Daraz February 2020

BUILDING SOUTH ASIA’S LEADING ECOMMERCE PLATFORM

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Building South Asia’s leading ecommerce platform w w w.d a ra z . p k

DARAZ

As South Asian ecommerce leader Daraz continues to consolidate its position, Founder and CEO Bjarke Mikkelsen discusses the strategies and ethos driving its success

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hen it comes to opportunities in the ecommerce space, South Asia represents some of the world’s most fertile ground.

With the barrier to entry for technology’s capabilities dropping lower all the time, emerging markets such as Pakistan, Bangladesh, Sri Lanka, Nepal 04

and Myanmar - the territories where fast-growing retailer Daraz lays its cap - offer huge potential for enterprising tech leaders seeking to break new frontiers. Nevertheless, many are unaware of the untapped potential of the 500mn+ population in those markets and their desire to become part of a global economy through technology.

In 2015, Bjarke Mikkelsen, CEO at Daraz, made the bold leap from investment banking to the ecommerce space, targeting the as yet underserved South Asian region with great success. “I decided to do something different,” Mikkelsen explains.

“I wanted to be in the right industry, at the right time, in the right markets for the first time, to take the advantage and do something cutting edge.” He is frequently asked how he managed to make a success of the shift between such different industries,

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“ Today, we have been given the title of DEX Hero.

I have a very big job of making sure people receive their packages,” says Sajid Ali of Daraz’s logistics arm, DEX. “ The most important thing for Daraz is the customer and we are the ones dealing with the customers.” w w w.d a ra z . p k

DARAZ

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“ We want to capture as big a market as possible, but we want to make sure that we scale in a healthy way. This means a strong focus on organic growth and making sure that the users that come on the platform remain engaged.

If users stop coming back then we need to improve our service, find ways of being more relevant, or simply being more fun to enrich people in their daily lives” — Bjarke Mikkelsen, Founder and CEO, Daraz

but Mikkelsen asserts that the skills he has brought from his previous career have served him well in ecommerce.

“It’s actually not that different because, in banking, my job was to make big things happen for people who were very ambitious and had the funds to follow through.

In this case it’s more operational, but the principle is not that different.”

For Mikkelsen, a more significant difference is the territory itself.

Shifting from his career in London’s corporate sphere to the developing markets of South Asia presented the need for a shift in perspective.

Keen to foster an understanding of how best to operate an ecommerce firm in such environments, he spent time in the rural areas of Pakistan and Bangladesh. “Apart from the business opportunity and incredible talent in our markets, most people fail to appreciate the natural beauty of these countries. It’s like nothing I have ever seen before,” he says, adding that the experience made it clear that Daraz would require a highly tailored approach to best penetrate these markets; a local business for local people.

CLICK TO WATCH : ‘DARAZ SELLER STORIES – ZAID’ 07 Having constructed a team with

re-platformed its systems to align

the market and sector knowledge to

with Alibaba’s global framework and

augment his acumen, the risk has cer-

resultantly unlocked reams of poten-

tainly been rewarded. Considerable

tial in the process. “It took about a

growth across its South Asian opera-

year to finish, and it was not without

tions resulted in an acquisition from

pain or impacts to the business,

Asia’s pre-eminent ecommerce leader,

but in the end the product we have

Alibaba Group, in 2018, and the firm’s

today is ten times stronger and more

capabilities have since expanded expo-

advanced than anything we could

nentially. With the acquisition, Daraz has

have built ourselves in the next five

become an important piece of Alibaba’s

years,” Mikkelsen enthuses. “The new

global strategy to target 2bn consum-

technology infrastructure has been

ers in its ecosystem by 2036.

a huge win for the business. Alibaba

During the transition of its IT systems from Portugal to Pakistan, Daraz

has always taken our requests seriously and given us the flexibility to w w w.d a ra z . p k

