Published in Jul-Aug 2019
Ehsan Saya, MD, Daraz Pakistan, speaks on the impact of the Alibaba acquisition.
ANUSHA ZAHID: Ali Baba acquired Daraz in May 2018; why do you think they were interested in extending their geographic footprint to Pakistan?
EHSAN SAYA: Pakistan has largely remained a very under-penetrated market in terms of e-commerce and has therefore not been the focus of large, global e-commerce companies. Despite this, it is a massive market of over 200 million people and now, with growing smartphone penetration and relatively cheap mobile internet rates, Pakistan is becoming a promising country for businesses such as Alibaba.
AZ: How has Daraz benefitted from this acquisition?
ES: In several ways. In addition to the financial benefits, our knowledge base has increased due to their expertise. This is especially important from our perspective because we are building a huge ecosystem where we empower our customers and sellers and we are spending millions of dollars in logistics in order to increase our distribution network across Pakistan. We have also benefited from Alibaba’s technological expertise and as a result we have become a ‘brand new’ Daraz as all our processes (including our advertising, customer service, purchasing, retail and transportation) have improved significantly.
AZ: How have your customers benefitted from the acquisition?
ES: A year ago, approximately 400,000 products were available on our app; today, that number has risen to over four million. We have introduced several features and these include a new, personalised Daraz app, ‘Daraz Wallet’ which enables consumers to make payments quickly and receive instant refunds; a ‘Global Collection’ for customers overseas and a Q&A feature that allows customers and sellers to interact directly. Furthermore, to ensure customer satisfaction, we stringently look at reviews and ratings so we can address complaints and identify sellers who may be abusing our policies (for example selling counterfeit products). Although these policies were in place earlier, they are all the more important now as the number of sellers on our platform is increasing rapidly; we add anywhere between 2,000 and 2,500 new sellers every month now.
AZ: What is the percentage share of FMCG products in Daraz’s total sales and how have they been affected by the economic downturn?
ES: FMCG products constitute about 15% of our sales. In terms of the overall offline market, I think FMCG revenues have gone down and some of them are struggling, although there are certain categories (such as diapers) which have witnessed an increase of approximately 20%. As far as Daraz is concerned, we have not experienced a decrease in the sale of FMCG products as much as offline markets have despite the fact that their prices have seen upward revisions nearly three to four times this year.
AZ: Several FMCG companies have ‘official stores’ on Daraz; what is the reason for this?
ES: As many of our orders for FMCG products originate from second-tier cities, these stores make it easier to shop for FMCGs; we guarantee authenticity as we acquire products directly from distributors. This reliability factor has led to a significant growth of FMCGs at Daraz. We offer at least 300 brands and 100,000 products across all FMCG categories and thanks to our strong distribution network we have customers across Pakistan, even in the smaller cities and towns.
AZ: Since August 2018, Daraz has established ‘brick and mortar’ stores in 46 locations across 19 cities. What was the rationale behind that? ES: The mindset in Pakistan is that ‘If I can’t see it, I can’t believe it’. The physical presence of a store makes people believe that Daraz is ‘real’ and this results in them starting to trust Daraz as it increases in visibility. The stores also serve as venues for customers to return their merchandise, find out about promotions, or pick up items they have ordered online. We have opened these stores in central locations, to encourage people to use them as communal spaces, have a cup of tea, interact with each other, use our free WiFi, or watch a cricket match. As far as second-tier cities are concerned, our shops provide customers with products that are not available easily such as FMCGs.
AZ: How has the response been to these shops?
ES: Phenomenal. They have made it easy for our sellers to drop their packages when they receive an order and we have earned a lot of credibility in our customers’ eyes as we are better able to solve their problems and make faster deliveries. We primarily sell FMCG products at these stores and this has allowed Daraz to cater to their needs.
AZ: What percentage of your customer base relies on cash on delivery (COD)? ES: About 80% of our transactions are COD, but the number of digital payments is increasing across all cities. Easypaisa is extensively used in second-tier cities. However, what is important is to give customers as many options as possible from a payment perspective which is why we have banking partners, as well as digital wallets such as Easypaisa and Jazz Cash. The response to Daraz Wallet has also been promising.
AZ: What are Daraz’s plans for the future?
ES: By 2022, we want to increase our customer base to 25 million and acquire 200,000 active sellers. We want to increase digital payments and our distribution network further. Logistics remain a challenge in Pakistan because the ecosystem is not digitised and integrated and our aim is also to fully digitise the logistics ecosystem with real-time visibility for customers regardless of location via Daraz Express (our delivery system) which currently has 1,000 riders in 30 cities.
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