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Building An Omnichannel E-commerce Company In Bangladesh With Waiz Rahim, Founder and CEO, Deligram

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Waiz Rahim is the Founder and CEO of Deligarm, an omnichannel ecommerce company that aims to operate at the intersection of online and offline and integrate the power of digital commerce with offline retail by enabling existing mom and pop corner shops in neighborhoods to act as their agent points for both distribution and collection.

A Rahimafrooz affiliated company, Deligram aims to do for digital commerce what bKash did for financial services.

Founded in 2017, Deligram started as a pilot in Comilla. It partnered with 40 retail stores with an ambition to figure out a new model for ecommerce distribution by leveraging the presence of local corner shops to overcome infrastructural challenges. Deligram calls these partners dgAgents. Since Deligram is a Rahimafrooz affiliated company, it could easily use Rahimafrooz’s existing retail channel to build a distribution model. After months of the experiment, it moved to Dhaka in January this year. It has since grown to become one of the important players in Dhaka’s ecommerce space.

Today, Deligram has two hubs, one in Dhaka and another in Comilla and is in the process of opening two more in Gazipur and Narayanganj. It has 125 agents and aims to have 300 by the end of this year. It has raised US$2.5 million in two rounds of funding and aims to become the “the largest retail platform in Bangladesh regardless of online or offline”

In this excellent interview, Deligram Founder and CEO Waiz Rahim walks us through his path to entrepreneurship, how Deligram came into being, the early days of Deligram and how he hired first few people and validated the omnichannel model, how Deligram has evolved and grown from a mere idea into a company with over 125 agents, sheds light on business model of Deligram, internal culture, its business today and ambition going forward, talks about raising money, growing the business and much more.

This was a much longer interview. So we had to break it down into two parts. This is part one. Please return later this month for the next installment of the interview.

Future Startup

Could you please tell us about your background and what you are working on now?

Waiz Rahim

My name is Waiz Rahim. I was born and brought up here in Dhaka. Our family business is Rahimafrooz. Since my childhood, I have been lucky to get an exposure into the world of business and entrepreneurship through dinner table discussion, visiting factories and Agora outlets and so on. So when it came to deciding what I wanted to study in my undergrad at university I was pretty sure that I wanted to study Industrial Systems Engineering. Primarily because I felt that business was a soft skill that you could learn and pick up through reading and help from others but there are certain skills that are harder to pick up by yourself. I thought if I learn some of those skills it would be more useful than learning others.

Industrial Systems Engineering provides an engineering foundation that covers both the services and manufacturing industry. It gives you a strong analytical engineering background. I got into the University of Southern California which was, for Industrial Systems Engineering, one of the top ten universities in the world. Other than being a highly valued institution, USC was very international and well balanced in nature.

The new world at USC fascinated me. Although I was studying engineering, I was equally interested in entrepreneurship school, in the film school, in the design school, and in the philosophy school. I spent most of my time just getting by my engineering courses but sort of doing a minor or a second major on all these fascinating disciplines. I was picking up all the best professors across all the departments whether it be art, philosophy, religion, and sort of making my own khichuri of learning experiences based on the recommendations and writings of the professors.

At the same time, being at Los Angeles and so close to Silicon Valley, it was easy for me to visit Silicon Valley and visit companies, attend events, and meet people. I was involved with the entrepreneurship club on campus that used to bring venture capitalists and different companies to the campus.

The university was an amazing experience for me because I could explore all these areas and have an interdisciplinary learning experience.

In my second year in University, one of my friends came up with this fabric which was a silver-yarn fusion. When he asked my help to sort of market that product, we came to learn that the minimum size of the factory production line would require $100,000. Obviously, we did not have that kind of capital to make the t-shirt and then sell it. So we went to Kickstarter. I asked a few friends of mine for help. W used the samples that we had from the factory and made two short videos using my camera and launched the product on Kickstarter.

To our surprise, the video sort of went viral within Kickstarter and we raised $250,000 for pre-orders.

That was just the beginning. Our real work began after that. We had to source the products. Do the quality control and ship those to 3800 customers across the world. And then every six months we would do the exact same thing over and over again. We would decide on the product and categories we want to focus on. We would create a pre-order sign-up page and then launch a pre-order campaign on Kickstarter. So every six months we would launch a new product on Kickstarter. In total, we raised about $1.5M through Kickstarter.

