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Daraz Turns Five, Daraz’s Unique Opportunity And Challenge

Alibaba owned ecommerce giant Daraz Bangladesh has turned five this month. Daraz was founded in 2012 by Rocket Internet. The company started its operation in Bangladesh as Daraz Bangladesh in 2014. Currently, Daraz has operations in Pakistan, Myanmar, Bangladesh, Sri Lanka, and Nepal. Last year, Chinese tech giant Alibaba bought Daraz in an undisclosed deal.

Since the acquisition, Daraz has expanded its growth push in Bangladesh. The company says it currently has hubs in 33 districts in the country. It has built the largest sorting center of the country in Dhaka and collection points across the country.

The company claims to have over 5 million products and 15,000 sellers on its platform.

Over the past five years, Daraz Bangladesh went through many changes. When it was first started operations in Bangladesh in 2014, the company’s primary focus was on big brand and authentic products. First few years of Daraz was relatively low key and slow and steady in nature.

In 2017, Daraz merged with another Rocket ecommerce entity Kaymu and expanded its platform to non-brand small sellers. Daraz Bangladesh has since expanded and evolved both in terms of coverage of products and types of services.

Over the past two years, the company has pushed growth through a combination of the expansion of its coverage and a torrent of relentless offers, vouchers, and discounts. As a result, it has been able to achieve growth numbers that are greater than almost all other ecommerce players in the market.

While the continuous push of offers and discounts helped Daraz to grow its numbers, the company suffers from a lack of reputation in the market. Complaints against product and service quality are rampant.

To address these challenges, Daraz has introduced DarazMall, a category on its marketplace for which the company provides product quality, service guarantee, faster delivery, and better return policy. It has also been investing in improving its overall service quality through various measures. The company introduced its logistics operation Daraz Express in 2018 in order to bring greater control over its logistics and customer experience. Daraz plans to move to 100% in-house logistics and has already started working towards that goal.

Daraz sees an opportunity in Bangladesh. Rightly so. Ecommerce is still in its early days in this South Asian country. There is not much competition in the space. It is not that there are not enough ecommerce companies. There is a long list of ecommerce players in Dhaka but a lack of proper venture capital ecosystem makes it harder for local players to raise investment and compete against deep-pocket competitors such as Daraz which is now owned by Alibaba. Alibaba has also bought a minority stake at local MFS giant bKash in 2018. Many digital entrepreneurs complain about a lack of clear policy guidelines in the space and fear a competitive disadvantage in the long run. They are pushing technology policies favorable to local initiatives, at least for time being when local players gain enough muscle. There is the other camp of entrepreneurs who think that when international players come into the country they bring in knowledge and expertise. They are in favor of progressive policies and in favor of international players coming into Dhaka. At the same time, they propose policies that would help create a level playing field for all players and limit the undue advantage of international players.

However, it does not seem like customers or the regulators care about these issues, not at least in the short-run. Over the past years, Daraz has managed to build a user base and it continues to grow. Today, the company is the most dominant player in Dahak’s ecommerce space.

That being said, competition is likely to intensify in the coming days as companies like Ajkerdeal, Chaldal, Deligram, Evaly raise more money and invest more for market dominance. Since the ecommerce adoption remains relatively low across the country, the room for multiple players remains open.

Any regulatory challenge is unlikely for Daraz, at least in the short-run. The real challenge will remain more or less the same: ensuring superior customer experience as well as rapidly growing the ecommerce adoption across the country.

The deep pocket plus years of insight into building ecommerce across markets of Alibaba puts Daraz in a different league in Dhaka’s ecommerce space. However, the advantage comes with its limitations as well. The more progressive policy push in the digital space that has happened in markets like India to ensure a level playing field for everyone and limit the undue advantage of multinational players could prove a challenge for Daraz in the long-run. The competition in the ecommerce space is also slowly growing. Unique consumer behavior of Bangladeshi shoppers remain a puzzle that ecommerce players are yet to solve. However, for now, Daraz is in a unique position and is likely to continue to dominate Dhaka’s ecommerce space.

Mohammad Ruhul Kader is a Dhaka-based entrepreneur and writer. He founded Future Startup, a digital publication covering the startup and technology scene in Dhaka with an ambition to transform Bangladesh through entrepreneurship and innovation. He writes about internet business, strategy, technology, and society. He is the author of Rethinking Failure. His writings have been published in almost all major national dailies in Bangladesh including DT, FE, etc. Prior to FS, he worked for a local conglomerate where he helped start a social enterprise. Ruhul is a 2022 winner of Emergent Ventures, a fellowship and grant program from the Mercatus Center at George Mason University. He can be reached at ruhul@futurestartup.com

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