DARAZ

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“ I wanted to be in the right industry, Focusing on the wants and needs of local customers has formed the backat the right time, in bone of Daraz’s operations and growth. the right markets The expectations of consumers in these emerging markets go deeper for the first time, to than simple functionality, Mikkelsen take the advantage says, referring to the results of a recent study that Daraz conducted with market and do something research leader Nielsen. “There were a cutting edge” localise how we implement the prod-

uct in our markets.”

couple of things that surprised me,” he

says. “The most important thing from a user interface (UI) perspective is that

— Bjarke Mikkelsen, Founder and CEO, Daraz

it’s a fun experience.” The assump-

platform has also been a major element of

tion that convenience is king is more

the ecommerce platform’s development.

applicable to more developed markets

“We apply a lot of focus to user-generated

where entertainment is ubiquitous to

content, reviews and ratings, then using

the point of being all-consuming - in

data and algorithms to ensure the sellers

South Asia, those facilities for diver-

of good products get more exposure

sion are not so common.

than sellers with lower quality offerings.”

Quality was also earmarked by the

These factors have been embedded in the

study as being of particular importance,

design of Daraz’s platform and accompa-

especially in terms of offering comparison

nying mobile app, while the infrastructure

tools between non-branded products.

surrounding its service continues to be

Differentiating user journeys through seg-

developed in line with the third leading

mentation of entry points and UX on the

consumer expectation: rapid delivery.

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E XE CU T I VE PRO FI LE

Bjarke Mikkelsen Bjarke Mikkelsen is the Founder and CEO of Daraz and has built the company from a small startup in Pakistan to an important part of Alibaba’s global ecosystem. He started his career in A.P. Moller - Maersk and then worked his way to Vice President at Goldman Sachs in London before making the jump to become an ecommerce entrepreneur. His career is characterised by adaptability and transformation management. Applying structure in a chaotic environment and building a company culture where the best talent and ideas can f lourish has been the key to Daraz’ success. His motivation is to create equal opportunity for the 500 million people living in Pakistan, Bangladesh, Sri Lanka, Myanmar and Nepal.

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DARAZ

“ We apply a lot of focus to user-generated content, reviews and ratings, then using data and algorithms to ensure the sellers of good products get more exposure than sellers with lower quality offerings” — Bjarke Mikkelsen, Founder and CEO, Daraz 12

Compared with the proximity of Mikkelsen’s native Denmark to its European neighbours, there is considerably more complexity and cost associated with international logistics in South Asia. “Because a large proportion of the population in our markets have a very low income, customers will not spend a lot of money on products in one go,” says Mikkelsen, noting that it therefore does not make sense to import low-cost items when the price of shipping will vastly outweigh the value of the product. As part of its Daraz University programme, which offers best practice advice and education for the platform’s sellers, the firm is looking to establish “hyper-localised ecosystems” through offering products to customers based not only on price and quality, but also on proximity.

This strategy is consolidated by Daraz’s hands-on approach to logistics, borne of the desire to expand its seller base as optimally as possible, regardless of the scope of individual merchants’ operations. Having established its own logistics company, Daraz Express (DEX), which, as a digitised and fully integrated firm, represents

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a first for the region, Daraz “wants

process parts, along with the value

hundreds of thousands of sellers on the

proposition to sellers,” he says.

platform; small and large distributors,

If an order is made for a product that

individual retailers and manufacturers.

isn’t distributed by Daraz’s own fulfil-

Some of them have the capacity to

ment centres, the merchant receives a

operate their logistics independently,

sale notification via the seller app. From

with their own ecommerce setup and

there, they can prepare the package,

their own people to prepare the pack-

print an airway bill, and send the pack-

ages along with shipping and delivery.

age via one of two options. In some

Some of them don’t have that capacity

areas, Daraz provides a local pickup

and would rather that Daraz man-

service while, failing that, the seller can

age the logistical processes. That’s

alternatively drop the package at one of

something we have spent a lot of time

the firm’s distribution hubs to be fulfilled

building in terms of the system and

by Daraz’s logistics network. “As long as w w w.d a ra z . p k

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we control the package on our systems,

online marketing, are one of the ways

it’s not a problem. The challenge is that,

to build trust in our brand.” The gravitas

once we hand over the package to a

that comes through such partnerships

third party, such as a delivery partner,

clarifies that the company “is not just

what happens? Is that third party inte-

kids in a garage posting online adverts

grated with our systems? What is their

and sending out products”, he says.