That's how I came to experience the power of digital commerce for the first time. The fact that two people living in a dorm room in LA could start an entire company without any marketing, logistics, account or anything for that matter was an experience beyond my comprehension until that point in time.

Everything in the US is modular. You could use Shopify as a storefront and on the backend, you could use other services for shipping and warehousing. We used a warehousing service based in Northern Carolina where I had never been to but all our products were shipped there from manufacturers. From there after packaging and everything we would use another third party service such as FedEx or UPS for last mile delivery.

Then in my final year, I got a chance to work at Amazon for one year for my senior year project where I got to study a project in one of their distribution centers in California. There I could see how Amazon was doing things at scale and how they connect everything to offer an excellent service, especially on the back end.

With all these experiences when I finally graduated I was confused about what I wanted to do: should I stay in the US and continue my learning or come back to Bangladesh and start something. At the time, I realized that Bangladesh is going through a transformation where not just the GDP is growing, a lot of powerful factors have come together to make this transformation possible. It is the fact that GDP is growing, that urbanization is increasing and Bangladesh is both blessed and cursed with one of the highest population densities in the world and out of 160 million people, we have 90 million people who are below the age of 30 - all these factors are playing a role in this transformation. Bangladesh has the highest growth per young person per square kilometer in the world. That density of growth combined with the fact that smartphone penetration is increasing, data usage is increasing, and the fact that people want a more convenient and easy lifestyle - when I looked into all these things I was excited about coming back to Bangladesh.

Given my experience with both frontend and backend operation of ecommerce, I wanted to learn more about this business in Bangladesh. I saw that a lot of people have been working on ecommerce in Dhaka but I also realized that people have a superfluous understanding of ecommerce. They don’t realize that the website they built is just 2% of the entire technology they would have to build up for running an ecommerce operation in Bangladesh.

There are three problems in Bangladesh when it comes to ecommerce. One, consumer behavior is different. The average person on the street with a smartphone necessarily does not know what a website is or is not used to browsing one. For many people using browser and looking up a website and then interacting with that website is not a familiar concept.

Today, it is not only mobile first, but it is also an app first approach. The challenge with app first approach is that if you build an app that a user does not use frequently, people usually don't feel like allocating space for it. The stickiness of an infrequent app is not high enough to make it viable.

Ecommerce is more of a consumer behavior barrier than an actual technological barrier in Bangladesh. There are a lot of ecommerce platforms that are running on the most sophisticated technology, a lot of ecommerce companies that run on third-party outsourced technology, but that's not what differentiates ecommerce companies. What differentiates is the fact that people don't trust ecommerce as yet. Common people are still skeptical of the fact that if I order something online seeing a photo of a product and then if I don't like the product and want to return it, I would still get my money back. People do not fully believe that as yet. Without an offline presence, it is hard to win the trust of the customers.

Second, even though the number of people have a smartphone and using data has grown significantly, the logistics ecosystem in Bangladesh is so weak that there is not a single courier or ecommerce platform that could do more than a thousand home deliveries outside Dhaka per day while maintaining the quality of service. In fact, we have seen that for many companies quality of service suffers when the number of orders crosses one thousand. Because home delivery is not a scalable thing for Bangladesh. Addresses are difficult to find. It's not only the fact that home delivery is expensive, but also that the experience of getting the delivery is not smooth for the customers either. Due to these experiences, many people don't want to shop online every week. Maybe they shop when they have to, once a month or once every few months, but people coming back online on a regular basis is not something that we have.

Third, running a pure marketplace model has a lot of challenges of its own. Bangladesh lacks in terms of brands that have both mass market appeal and affordability. There is Aarong. Other than that the list is pretty slim. Most of the brands that we have mostly serve the niche market and the middle and upper-income segment of the market. There are not many brands that cater to mass people. If there are some brands, they are not ready to go digital.

Digital commerce does not start from having a product and then building a tool or website and start selling online. It starts with product design. The product has to be designed according to the priority of the medium. Communication with customers is different. You have logistics and other management needs as well. These are very different things from what offline retailers do. So one has to have that preparedness to do these things. And then comes how organized they are. Very few retailers are organized in terms of each unique product serialized in terms of SKU and variant of each product. Most retailers don’t have a system to track and manage how much stocks they have and what is the stock location. Most companies don't have the IT infrastructure to locate products or IT infrastructure to share API integration to work with ecommerce platforms. As a result, what has happened is that no one could offer end to end inventory management.

