The leading eCommerce marketplace of the country AjkerDeal has just raised an impressive round of investment recently. The startup has been growing consistently since it launched in 2011. It has also evolved from a deal platform to a marketplace for the masses.
Fahim Mashroor, Co-founder and CEO of AjkerDeal, spoke to Future Startup’s Ruhul Kader about the evolution of AjkerDeal, current focus, challenges, and the future plan.
Future Startup: When you first started AjkerDeal, it was more like a daily deal site, something like Groupon, but now it has evolved to a marketplace.
Fahim Mashroor: We started AjkerDeal at the end of 2011. At that time, the Groupon model was very popular around the world. We thought of doing something similar in Bangladesh. We primarily designed it as a daily deal site.
But within a year we realized that deals follow a different pattern in Bangladesh and it’s hard to manage enough transaction to succeed in deals model. So, we shifted our focus from deals to the marketplace.
There are a few models for e-commerce sites. One is the inventory-led model, where products are stored through sourcing and delivered to customers directly. Another is called “mixed model” where you don’t keep an inventory, instead source products from others when customers place orders. And there is the ‘mercantile model’, where the merchants make the delivery.
There are different models in different countries. Like China’s daily.com is an inventory-led model or Amazon.com. Flipkart also had an inventory-led model at first, but now they are shifting towards a “mercantile model.”
We realized that the inventory-led model has a few drawbacks, especially, it requires huge investments in logistics and warehousing. So, we decided to opt out for a mercantile model where the products will be distributed largely by the merchants. However, we will take care of special cases where merchants are unable to delivery.
We have observed that in many cases merchants deliver faster than us. If we had chosen the other way around, we would have to collect the products from the merchants. Two things would happen then: we would have to bear the logistics cost for collecting from merchants and then again delivering to the end customer.
FS: Don’t you think there are risks to this model as well? When people buy a product from AjkerDeal, they are supposed to consider it a product/service of AjkerDeal and likewise credit or discredit the platform for the good or bad quality of the product, while in reality, it is merchants who should be blamed?
Fahim: We inform the customer beforehand that merchants will be delivering the products and we also tell them that we will be liable for any sort of issues, such as- products replacement or performance.
Payment is a significant problem here. Payments are mostly made through Cash-on-delivery method. It gives customer extra power where a customer can check the product themselves before paying for it. From that perspective, customers don’t have much risk.
Even if a customer makes an advance payment, they are making it to us. So, if an issue arises with the product, we can always refund the money. We are taking the responsibility on behalf of the merchants.
FS: Briefly tell us about investment.
Fahim: AjkerDeal started as a project of Bdjobs.com. It was separated in 2014 when Bdjobs was receiving foreign investment. The initial investment was made internally by the original shareholders of Bdjobs. We have already made three rounds of investments.
[Recently, AjkerDeal raised a BDT 10 crore in new funding led by Fenox and participated by Innotech Corporation, a listed company in Japan, as the main investor.]
FS: How is the growth so far?
Fahim: Our growth, in terms of traffic, has been good. Among other local websites, only Daraz.com has a larger traffic than us, because they do a lot of promotion. We make around 1000 deliveries on a regular basis.
FS: How does your business model work?
Fahim: Our model predominantly depends on commission. We make sales and charge bills to the merchants on a monthly basis. It varies from product to product and ranges from 5% to 20%.
FS: How do you see eCommerce as a business and what are the key challenges?
Fahim: eCommerce is an investment-hungry business. We had to make a lot of investments ourselves and we are still doing so. There is a significant difference between running small and building a scalable ecommerce business.
Take a Facebook merchant or a small e-shop, they don’t have to bear a number of costs like logistics, software development and others. But the problem with this type of business is that they are not scalable. Yes, they are profitable given that their products are generally outsourced and they are lean and small.
But, since AjkerDeal is a marketplace, we can’t raise our price more than 10%—15%, because we have to deliver our promise of affordability. Doing otherwise will result in brand failure for us. So, we get a very low margin.
We have to choose those merchants who are willing to sell at a lower price. Consequently, in order to make our model commercially viable, we need more time and investments. Instead of betting on higher margin, we bet on the scale.
The most important challenge now is the size of the market and attaining a certain scale. Unlike a small boutique shop of a Facebook merchant, we have a lot of costs to cover. So, for us having the scale and enough daily transaction is the key.
At AjkerDeal, our plan is to scale throughout the country to all types of customers. Currently, we have more or less 100,000 products in our inventory.
FS: How do you plan to tackle these challenges?
Fahim: Firstly, creating awareness through marketing and branding is important. We are doing it. Then we need to ensure quality service and affordability.
Customers are price-sensitive is Bangladesh just like in any other market. So, we need to offer lower prices online than offline. From that point of view, an ecosystem needs to be built and we are contributing to building it.
FS: What is your key growth metric?
Fahim: At the end of the day, merchants are our actual financial clients because they are paying the fees for using our services.
FS: What is your process of onboarding merchants? Do you have a screening process or a list of criteria to check?
Fahim: The customers depend on us as a platform and merchants for sales. So, we can’t take anyone in. When a merchant shows interest or we go on a merchant-hunt, we look for capabilities like delivery efficiency, inventory, and overall professionalism.
If a merchant performs below the standard, we let them go. Because his/her low performance eventually impacts our brand image. We regularly measure performance and rank our merchants.
FS: What is the future plan?
Fahim: We have always wanted to be the marketplace for the masses. That is why we use Bangla as the language on our website. We focus on localization- local language and local context. We want to be an everything-destination for online shopping in Bangladesh.
We are not a mall; we are a market. We want to be a place where people can buy both high and low-end products. We want to be the ‘New Market’ of the internet in Bangladesh.
Note: Interview by Ruhul Kader, Transcription by Sheikh Rahatil Ashekan | Interview date: March 22, 2016