s not just a pandemic or social distancing that makes it challenging for organizations today to grow and reach profitability - it's the repercussions this has had on the global economy that is one of the biggest barriers to overcome.
According to McKinsey and data from the IMF, the current global economic downcycle is 3 x deeper and 6x faster than what we experienced in 2009. On the plus side, a data point from the 2009 slump that keeps us optimistic is from the Kaufman Foundation. It reads that over 50% of Fortune 500 companies started either in a bear market or full-blown recession.
So there is a silver lining and for some eCommerce businesses, the current context has driven growth to unprecedented levels. Predictions for the regional landscape estimate that online commerce will reach $50 billion (Dh183.5 billion) by 2025, according to a Kearney Middle East report.
So while that paints a picture of an appealing future for the industry, we all know the journey of getting there is not easy. Here’s what Marilyn and Rami discussed.
E-commerce is booming. The World Economic Forum has estimated the UAE’s 2020 e-commerce market to be valued at $27.2bn, with similar growth across MENA. And interestingly and perhaps more specifically to Joi Gifts, the regional gifting market in specific is estimated to be valued at $28B which is no small number.
Marilyn asked Rami to share his journey growing Joi Gifts. “You said it beautifully," said Rami. "It was a challenging year for everyone, but there was a silver lining. We saw the movement to retail transactions and we were at the center of that. Joi gifts is an online gifting marketplace. We are in e-commerce, but we’re a marketplace. Despite a challenging context. I joined in September of 2020. When lockdown restrictions eased up and we found our flow, we saw our potential. While the business was growing over the past 3-4 years, last year we grew 5x." he continued.
"We saw that people who purchased gifts were forced to do so online. We saw that as a sign that this would be the year we would double down and really cater to our audience's gifting needs. We embraced the challenge." he added.
Marilyn followed this up with a second question, citing data about the global e-commerce landscape. She says, “The Middle East & Africa saw a 20% e-commerce sales growth, but compared to other regions in the world, it is the slowest in terms of growth. To compare, in the US, COVID-19 catapulted 5 years of growth into 6 months (or it grew at 44.5%). Interestingly, the fastest-growing region was Latin America which grew by 36.7%."
She continues, "For this region, a 2018 Google and Bain report cited that the main barrier was access to inventories and the number of SKUs, payments, and logistics (cross border shipping). Do you still see these as the biggest hurdles? If not which are and what are you doing to overcome them?"
"We’re a hyperlocal marketplace, we do not do shipping. We operate as cities, and onboard merchants available in the cities who we source products from in real-time. A lot of time our orders are overnight or same-day and we deliver them in time slots. So, the logistics piece is the last mile, and we were able to crack that," said Rami.
He continues, "SKUs remain to be a challenge. We're cautious and we want to be the best platform with the best products. From homeware to body care, to chocolates and flowers, we want to work with the best brands. So, we were cautious to make sure we onboard the best merchant partners and best brands. That bit comes at a cost. We could have ramped up our offering and our catalog in a faster way, but we chose not to do that. Having said that, we've been seeing that we get more visibility and there's more trust in who we are as Joi Gifts, then that conversation becomes easier. So, today our catalog is ramping up at an increasing scale, and while that's been a challenge, we've seen it remedied as well."
On the logistics side of things, we have a few models, we have a salaried fleet in the UAE, we work with 3PLS in different markets and markets where we still have a smaller footprint.
Recalling a conversation she had with Rami about Joi Gifts delivery and logistics, Marilyn says, "Tell us about your delivery. I don't know if you guys still do this, but there are a few talents on your team."
"Yes!" responded Rami. "Mainly in the UAE but we want to roll out those capabilities elsewhere. We have refrigerated vans because we sell a lot of perishable items on our platforms including cakes and flowers which we have to deliver those fresh. The other thing we care about is the experience itself. Our Joi Agents (our delivery team) have a concierge-style uniform and make sure they deliver with the best possible experience. It is a special moment when you receive a gift, we call it a Joi moment and we want to use those to differentiate it from your average delivery or e-commerce service. You can book a singing telegram, a Joi Agent can sing happy birthday or a love song depending on the recipient."