The thing is that ecommerce is not doing one thing really well, it is about doing five things really well at the same time starting from product and merchandising to pricing to your digital marketing and communication to your logistics and payment and then last mile delivery.

Our focus is - forget the fact that we have a website called deligram.com - building the back-end for ecommerce starting with the central warehouse that we have in nakhalpara and then build out the backend infrastructure. We have a warehouse and distribution point in Comilla as well.

Our expansion strategy is simple, we are only going to expand to cities where we have our own setup which makes it very slow for us but it also means that we want to ensure the best possible service for our customers. We don't serve a customer in Rangpur because we know that we would not be able to ensure the best service for him/her.

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Future Startup

When did you first come up with the idea that ecommerce in Bangladesh has all these problems and I want to build something to solve it? And then what went into building the initial operation of Deligram?

Waiz Rahim

Being part of the Rahimafrooz group you get a lot of insight into the pulse of mass people in Bangladesh. One of the advice one of my uncles gave me was that if you really want to understand Bangladesh, you go and explore rural Bangladesh. We have a foundation called Rural Services Foundation that does solar and renewable energy installation across rural Bangladesh. After coming back to Bangladesh, the first six to seven months, I spent my time working with the foundation visiting areas in rural Bangladesh starting from Sandwip Island to the village in Comilla and so on. I found out that there is an appetite for consumption and unmet demand. That was the lesson I learned on the ground.

Before starting Deligram, I had started an omnichannel ecommerce delivery model in rural Bangladesh through the foundation. We started a pilot in 2015 where we built a basic app which acted as an offline catalog. We signed partnerships with 4 smartphone brands and displayed their products in that app. For distribution, we would use foundation employees. These foundation employees, when they went home to home to provide the services or collect monthly installment, told people about the service that 'apa (sister) if you need a phone, let me know, I could help you get a phone in 5 days". We used that offline mechanism to acquire customers and the salesperson would get a commission off of that. It was very successful in the sense that it worked.

Future Startup

How long did you run that pilot?

Waiz Rahim

We started the pilot in December 2016 and I was part of it until May of 2017. The challenge was on the unit economic side because fulfilling orders to rural Bangladesh was costly. There were not just enough density and frequency of orders to make it viable because of logistics cost to rural Bangladesh is around 150 taka for an order.

In urban markets, people are willing to pay 50 - 30 taka delivery charge but rural Bangladesh is a price sensitive market. Similarly, it almost impossible to scale by completely subsidizing the delivery cost. Mathematically, it did not make sense, although it was a nice story, great business model and all that.

From there we shifted our strategy. Our vision remains the same but we shifted our focus to tier 1 cities.

Future Startup

So what happened after May 2017?

Waiz Rahim

Being a part of the Rahimafrooz group has a lot of advantages but trying to build an interesting company and independent culture is not one of them. I realized that it would not be easy to build a startup within the Rahimafrooz structure, you're going to be bound by different corporate culture, you have to maintain certain standards for office and so on. The first we came to this office we did not have any AC in the office but you could not imagine walking into a Grameenphone or Rahimafrooz office and facing an environment like that.

Second, we were not being able to attract the right kind of technical talents. It is very difficult to recruit in Bangladesh. People are not necessarily attracted to startups. People are not attracted to a large conglomerate either because of their traditional approach. It is very difficult to position yourself having the best of both worlds that we are an affiliate of a large group but we are not exactly part of that huge organization and fall under that environment.

So we realized that we have to break out and sort of build an independent operation and organizational structure.

Our first goal was to build the team. We knew that there was a huge opportunity in ecommerce. We did not know what shape it would be. This was between May-June 2017. That's when we started building the team. I met with Irfan Bhai who is our head of operations now. Back then he was at Unilever. I met with our CTO who was working at a US-based company at that time. I spent 3-4 months getting to know the right set of people and recruiting.

Future Startup

How did you find and meet the right kind of people? What are the things you did and the strategies you applied to find and hire these people?

