Traditional grocery stores are a regular fixture of every neighborhood in Morocco. When compared to large supermarket chains and hypermarkets, these convenience stores, known locally as baqala or dokan, offer a better customer experience, standing in close proximity to the residents and offering them more flexibility when it comes to payments. This has resulted in local fast moving consumer goods (FMCG) brand owners giving higher discounts to grocers, in a bid to entice more shoppers.
"People spend 40 per cent of their income on groceries, basically making 90 per cent of their purchases inside grocers, not big stores such as Walmart, Carrefour, et cetera. So, 90 per cent of sales in the FMCG sector are coming from groceries. It is a vast market valued at $30 billion in Morocco and $600 billion all over Africa," says Ismail Bargach, founder of WafR.
Glimpsing the opportunity, Bargach along with Reda Sellak, co-founded Wafr, a social commerce startup which aims to digitise the promotions and cashback rewards in grocery stores, enabling both FMCG owners and grocers to boost customer loyalty. This, the founders claim, increases revenues as well as reducing the fraud risk associated with such marketing schemes.
"Inside these stores, it is hard for a FMCG brand to make promotions. People go inside the grocer, find ten different brands for one item such as milk or whatever. So if you win the game of growing your market share inside those stores, it becomes really easy for you to grow your sales and therefore profits," Bargach adds.
Through the WafR app, customers can locate up to 25 stores in their vicinity where they can find discounted products.
From the customer side, WafR’s value proposition goes in line with the growing tendency for consumers to draw down expenses in the midst of an inflation surge. While WafR focuses solely on the FMCG market, other startups have also recently entered the fray to offer digital cashback across other retail segments. This includes Kenz'Up, Jumia and Lucky, an Egypt-based fintech super app that closed a $25 million Series A round back in March.
WafR currently partners with over 20,000 grocery stores and claims its customer base has grown 50 per cent month over month. For the network effect to kick in, as Bargach elucidates, the startup has to onboard more merchants so it could be profitable for FMCG brands to provide WafR with discounts that they eventually dish out to the merchants and customers.
In a bid to circumvent this challenge and lure more merchants, the startup has come up with a new strategy whereby merchants can sell credit top-ups to their customers and increase their profit margins.
"This way, we encourage our merchants to use our wallets instead of selling top-ups the standard way that phone dealers use, providing merchant clients with a tangible value besides the one that is coming from FMCG companies," he explains.
So far this year, the startup raised a total of $1.1 million across three successive rounds from African and local investors, the latest of which was closed back in June. For the company to stay afloat, it is looking to secure another round in the coming period, but "bigger valuations are now harder to realise than a year ago", as Bargach puts it.
"[The ecosystem] in Morocco was less impacted by the global downturn compared to Egypt or Nigeria for example, where it was possible for VCs to take bets on companies with fundamentals that can be questioned,” he adds. “We had been very lucky to close our latest round right before the start of the crisis, but what we are doing right now is that we are trying to prove that with this money we have, we are building a solid foundation for the company. It's not just a company that is growing out of no business model with negative gross margins, and instead march towards profitability.”
In 2021, Moroccan startups raised $21 million across 19 deals. So far this year, Moroccan startups raised in excess of $11.2 million across 15 deals.