From Titan To Colossus

One of the most fascinating details in the Arabian Nights story about Ali Baba and the Forty Thieves is the cave of wonders, a treasure trove of ill-gotten gains collected by the thieves, replete with untold riches and magical artefacts.

The cave was the inspiration behind Jack Ma’s choice of name for his e-commerce colossus Alibaba.com. The idea being that the portal will provide customers with as wide a selection of treasured products as the legendary cave of wonders. One may think that living up to such a legendary mandate may be a tall order but resilience and expeditiousness are traits Ma and Alibaba are known for. As one of China’s leading e-commerce companies and at over $480 billion, one of Asia’s highest valued, Alibaba has worked hard to ensure that it has both the offering and the technology distribution architecture to deliver a cave of wonders to its customers across a growing number of countries around the world.

In the last five years, Alibaba has spent billions in investments and strategic acquisitions. Investments which grew from one billion dollars in 2013 to nearly $13 billion in 2017 and finally, to $11 billion last year – show no signs of slowing down.

Alibaba has also made waves in Pakistan by acquiring Daraz.pk from European tech-incubator Rocket Internet. The value of the transaction was not disclosed but rumours have put the prospective value at anywhere between $350 and 500 million, which is in line with similar acquisitions made by Alibaba in recent years.

In the last five years, Alibaba has spent billions in investments and strategic acquisitions. Investments which grew from one billion dollars in 2013 to nearly $13 billion in 2017 and finally, to $11 billion last year – show no signs of slowing down.

As part of the acquisition, Alibaba will gain a foothold not only in Pakistan but in markets such as Bangladesh, Nepal and Sri Lanka, where Daraz commands a sizeable share of an albeit nascent but growing e-commerce scene. The acquisition is all the more exciting when seen in the context of other Alibaba picks in the region, including Indian e-payment processing app Paytm as well as the acquisition of a 45% stake in Telenor Microfinance Bank through the Alibaba subsidiary Ant Financial. This move will facilitate digital platform services and mobile payments for Alibaba-owned platforms across the region.

As part of the new acquisition, Daraz will continue to offer its diverse range of products and services to consumers across South Asia, within its existing brand identity. However, with Alibaba’s deep pockets behind it, Daraz is expected to become more agile, offer a wider range of services and eventually change the size and scale of the e-commerce landscape in Pakistan and the greater South Asian region.

According to industry analysts, Daraz gels well with the profile of companies on Alibaba’s acquisition list. Daraz in Pakistan has a significant e-commerce market share and has registered bumper sales ranging from one to three billion rupees (for its legendary Black Friday promotions).

Euromonitor has forecasted Daraz’s growth at 8.2% year-on-year until 2021. Considering the fact that Pakistan is an underserved market from an e-retailing standpoint, the growth is likely to continue beyond 2021; especially given Pakistan’s young and tech-savvy population.

Although all this looks rosy, Alibaba will face considerable challenges as it pushes into Pakistan and South Asia. Among them are the labyrinthine regulatory frameworks and a creaky infrastructure which hampers growth in connectivity and financial transaction convenience; factors which explain why the volume of e-commerce transactions in the region (India excepted) has not crossed the ‘one-billion-dollar’ mark. However, with the arrival of big names in e-commerce, the scale of the sector will grow and we may see yet another boom similar to the telecommunications boom in the mid-2000s.

Euromonitor has forecasted Daraz’s growth at 8.2% year-on-year until 2021. Considering the fact that Pakistan is an underserved market from an e-retailing standpoint, the growth is likely to continue beyond 2021; especially given Pakistan’s young and tech-savvy population.

As further evidence of the promise in the sector, analysts point to the fact that the Daraz.pk investment is only a small portion of the acquisitions Alibaba is making in Asia, including India, Indonesia, Malaysia and now, Pakistan. The strategy it seems is for Alibaba to make a quantum leap from being an e-commerce Titan to an omni-channel Colossus.

Alibaba undoubtedly has a vision similar to other e-commerce heavyweights such as Amazon to be part of the customer’s journey through a number of channels both physical and digital. As part of this vision, it hopes to add value to the customer experience through better experience, unparalleled offerings, personalised service, data-driven technology and unmatched accessibility. Alibaba has been acquiring a number of stakes ranging from brick and mortar grocery stores, bike-sharing apps, supermarkets and payment processors. The idea is to take the existing offerings of these companies and distil them to create lasting relationships through market dominance.

Tariq Ziad Khan is a US-based marketer and a former member of Aurora’s editorial team.
tzk999@yahoo.com