Waiz Rahim

First, I asked everyone I know to recommend domain experts for a couple of positions. So when I finally started meeting potential candidates, I had a running list of people I wanted to meet. I realized that a lot of people were recommending the same set of people - one or two people in a domain. From that, I knew that I had to meet with them. When I met them the first goal was to figure out what they are passionate about.

Being an early member of a startup is difficult. Once a startup is in operation, raised some funding, it reduces the risk of joining a startup. But joining a startup where the only office you had was a 600 square feet apartment in Mirpur, you have to be a believer that the model would work and there is an opportunity to build something of consequence.

I was lucky in the sense that people I met they could see the opportunity and they wanted to do it. So number one criteria was finding that passion in people for the problem. Not the solution. Not that we are going to do this in a digital way or otherwise, we fall in love with the problem.

The second thing was: are they the domain experts in their field? They don't have to be number one domain expert but do they know enough to get us from zero to one. That learning mindset. Trying things out, learning from the mistakes and challenges and then get to product-market fit.

The third thing was whether there is chemistry and cultural fit because we would spend days and nights under the same roof and if we do not get along well and don't enjoy working together, it would be a challenge.

Future Startup

How many times would you meet with a person before onboarding him or her?

Waiz Rahim

I think at least 6-10 times. Each of those conversations was between 3-5 hours long.

Future Startup

What are the things you talked about?

Waiz Rahim

It was organic discussions. I would talk and share about our plan and model with them and then get their feedback on it. Then we would talk about the details of the business, how we see it, customers, customer behavior and so on.

The purpose of the conversation was to learn about the person as much as possible and then also understand how passionate they are about the challenges we are trying to solve.

Future Startup

So you spent May-June in building the team ...

Waiz Rahim

We spent May-June and all the way to August building the core team.

Future Startup

How much money you had at that time?

Waiz Rahim

At that time, we had less than 25 lakh taka which I put from my own pocket, I mean my family put it, as seed funding. Our initial goal was to build the core team with the money and at the same time, we were fundraising.

So in May-June, while I was building the initial team, I was also talking to investors telling them what we are building, our ambition and all that.

A lot of people showed their interest and a lot of people turned it down because we were a bit way too early. The key thing about investors is whether you really like the investors and also, investors liking your team and the problem that you are trying to solve. We also got lucky again. We found a great set of investors.

Future Startup

You are done with hiring your core team by August, right? How many people did you hire at that time?

Waiz Rahim

We had about 4-5 people at that time.

Future Startup

You had an office in Mirpur...

Waiz Rahim

We had a 600 square feet a two-bedroom office beside a garment factory in Mirpur. That's how we started working. We wanted to build the back-end first. We knew from our past experience that offline approach to ecommerce works, behavior-wise it works. Let's build out the backend infrastructure to do the difficult part which is building a backend ERP for managing real-time inventory. That's one place where existing e-commerce and existing retail companies struggle and none of them have real-time inventory. So that was the first problem we set out to solve in the first six months.

We sort of built the backend and then decided okay because it was something so new and we did not know what customers want, let's launch it in one pilot city where we could pretend like this is not full commercial launch but in reality, we're actually isolating ourselves so that we could learn from the market.

We did not want to launch in Dhaka because customers in Dhaka have high expectations and ecommerce is already here. It's not new behavior. Also, we realized that just because something works in Dhaka does not mean that it would work in a tier 2 city. But something that works in a tier 2 city, it is most likely to work in Dhaka as well. So we did not want to launch in Dhaka, Chittagong or Sylhet. The next largest city was Comilla. It is also logistically close to Dhaka. So we went on and launched our pilot in Comilla. We got a physical outlet there which was sort of a storefront for us. We did not take orders there. It was our services hub. It also gave people the feeling that we are physically there. We on-boarded about 5-10 mudi dokan, we gave them a Deligram tablet and launched our agent model.

We worked hard from July to December, trying to perfect the model - how does the commission work, how does the transaction work, how does the logistics work, how could we scale the model, how could we design the product assortment that people would come to buy from a mudi dokan, etc. A significant percentage of consumers of these shops are men because men go to these shops more often for various purposes. We experimented with a lot of online to offline digital marketing. We would run campaigns on Facebook and Youtube and have them convert offline. That was an interesting learning experience for us.

