Meeting halfway: Daraz juggles assortment and delivery speed
It won’t dive into quick commerce at the expense of its merchandise mix, says Daraz CEO.
Quick commerce, or item delivery as fast as 10 minutes, is on the rise but one e-commerce platform is taking a different approach to the trend. Daraz Group Founder and CEO Bjarke Mikkelsen vowed that Daraz will not sacrifice having a wide assortment of products, which is a crucial factor for online shoppers. It will, instead, strike a balance between assortment and delivery speed–even if not as fast as within an hour but still within the day.
In an exclusive interview with Retail Asia, he discussed what is in store for the e-commerce platform in 2022, a year focused on integrating business models and features that will address the customers’ needs.
How has Daraz performed in 2021? What were the factors that contributed to these results?
2021 was a very good year for us. First and foremost, we saw tremendous growth in our user numbers. We now have about 40 million active users across our platforms and the internet population in our four markets is about 100 million. Almost 40% of the internet population in our markets is now using Daraz on a monthly basis. The key driver of this is COVID which has accelerated the shift toward digital services.
Do you expect the same performance this year, and what do you think will be the drivers for this?
We're very optimistic. First of all, e-commerce is still a very small proportion of the retail market in our countries. Regardless of COVID, we still have a lot of growth opportunities. But I think that the growth in users will probably not be as high as we've seen in 2021. We will ensure that e-commerce becomes much more integrated, and we start building frequency and high engagement with all of these users. As I mentioned, in 2021, we reached 40 million users across our platforms while growing orders by 100% year-on-year. In 2022, we expect a reduced pace of growth as we focus on strengthening user experience.
Amongst your foreign markets, which country is the biggest market and which countries in Southeast Asia do you see an increase in consumers or penetration?
We operate in four markets primarily. Pakistan and Bangladesh are the two biggest markets from a population and from an economic perspective. These two markets are almost the same in terms of business size. We also have Sri Lanka and Nepal, and both are performing really well. They're also significant in terms of population, particularly Sri Lanka which has a higher gross domestic product per capita. It's a country where we see a tremendous opportunity.
In all of our countries, we see the potential for growth over the next five to 10 years as a fantastic opportunity. Particularly now, in many countries that we're heading into, there is a tough macro situation where inflation is rising, and we'll probably see some currency depreciation, which we expect in some of our markets, this is an opportunity for Daraz also to help the countries navigate through this macro uncertainty because e-commerce can make sure that there's an equal service for everyone in the country and that everyone has access to products at the best possible prices.
What consumer trends have you observed in the past year and what are the emerging trends amongst shoppers this year?
I would pick a few. First and foremost, live streaming is something that we're seeing taking off in our countries and where we are investing a lot of our time and also tech resources in terms of developing digital content. For example, we started Streaming Cricket, which has had tremendous success and adoption in our countries through our platform. It is also the way that sellers can interact with consumers because, in our countries, the biggest factor for growth is building trust with the consumers. Most of the time, if the consumer can actually see the product in the live environment with the seller actually displaying it in his store, this is something that can help build trust. It is definitely one trend that I think will only accelerate, and we'll see a lot of that in 2022.
The second that I would pick that was big in the last year is quick commerce. A lot of companies started doing these very fast, like 30 to 40 minutes, or even 10 minute grocery deliveries, which is a big trend that we're seeing taking off in our countries. What we're seeing now from our customers is that it's about finding the right balance between assortment and speed. Rather than having a very small assortment of products that you can get delivered in 30 minutes, a lot of people are asking for a bigger range of assortment, but maybe same-day or four-hour delivery. That's where we're going to focus on because we have about 10 warehouses across the region, and we have 50,000 products that we can deliver relatively quickly. The balance between assortment and speed is going to be a big thing.
Early this year, Daraz unveiled its new look for 2022. Can you share with us the reason behind this move?