"Oftentimes I imagine you don't even know the address of the person you're supposed to be delivering a gift to," taking an audience question Marilyn asks, " how do you manage that aspect of the delivery addresses today? "
"That's a very good question," responded Rami. "It was an eye-opener for me coming in. When I was being onboarded to the business they said it's not mandatory to leave your address, and I said 'what are you guys talking about? What business are you running? How can you deliver something without asking for an address?' But it turns out that a lot of people don't know the full address of the person they're trying to gift. The numbers are quite revealing and staggering but it's our reality. This is something we had to embrace and we had to manage with what customers could give us. It puts a burden on us to make sure we obtain the address from the recipient but we also sometimes have limitations as to when we can reach out to them because the customer might not want to spoil the surprise. We've gotten good at managing those situations and we're trying to solve the problem of gifting."
On customer service
Taking another question from the Audience, Marilyn asked Rami about customer service. "What tools do you use to follow up on customer's questions and how were you able to scale this fast during a lockdown you've grown 5 X, what has happened on that front of your business?"
"Customer service, when you're scaling with those kinds of numbers, is always a challenge. But it's a very important part of what we do. To some extent, we're relatively high in contact business. Case in point - we spoke about the missing addresses - this creates an outbound pipeline of calls you need to make every day. We have customers calling in for advice on gifting, asking for status updates. To manage these we use Zendesk, as our tool, and basically, we've integrated it with our other systems and tools and software. In terms of the customer service team, they are mostly based in the UAE and Saudi Arabia, we call them our Joi Angels.
We've had to scale this and sometimes we've outsourced and we've been experimenting with a few ways and it's one of those things we don't want to compromise. Customer care is everything in gifting, so we're trying to do it as efficiently as we can without compromising on quality, and lead times."
Responding to this, Marilyn adds: "There's definitely that debate of, how much you keep customer service in-house and maintain the experience and control over the tone of voice, the way people answer, but also how connected and aligned they are to your mission. It's beautiful to see this across your branding, your denominations, but this idea of gifting, joy, shines through, and that choice between the ability to scale while maintaining that brand touch point is definitely a difficult one."
"To that point, we’re occasions driven," said Rami. "We see substantial spikes in these seasonal moments and we have outsourced and hired temps. There is an onboarding process for them, they are brought on board in advance, have access to the tools and we always ensure they have a customer care background."
Scaling amidst a pandemic
Switching gears, Marilyn asks Rami about how Joi Gifts scaled. "Scaling all the while achieving profitability is not something we see a lot of. We usually see companies focusing on one or the other, and generally, growth comes at the cost of not being profitable for a lot of companies in this space. Tell us why you chose to focus on profitability, but also what were some of the things that you really focused on as you were working towards that?"
"This is something where we're super excited and proud to have reached profitability this early in our journey. We don't think we've even reached the tipping point in our growth. Credit goes to the founders. I've joined relatively recently, but I'm totally on board with their approach to how they scaled the company. They scaled very healthily, very organically, and it was not 'growth at all cost' type of ambition. Right now we are fundraising for a Series A There's a lot of investments in marketing, and awareness that we need to do now. Having said that where we're at a very healthy place, and we're not dependent on fundraising. We're a profitable business. We can continue to grow - it's just a matter of how quickly we want to scale now.
We've invested a lot in organic growth. The grand majority of our customers come from organic channels versus paid. That makes our cost of customer acquisition super low, compared to the industry. Another reason is our model - the market-based model - which we're big proponents of. It's just a very scalable model. It's a model that doesn't put a lot of pressure on your working capital requirements, and we can scale relatively quickly. We can expand to other markets with zero boots on the ground. It's a combination of all those factors that led to us being able to achieve this milestone early on in our entrepreneurial journey."
Taking an audience question Marilyn asks, "can you give us a breakdown of your customer demographics?"
We have two sets of customers. We have the actual customers who pay us money and, then we have the recipient. The ratio of male to female is around 60:40. In Saudi Arabia, a lot of women gift other women, relatives, friends. A few months ago Saudi overtook the UAE as our largest market. We continue seeing it as being by far one of the largest markets with a lot of the growth will coming from there."
Marilyn asked Rami to share more about how Joi Gifts enters new markets without 'boots on the ground'.
"Qatar was the first city, we launched after I joined. It was nice for me to go through that process as well. I was amazed at our ability to launch in a key market quickly and with relative ease. A few years ago it would have been a difficult conversation with a merchant, especially a merchant with a strong brand. Now, the proof is in the pudding. We've onboarded amazing merchants so when you enter a new market, it's an easier conversation to tell them the value of this collaboration, and that we can launch with a smaller offering and expand as we go. There's no critical mass. There's no dispatch center that we need to invest in. We need the key categories to be there: flowers, balloons, a few awesome brands of cakes and chocolates, and we can set up shop. That by itself gives a comprehensive selection for someone who wants to buy online. Over time, we spend more and more in expanding our catalog and breadth of the offering there."
