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Daraz Plans Strategic Investment In Logistics and Infrastructure

Daraz, in line with its previous precedence, made an announcement last week that the company will be investing some BDT 500 crore in Bangladesh through 2021, reports the Daily Star

1/ The report, while remains rhetorical in nature, offers an insider view into Daraz’s priorities in Bangladesh in the coming months and years. The company eyes major expansion. To back its expansion, it aims to build logistical infrastructure and local hubs across the country. Infrastructure remains critical limitation for ecommerce companies in Dhaka. For instance, a lack of delivery infrastructure continues to negatively affect the consumer experience and the growth of ecommerce in Dhaka. Daraz, with the new investment, aims to tackle some of these limitations and leaps ahead of the competition. 

2/ Daraz remains the leading ecommerce player in Dhaka in the B2C space. The company has been investing heavily in promotion and expansion to establish a market dominance in ecommerce. While there are a number of ecommerce companies in B2C space, Daraz continues to enjoy a relative lax of competition as local ecommerce companies struggle to raise enough external investment.  

3/ With the new plan, Daraz is primarily eyeing to invest in three areas: 1) logistics infrastructure including warehouse and sorting center 2) delivery infrastructure including hubs and its logistics service Daraz express 3) developing entrepreneurs or ecommerce merchants for the Daraz marketplace. 

4/ Daraz currently has about 60 hubs across the country. The company says it aims to take the number to north of 150 hubs. 

5/ Daraz already has some programs around merchants development. The company says it runs a program called Nandini to create female ecommerce entrepreneurs. 

6/ Daraz has already been investing heavily in its logistics service Daraz Express even before this announcement. You can read our analysis of DEX here. 

7/ The coronavirus pandemic has already fast forwarded the ecommerce growth. Daraz and other ecommerce players are looking to take advantage of the situation. Daraz has launched and relaunched some four initiatives during the pandemic in areas like grocery, medicine and games.  

8/ Acquired by Alibaba Group in 2018, Daraz has been in operation for five years in Bangladesh. The company says it directly employs some 3,500 people and has some 18,000 merchants on Daraz platform. 

What to read 

1/ Daraz’s investment announcement came in a time when coronavirs pandemic ravages through the world and Bangladesh. Bangladesh has seen widespread job loss due to the virus outbreak. Several predictions suggest significant contraction of the economy in 2020 and beyond. With the new investment announcement, Daraz aims to do both build a positive image in the eyes of policy makers as well as send a message to the market that the company is going to push forward in the coming years and very much prepared to keep its lead. 

2/ As I wrote earlier, the coronavirus pandemic has fast-forwarded the future of ecommerce in Bangladesh. This reality is evident in the fact that ecommerce companies are seeing a large number of new users who never shopped online before. This behavioral shift in shopping among a large swath of consumers is unlikely to reverse once the pandemic slows and we return to a regular time. 2003 and other similar past events support this claim. This understanding of the future makes Daraz’s announcement even more pertinent and strategically meaningful. 

As Bangladesh emerges from the pandemic in 2021 and consumers largely move to online shopping, the company aims to be prepared to take the opportunity. 

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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