The last time we did anything that touched the brand was in 2018, which was before we were acquired by Alibaba. Everything has evolved since this time. We now have built a complete ecosystem. We've built a nationwide logistics infrastructure operating across the region. We’ve developed the payment infrastructure of our marketplaces. We built our buy now, pay later solution to offer credit services to our customers. We’ve also built a lot of channel experiences to segment the user experience on the app.
If I think back, it's a completely different company. Everything has changed including the technology and the whole platform. So we thought it was time to refresh our brand and make sure that it lives up to this ecosystem that we've built, but also with an architecture that ties all of these different aspects of our ecosystem together in a more coherent way. I wouldn't call it a departure from who we are. We're still called Daraz and we still have the same business model. But it's something that lives up to our brand and our architecture and starts a new chapter for us.
What are the new things that come along with this move?
The main thing that we want to drive is discovery, exploration, and engagement for our consumers. Daraz shouldn't only be about going and buying something that you need right now. It should be the place where you can find anything that you're looking for and we always have the product that the customer needs at the best possible price. This theme of creating a universe where people can come, explore, discover, and be inspired is something that we will be building on with the new brand and that's what makes Daraz unique.
How important is customer experience to the company and how do you plan to improve this?
Customer experience is really the sum of everything we do. it's something that we always obsess about. It's also not easy when you have an ecosystem of hundreds of thousands of active sellers and millions of customers and products, and to always control the customer experience. But it's our job and our responsibility to make sure that even in this ecosystem, the customer, as well as the seller, always feels protected and has the best possible experience.
Over the last couple of years, we’ve spent a ton of time building the framework, which starts with seller education, making sure that our sellers on the platform are educated and that we have the right regulation around the marketplace, we have the right enforcement of our marketplace rules, and we build good services to support it.
But what we want to do now is take it to another level where people also feel that it's a personal experience, it shouldn't just be about a framework that works in the background. A great example of this is through our algorithms and machine learning technology where we can deliver a unique navigation experience on the Daraz app, allowing us to match deals and promotions to a customer’s interests and preferences. It should be about every single customer or seller. If they need to reach out to us and speak to us for whatever reason, they should feel the passion that we have for this customer experience and make sure that they understand that we take it personally.
How do you encourage business sellers or small businesses to join Daraz?
It always starts with the onboarding journey. I think we've come a long way here but we're still trying to make it easier and more integrated because it's important for us to know who our sellers are so that we can verify to the customers that we know who's selling the product and that we can take action if anything doesn't happen according to the marketplace regulation.
We also need to make sure that we do our “Know Your Client” checks properly. Investing in having this integrated with all of the different databases of bank account verification is something we spend a lot of time on.
The second thing is to make sure that the sellers have the tools and the knowledge that they need to have to start growing and selling their products. What we're also investing in is more technology, more features for the sellers to have more insights on what exactly it is that they need to do in order to grow your business Daraz such as the product type, prices, assortment type, and content they need to produce.
To make it more personal, we've spent a lot of time making our app personalised for customers so everyone will see their product experience and based on algorithms that display things that are relevant to them personally. Now, we want to do the same for our sellers, so that everybody should have an experience that matches the business that they want to build.
One of the trends you mentioned that is increasing in your markets is quick commerce. What is Daraz doing in this aspect?
For us, it's about finding the right balance between assortment and speed, and the core unique selling proposition of Daraz is our assortment. I want Daraz to become a word in the same way that Google is a word. So just Google it or just Daraz it. Whatever you need, just Daraz, and we always have what you're looking for. That's what we're going to stay true to–to have a wide assortment and always have what the customer needs. But of course, we also need to make sure that we continue to refine our hyperlocal delivery network so we move faster and find the right balance between having a wide range of assortment and also having the products that you need right here and right now and deliver that much faster.
What more can we expect from Daraz?
This is not going to be a year where we're going to do transformational changes. It's going to be a year where we focus on integrating these various channels and these different business models that we've built over the last couple of years. We will also make sure that we stay relevant, build more services for our huge user base of 40 million, and build a seamless shopping experience end-to-end on our platform. Everything for us in the next year is going to be about the experience rather than transformation.