Asking a question from the audience about cultural relevance, Marilyn asks Rami to explain how Joi Gifts adapts to local cultures of gifting in different markets.
"There are subtleties in the region, and you have to be cognizant of these. For example, in the UAE, we have a lot of expats. We learn new things all the time. In some cultures, it is bad luck to gift flowers in even numbers. So one action point was to add bouquets that were not in the ‘dozens’. So we’re constantly picking up on these nuances to reflect them in our offering. The other thing is that we have amazing category managers in the market. They understand the customer base, what they look for and they source accordingly.
Another thing we noticed and quite surprising is that the average basket in Saudi is 20% higher than in the UAE. In gifting, it's very important that the perceived value of the gift or the actual value of the gift, right and In Saudi, that's the case. In other cultures, the gesture is more sufficient than the perceived value.
Working with distributed teams
Taking another question from the audience, Marilyn asks: "Could you please share some views on availability or lack of relevant talent in the region?"
"I refuse to say we don't have talents in the region. I think we have amazing talent in this region. In this, remote world that we're living in it's about how we distribute the talent. What do you have at HQ? What do you have at the country level and what do you have at the market level,? It's a city-by-city game for us and we're hyper-local so it's about who needs to be where. We learned that we don't need a massive pool of talent that needs to be [in Dubai]. We have an amazing tech team in Istanbul and our CTO and his team are just awesome! We have a great cadence with them and it doesn't matter that they're not in Dubai. I've never met them in my life and yet we have an amazing working relationship. We're delivering on our product roadmap, we're adding awesome features by the week. Of course, I'd love to spend more time with the team in Saudi, especially the operations and leadership team there, but due to the pandemic, I didn't get the chance to travel as much. I believe in the people of the region and then the amazing talent that we have here. I don't think the talent is a bottleneck."
Marilyn asks Rami about how he organizes his distributed team and how they collaborate.
"As we started doing new things and we had new workflows that we integrated into our day-to-day, we felt like the collaboration is great and the communication is great and the sense of belongingness is there. We have very open conversations, we try to schedule one-on-ones. We have this culture of sharing feedback openly. Sometimes we do acknowledge that more needs to be done to make sure that the team is cohesive and really bonding very strongly. Now we have our weekly company-wide cadence on Sundays. We have a tech stand-up, which used to be daily but we've reduced that to three times a week, in the mornings. We've done a few fun things like virtual pizza lunch breaks. Those are some of the things, but, I think we're going to get inspired from your ritual bank. Marilyn, we need to do more.
"What’s your advice to a start up in terms of assessing what the appropriate technology solutions and investment are for their business?" asks Mairlyn.
"I’m not an entrepreneur who started a company from scratch. It is hard to insert myself in those early days but from what I can say is that if your product or service requires technology, keep those resources in-house. They will join you on this journey and keep it all internal. In terms of tools, a startup will not have everything they need from day 1. It's about priorities. Does marketing automation mean more? Does your customer care platform come first? Then prioritize that. You can’t run out of tools that manage and scale a business but you need to prioritize."
"I agree," said Marilyn. “As all good MBA students know, the answer is always - it depends. Depending on the business there are 'must-haves' or 'nice to haves', but there is a requirement for frugality in the early days and it is important to make the right decisions.”
Rami added, "Absolutely. Invest in a collaboration or project management tool. We use Click up which is similar to Asana and it has become our DNA. That project management capability, if not enforced wont work but it is so important especially for distributed teams."
One last question
And for our famous last asked, Marilyn question Rami, to complete the following sentence: "The future of work is..."
"The future of work is exciting! It has been a tough year, professionally or personally. Everyone went through trials, tribulations and hardships. There was a lot of uncertainty for businesses and for professionals. They could not have imagined how their companies could operate in such a vulnerable environment but what is reassuring is the innovation we have seen. The ability for dinosaur industries to embrace new ways of working, collaboration. I come from investment banking and up until 2017, we used to have millions of dollars at stake on a deal and we’re on a dial-up number and couldn’t hear people! But everyone has had to adapt and I think this is going to make work more exciting.
The notion of shaking hands physically or closing a deal in person to achieve business milestones is no longer there. Investors are writing checks on zoom and its become accepted. People like us get to launch new markets remotely and to me, that is really exciting. It opens up the possibilities of what we can achieve in our work."