“Pakistan is difficult market to operate in” says Daraz CEO
Does the founder and group CEO of Daraz, the leading participant in Pakistan’s $1.5 billion e-commerce market, believe that the country is a challenging one to do business in?
“Absolutely. I’d say so,” said Bjarke Mikkelsen, who heads the Alibaba-owned ecommerce platform operating in Pakistan, Sri Lanka, Bangladesh and Nepal.
During his one-day tour to inaugurate the country’s first automated smart distribution centres in Karachi and Lahore, Mr. Mikkelsen spoke to media and stated that the largest obstacle to e-commerce in Pakistan is the lack of seller education.
The group CEO of the online marketplace, which boasts 20 million active monthly users and a 35 percent national ecommerce market share, thinks trust deficit issues are unique to developing nations.
“If the seller sends a red t-shirt instead of a blue one, that only undermines trust. The customer will not buy again. We can only be as good as our sellers,” he said, adding that the trust deficit exists in developed markets like the United States and Europe to a “much, much lesser extent”.
According to him, the company has worked consistently to reduce the rate of quality-related returns, which is a gauge of consumer satisfaction in e-commerce, from 2 percent of all orders to 0.7 percent in recent years. According to him,
“We’re at an inflection point now as the trust in the market reflects the way things were maybe three, four years ago,” he said.
“Despite the staggering figures, Daraz has regularly lost money throughout the eight years that it has operated in Pakistan. We’re still three to four years away from profitability… Growth has been the focus over the past many years. We have been growing the ecosystem while securing the market. It has been costly. In Pakistan, we’ve spent $100 million doing that over the last three years, he claimed.
Mr. Mikkelsen said Daraz believed in creating a sustainable business in response to the previous “blow-ups” of quick-commerce start-ups that promised food deliveries in 30 minutes after raising mind-boggling sums from venture capitalists. “We’re here to stay for a while.”
According to Mr. Mikkelsen, the opening of the two automated smart distribution centres would significantly increase the company’s operational capacity.
In collaboration with Cainiao Network, the logistics division of the Alibaba Group, the business established the “most technologically advanced logistics facilities in South Asia” for a total of $4 million, he claimed.
“Pakistan is difficult market to operate in” says Daraz CEO
To guarantee operational quality and stability, these centres will include automatic assembly lines and use Cainiao’s own solutions, including e-programmable logic controllers. The buildings are over 50,000 square metres in size and can handle 428,400 orders each day.
It will enable us to increase our sorting capacity by more than 4.2 times and decrease manual errors by more than 90%, he claimed
