MAMUN M. ADIL: E-commerce has grown substantially of late. How do you foresee its growth?
Muhammad Ammar Hassan: Although Covid-19 undeniably accelerated the growth of e-commerce, this change has been in the offing for a while, as we have been recording a consistent 20 to 25% YoY growth. In Pakistan, e-commerce accounts for less than two percent of the overall retail market, which is much lower compared to India (6.5%) and China (27.2%) – on average e-commerce accounts for 20% in South Asia. However, a factor worth keeping in mind is that Pakistan’s middle class, which, according to McKinsey & Company, is expected to double by 2030 and reach 100 million people. This means that Pakistan is a rapidly growing market as far as consumers with online purchasing power are concerned.
MMA: In 2019, Ehsan Saya, MD, Daraz, told Aurora that he wanted Daraz to increase its customer base to 25 million and acquire 200,000 sellers by 2022. Have these targets been achieved?
MAH: Yes; as of December 2022, our user base stands at 27 million and our total verified sellers at 262,569.
MMA: Alibaba acquired Daraz in May 2018; how has this acquisition panned out and how has it improved Daraz?
MAH: It has gone very well and benefited us greatly. The first step was migrating our tech, and gaining access to one of the most sophisticated technology ecosystems in the world. We frequently exchange software and tools, and this puts us miles ahead of our local competitors. Furthermore, the mentorship and knowledge exchange through Alibaba has been immensely beneficial and helped us gain insights and be trained by the best – which is why Daraz alumni are welcomed abroad and are working with tech giants such as Google and Meta. The unprecedented tech and information we have introduced in Pakistan have also benefited brands in the ecosystem.
MMA: In 2020, Daraz introduced an affiliate programme for influencers through D League. Please elaborate.
MAH: D League was a performance-based influencer campaign that emerged during our 11.11 sale, marking our foray into affiliate marketing. The D League on-boarded 11 prominent influencers who generated gross merchandise value (GMW) to the tune of $0.5 million. Our selection process is rigorous, because we focus on finding influencers (not content creators), who have the ability to influence consumer purchasing decisions. After the success of D League, we implemented a full-time influencer programme that allows influencers to earn a commission of up to 10% on every order placed through their links. This system provides transparency concerning ROI for Daraz and enables influencers to earn based on their contribution rather than a flat fee. Since August last year, we have accumulated a pool of over 500 influencers who have impacted over 75,000 buyers, half of whom were repeat buyers.
MMA: Daraz Live was launched in September 2021; how does it work?
MAH: Live commerce in its true essence is the experience of sellers being able to go live via video to showcase their products and interact with consumers in real-time and address queries. Daraz Live is an in-app live streaming experience whereby users can browse through products, benefit from discounts through exclusive livestream vouchers, and order through the livestream. Our focus has been on building a 360-degree in-app live commerce experience that is in line with global best-in-class practices. We see live commerce as the future of e-commerce, where we ‘humanise’ the online shopping experience by providing that personal touch that builds authenticity and trust. For a market like Pakistan where customers’ trust is low when it comes to in e-commerce, live commerce addresses this problem and allows users to view products and interact with sellers in real-time. The simplicity of execution has been a big win for sellers, especially those belonging to semi-urban and rural areas, as it is highly interactive. In fact, 40% of our sellers do not live in KLI, and Daraz Live provides them with a great solution for customer engagement.
MMA: How has the response been to Daraz Live?
MAH: The conversions grew by nearly 700% during the 11.11 sale and a further 250% during the 12.12 sale. In the last year, we have executed over 9,000 livestream events partnering with over 400 brands and over 100 influencers. Daraz Live has generated over two billion consumer views, with 3.3 billion minutes of content watched. We generated over 380,000 orders and a GMV of over eight million dollars.
MMA: Has your user profile changed?
MAH: We are still primarily a metro-heavy brand as awareness of e-commerce is higher in urban cities, but we are also seeing increasing penetration in semi-urban and rural areas. A reason for this is that some big brands are still not available on-ground in the smaller cities, and Daraz offers instant access to products of all categories from all over Pakistan. Another USP is our logistics network, which covers every location.
MMA: According to your corporate profile, Daraz is the fourth largest platform in Pakistan (with over 27 million monthly active users), after Google, Facebook and TikTok. On what basis was this claim made?
MAH: Every digital platform measures its performance through its MAU (monthly active users) as a benchmark, which is a number easily available publicly through various tools and platforms. This number was derived from the same metric, which measures the monthly active user count.
MMA: How has the Pakistani consumer changed?
MAH: Pakistani customers are becoming increasingly tech-savvy and aware of global trends. As far as Daraz is concerned in this context, users come to us to make all kinds of purchases. For instance, our grocery category took off massively during Covid-19 and its popularity has remained despite the lockdowns ending. Then there are some emerging categories – for example, the gaming community purchases accessories for PUBG; then there are products like pet supplies that are not that easy to find offline. We have also discovered some interesting trends by studying our orders and searches. For example, Gen Z often see trending products on TikTok and buy them from Daraz. A few weeks ago, our most searched item was the nano tape! Similarly, K-pop’s growing popularity in Pakistan can be assessed by the fact that Bangtan Boys (BTS) t-shirts and ramen noodles are among our highest-selling products in their respective categories. Trends also change a lot due to macroeconomic factors. Due to the recent inflation, customers are more on the lookout for pocket-friendly alternatives and maximising their savings. We are seeing a surge in digital payments as they allow them to benefit from discounts.
MMA: In 2022, Daraz started smart distribution centres. Tell us more about them.
MAH: They are located in Karachi and Lahore and were established in collaboration with Cainiao, the logistics arm of Alibaba. Essentially, they are automated facilities that sort parcels that need to be delivered according to their locations. Previously, the entire process was done manually and the smart distribution centres have increased Daraz’s sorting capacity by over 4.2 times and decreased manual errors by over 90%. Consequently, we can now process approximately one million orders per day.
MMA: What is Daraz’s future outlook?
MAH: We are very optimistic. Growth is yet to come, not only in Pakistan, but in the entire region, including the markets we operate in – Bangladesh, Myanmar, Nepal and Sri Lanka. We are here to stay and look forward to playing our role in supporting digitisation, financial inclusion, and creating entrepreneurs. We will continue to invest in product innovation across our platforms and our biggest objective is to keep acquiring users since we have barely scratched the surface as far as e-commerce is concerned. However, user experience is critical for retention, so we will continue improving it simultaneously.
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