After running the pilot across Comilla we knew that these works end to end from logistics to packaging to marketing and everything. January 2018 is when we finally started piloting in Dhaka as well. Even then it was like pilot project 2.0. The first objective was to understand whether this would work or not. Would mudi dokan be able to upsell other products?

Mudi dokans in Bangladesh mostly sell FMCG products. We need to figure out whether they could sell electronics, apparel, healthcare and home appliances among other products. We wanted to find out whether mudi dokans would be able to sell those products as well as whether customers would be open to buying these products from mudi dokan that they had never done before. We wanted to check these assumptions.

The objective for launching in Dhaka was that we knew it works on a small scale but would it work in a larger scale and would we be able to manage relationships with 100/500 and thousands of mudi dokans and scale that up?

That's the phase we are at right now where after reaching a good point with the model we launched in Dhaka. It has been a few months now. In Comilla, we struggled a bit because we were figuring things out while working on it. But in Dhaka is has been a much smoother experience because we have had some experience of managing it in Comilla.

How Deligram works - Screen Shot 2019-03-28 at 1.19.55 PM
How Deligram works | Screen Shot 2019-03-28 at 1.19.55 PM

Future Startup

Could you tell us about Deligram in terms of model, you call yourself an omnichannel ecommerce company, you have agents who are basically small retail corner shops, you have these DG Hubs, how all these things connect? How are you different from other ecommerce companies?

Waiz Rahim

In the beginning, I sort of touched on that. Industry-wise, about 97% of all retail spending is happening in the informal sector in mudi dokan, wet market, etc. Only 2.5% is happening in modern trade such as Agora, Shwapno, etc. Ecommerce is still way below one percent. If you compare it with India, ecommerce is still only 3-4% of informal retail and modern trade is about 8-9%. The vast majority of the population still shop in the informal retail sector.

Retail today and in the future, comes down to two things: the experience of retail and the convenience of retail. Everything else people are sort of okay with. When I say the experience what I mean is that when I want to buy fresh fish and beef, I want to go and get the best experience of doing that. If I get the best experience and confidence in shopping from the wet market, I would do that. If I feel that Agora maintains a certain standard for their products, I would go to Agora. If you are in need of convenience and if you need six packs of Maggi noodles, you don't care whether it is from mudi dokan downstairs or Agora or whether you ordered online from Chaldal. People would always choose whichever is most convenient for them. The reality is that going to a modern trade shop is not easy. Going there taking rikshaw and coming back with bags of shopping, just doesn't cut it. So people take resort to their nearest convenience store or they shop online. I shop on Chaldal because it is a convenient option for me.

What we realized is that the model that we need for retail in Bangladesh is focused around solving at least two core problems. Number one is consumer behavior. Taking the existing retail landscape into account, there is no way to compete against mudi dokans. The convenience they offer and the relationship they have with their customers, you can't build that in any other way. And people are just not ready to be shopping online yet.

If you look at the 160 million people, only 11 million are middle income. Our smartphone penetration may be about 25%. Of that maybe only 5-10 million people use smartphones as smartphones. So we are talking about a small subset. Which means being purely ecommerce you would not be able to get to the mass market.

The second thing is the infrastructure challenge. By working in partnership with mudi dokans, we are supercharging to offer the convenience and variety of any shopping mall or convenience store or variety store in a mudi dokan. We are enabling them to serve not 500 hundred products but 15,000 products to their customers. That's number one. Secondly, the customer is able to go to what they are already used to and get a convenient experience. They don't have to download an app or go to a website or anything like that.

The model around is that on the back-end we are an ecommerce platform, we are doing logistics, inventory management and everything else, and on the frontend, we have lots of channels to reach out to our customers. We have our website and app - where you could go and shop online, but we also have these agents who act as our sellers. We are giving them a smart tab and they basically upsell products to their community and people know that I could come to Kamal bhai's store and get a blender or a washing machine or smartphone or power bank or anything I want.

Future Startup

Do you also use these shops for deliveries?

Waiz Rahim

Absolutely. We are addressing two issues with our collaboration with these mudi dokans and agents. One is trust. Customers trust these shops more than a website or an app because they already know them. So we are allowing customers to buy from the shops they already know. Secondly, it is a convenient way for our customers to collect their delivery at times that are convenient for them from these shops.