service level? Are they living up to our

“If you have a good, loyal customer

standards of good customer service?

base, then you have a strong foundation

That’s the main challenge.”

to grow from. If we cannot retain the

Daraz is demonstrably unafraid

customers we acquired, it doesn’t matter

to take responsibility for the quality

if we have 200mn potential customers

of the service its customers receive,

in Pakistan or 160mn in Bangladesh

with Mikkelsen pledging that, should

because we can’t just acquire custom-

any complications arise, the firm will

ers without retaining them. In the end,

do its utmost to take care of the customer. This, however, is not the only manner in which Daraz is working to develop its brand as a trustworthy platform for consumers who are cautious of technology and the intentions of companies that provide it. “Trust is a gigantic challenge,” acknowledges Mikkelsen, noting that partnering with trusted brands has been a major factor in its strategy. “We did an integration with a Friday night game show in Pakistan which can attract around 10mn live viewers. That’s almost twice the population of Denmark. Paid partnerships like these, as opposed to w w w.d a ra z . p k

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DARAZ

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Playing football with the local kids in Hunza Valley, Northern Pakistan

“ Apart from the business opportunity and incredible talent in our markets, most people fail to appreciate the natural beauty of these countries. Its like nothing I have ever seen before” — Bjarke Mikkelsen, Founder and CEO, Daraz

we have to deliver a service level and an experience that makes our customers happy. We want to capture as big a market as possible, but we want to make sure that we scale in a healthy way. This means a strong focus on organic growth and making sure that the users that come on the platform remain engaged. If users stop coming back then we need to improve our service, find ways of being more relevant, or simply being more fun to enrich people in their daily lives.”

Considering Daraz’s considerable growth and continuingly ascendant market penetration across South Asia, the strategy is certainly yielding success. Looking forward, Mikkelsen is enthusiastic about the potential for yet further expansions of Daraz’s capabilities and offering. “In the past, we’ve focused on building the categories we offer and developing a good standard of service across our operations, and that’s taken a lot of time and effort,” he says. “Now that we have a very strong base, we want to make sure that there’s something for everyone on Daraz.”

This expansion includes, but will not be limited to, a fashion channel, dubbed D-Fashion, with tailorable experiences w w w.d a ra z . p k

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DARAZ

“ The new technology infrastructure has been a huge win for the business. Alibaba has always taken our requests seriously and given us the flexibility to localise how we implement the product in our markets.”

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— Bjarke Mikkelsen, Founder and CEO, Daraz

for individual customers, along with D-Mart, a dedicated grocery function.

“D-Mart will offer different, unique value propositions, such as overnight deliveries of fresh products sourced directly from farmers. For people who want fresh groceries with guaranteed high quality, we can do that. If you want a monthly subscription service for your groceries, we can do that too,” says Mikkelsen.

D-Motor, another addition on the horizon, will cater to motorists and enthusiasts in a manner akin to D-Fashion.

For those of us in more developed parts of the world, ecommerce and its ever-increasing convenience has

Online-offline partnerships are important to build trust with customers in rural areas. If a product is not in physical stock, then the shop owner helps the customer place an order that can be picked up at the store the next day

2012

Year founded

3,000 Employees

become commonplace, even unremarkable. It is therefore important to remember the gravity of what Daraz is developing in South Asia, and what a marked paradigm shift it is offering consumers in the midst of maturing economies. With the scope and depth of Daraz’s operations only set to grow, it’s certainly an exciting time both for the firm and for the hard-won customers it holds dear.

One of 5,000+ co-branded Daraz Stores in rural Bangladesh w w w.d a ra z . p k

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12th Floor Executive Tower Dolmen City Mall Clifton Karachi Pakistan T +92-300-0704332 www.daraz.pk