The network of mudi dokans acts as logistics pick-up locations for us. We deliver products to these shops from where customers can collect their parcel at their convenience. Customers can choose where they want to get their delivery and once the delivery is done, we notify them to collect their delivery. Customers can collect their deliveries at the end of the day or at a convenient time.

Right now, although most people don't realize it, getting an ecommerce delivery is a frustrating experience because people are either at school or office and try to schedule the delivery at the time when they would be at home. It happens so that when your delivery arrives you are not at home to receive the product and pay in cash. In our model the delivery boy always does not have to call the customer asking for help to find the address or schedule at night. We deliver the product as quickly as possible to the designated mudi dokan and customer comes on the same day or night and collect the product from the pick-up location.

Future Startup

How does your relationship with the agents work? You pay them commission? Is it like bKash and others - a uniform commission rate?

Waiz Rahim

Our agents get a sales commission. The commission varies from category to category. Apart from commission, they also earn a delivery fee.

Future Startup

How do your hubs work?

Waiz Rahim

It works more like an internal back office for us. We use hubs as a customer care center for our customers and also as distribution centers for the product within that area. For example, when we send parcels to Comilla, it first goes to our hub, unpacked over there, processed and then goes to last mile destinations. Although we have agents, we still need a central distribution center from where we deliver products to our agents.

Future Startup

Could you give us an overview of Deligram today?

Waiz Rahim

Today, we have two offices. We have our Dev office in Mirpur DOHS where our tech team is based. We have about 15 people on the tech team. We have about 50 people on the operations team. We are operationally running in Dhaka, Narayanganj, Tongi, Gazipur, and Comilla.

In terms of total deliveries, it really varies for us depending on offers and occasions but I would put ourselves within the 3-4 ecommerce companies in Bangladesh in terms of transaction volume. Obviously, a platform like Daraz is way further ahead of us. Minusing Daraz, we should easily be within the top three ecommerce companies in Bangladesh having launched ourselves only a few months in Dhaka.

We have got 15,000 products on our website. But our goal is not growing the number of products, instead, ensuring better quality and service on our existing products. Rather than growing our number of products from 15,000 to 25000, our goal is to stay at 15,000 or reduce the number to ensure stock availability, quality, distribution, and packaging - a great experience to our customers.

Faster than we are onboarding new vendors, we are actually cleaning up vendors who are failing to ensure the same standard of quality. This is a challenge for us because a lot of ecommerce companies don't have their own high-quality standard and our vendors would often complain to us that we sold this item thousands on this other ecommerce site and people did not complain why would you complain about quality and issues like that.

Future Startup

How many agents and hubs do you have now?

Waiz Rahim

We have two hubs, one in Dhaka and another in Comilla. We are opening two more in Gazipur and Narayanganj. Agents we have about 125. This should be around 300 by the end of this year.

Future Startup

How have you attracted users and grown the business?

Waiz Rahim

At the point, we are not focusing much on the number of transactions. We are focusing more on brand awareness that what is Deligram.

There are a lot of ecommerce companies in the market that people don't essentially see differently. People who run them think that they are very differentiated but consumers don't essentially see that way. Customers see all of them as same.

Our marketing strategy has been to differentiate ourselves with our affiliation with Rahimafrooz, with our unique business model, focusing on our quality control and so on. So far it has been about brand building. And to work with our partners and bring interesting offers to our customers so that they try out Deligram.

Our entire strategy is around encouraging people to try Deligram. Give it a shot. If you love it, you would come back. If you don't love it, hopefully, we would learn something from it. Our ambition, however, is to retain all of our customers. Our retention so far is quite high.

Future Startup

What are the goals going forward?

Waiz Rahim

Scale up to top 15 cities in Bangladesh and give people the most convenient and best online shopping experience. Right now we see there is a bottleneck in customer experience. We want to figure out how do we remove that bottleneck. We are working on a few interesting products that would make the lives of our customers a lot easier.

We want to be the largest retail platform in Bangladesh regardless of online or offline. we want to have the widest distribution network across Bangladesh where we could do same day delivery any corner in the country.

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Building An Omnichannel E-commerce Company In Bangladesh With Waiz Rahim, Founder and CEO, Deligram

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