Since the Covid-19 pandemic, most businesses have gone through a big ordeal due to repeated lockdowns and restrictions. However, the crisis has also presented e-commerce businesses with opportunities to thrive. Knowing this, Nepal's leading e-commerce marketplace Daraz initiated the Sahayatri program to support the crisis-stricken small and medium enterprises (SMEs). In a conversation with Manisha Balami of the New Business Age, Lino Ahlering, managing director of Daraz Nepal, talked about the company's growth, expansion plans, initiatives to develop the e-commerce ecosystem, and upcoming campaigns. Excerpts:
How has 2021 been for Daraz Nepal so far and can you share how the pandemic has impacted the company's business model?
It has been a turbulent time for everyone. However, e-commerce platforms such as Daraz are thriving. We are fortunate enough to be in a position where we can do our part to keep the economy going.
During the lockdowns, we had to restrict our business to only sell and deliver health-related essential items like sanitizers, masks and groceries. However, an e-commerce marketplace like Daraz is about anything besides these items. We brought together stakeholders of the e-commerce sector to lobby and discuss with regulators that they need to widen their interpretation of essential items.
From 2020 to 2021, Daraz Nepal grew by more than 100 percent, and we want to ensure that such growth continues. We’re now striving for triple-digit growth. Since its acquisition by Alibaba in 2018, Daraz Nepal has grown by 1,200 percent. This has not only benefitted us as a marketplace but also the 12,000+ sellers who continued business online while offline markets faced Covid-19 restrictions.
Daraz Nepal is on the path to becoming a USD 100 million company in terms of annual sales a little over a year from now. This is super exciting that there are success stories like this in countries like Nepal. This can also be an inspiration for many other ventures and individuals.
How do you observe the behavior of Nepali consumers? Where do you see the trends moving in the industry?
People in Nepal are adapting to the changes. They’re adopting new technology quite fast. Before the pandemic, mostly people aged 18 to 35 used to buy products online. Now, even those aged 50 to 60 are shopping online. This rapid change in mindset and the paradigm shift would’ve never happened without the pandemic.
Meanwhile, we’re seeing a lot of different behaviors in terms of product purchases. For instance, grocery is a tough segment and it wasn’t growing much before the pandemic. However now, grocery is growing exponentially. It has grown by more than 1,000 percent year-on-year. Likewise, more than 1 million Nepalese are using Daraz every month. This shows that we’re going in the right direction.
Preferred payment method has changed fundamentally as well. 3 years ago, it was 100 percent cash-on-delivery. Now almost 50 percent of our orders are prepaid through debit/credit cards, and digital wallets like eSewa and IME Pay in particular. I think Covid-19 has brought this sector much forward than it would have otherwise.
Daraz now delivers to many cities across Nepal. How is the company managing its logistics operations?
Currently, we deliver to 47 cities and the growth outside Kathmandu valley is massive. Considering the topography of Nepal, it’s quite difficult to transport. Due to the lack of proper road networks, it’s still a challenge for our staff to find the exact location of customers during delivery. So, we hire a lot of riders whom we call ‘delivery heroes’ who are very familiar with the respective locality and can find the customer locations fast. As their experience increases, our delivery gets smoother.
When we arrived in Nepal in 2018, the foundations of logistics were very basic here. There were very few companies that we could partner with for the delivery of products. It became clear that the only solution can be to create our own delivery company. So, we established Daraz Express, the first e-commerce delivery company in Nepal.
We invest the biggest share of our budget every year into logistics to make sure our footprint around the country gets bigger. We also have a concept called Logistics Marketplace where we have multiple small companies and they’re all growing with us. As a result, our delivery has improved a lot. On average our delivery here is faster than other markets such as Pakistan, Bangladesh, Sri Lanka and Myanmar.
What challenges do you see in the e-commerce business in Nepal? What can the government do to facilitate the online platforms?
Here, the e-commerce market is still in the early stage. The major challenge for an e-commerce business is regulation. Although there have been positive changes in terms of regulations and awareness has increased, not everything is perfectly streamlined.
The government has been closely working with us to draft the e-commerce law which will eventually make the ecosystem better. This policy will be a big milestone for a country like Nepal in terms of fostering a good environment for e-commerce businesses. But the law is yet to be endorsed and implemented by the parliament
Another major challenge is in terms of making our partners more professional. This is a challenge constantly as we need to make everyone better including ourselves. We have been providing training in this regard. Over the years, there have been improvements, but still more needs to be done.
There is a lot of potential in this industry and we can see many companies thriving. But what they need is investment and this is something lacking in Nepal. Unlike other countries like Pakistan, Bangladesh and India where international investors are investing a lot of money, the Nepali startup sector is not much developed. We really hope that the government changes the laws related to foreign direct investment (FDI) to make it easier to do business in Nepal so that more investors come and uplift the whole ecosystem.
Countries around the world are severely impacted due to the pandemic, what is the role of e-commerce players like Daraz and how can it help communities during these times?
I believe we’re not just a company builder, but an ecosystem developer. It’s not just about us growing, but about everyone connected to the platform – logistics partners, payment partners, the sellers and multiple other companies like marketing agencies. Sharing our experiences and learning can help everyone become better together.
As the leading e-commerce platform, it’s our responsibility to also support the community. So, we’ve supported various relief programs partnering with hospitals and mental health institutions to provide health-related items, bring ventilators from abroad and supply food. Our team is proud and happy knowing we still created an impact even during restricted times.
We also implemented a new concept to allow our employees to have two days a year available for voluntary leave so that they can just support any organization for voluntary cause and give something back to the society. This is a small step and it won’t be the last one.
We’ve tried other initiatives just to set a kind of example, and hopefully, other companies will follow. We have recently created a concept of D-Women where we want to promote gender diversity within our company which I think will also set a benchmark for other companies. For example, 50 percent of my leadership team here consist of women, we have increased our paid maternity leave to four months and have also increased paternity leave to almost a month. For us, this is also a community impact.
Tell us about Daraz team here and the company’s working culture.
The average age of our employees in Nepal is 27 years and we have around 700 young Nepalis working with us at present. This number is increasing every day. When I look at the young team and their ambition to make a change in the country’s economy, it gives me optimism and confidence to work here.
We want to keep the system of hierarchy ‘super flat’ in our office. It does not matter where you have studied or worked earlier, the only thing that matters is what you do right now. The culture we want to live on is that everyone can speak up and be direct to each other in a respectful manner. We give a platform for everybody to try to learn as much as possible to grow in a short amount of time and change something in Nepal.
Daraz Nepal is also a melting pot of ideas. People working here come up with their ideas and this has also sometimes changed my roles in the company. In the beginning, I had to be really involved in the day-to-day activities, but now I don’t have to because the team members are quite clear about their roles and responsibilities. Now my role is making sure they have the right tools, best IT setup and software so that they can work efficiently and in the long-term strategy.
What strategies do you use to attract more sellers on board?
We have multiple initiatives to make it very easy, effortless and fast for the sellers to go online. So last year, we launched an initiative called Sahayatri where it’s all about getting new sellers on board, especially SMEs so that they can sell online without paying any commission charges. Under this initiative, we teach them how an e-commerce business system works and then eventually do delivery and service for them. Accordingly, this initiative has attracted a lot of sellers to join our platform.
We are still running this program, and the big change this year is that it is not only confined to the Kathmandu valley. We now have sellers from cities like Birgunj, Biratnagar, Butwal and Pokhara. The beauty of e-commerce is about access to the market. This program is allowing sellers to sell nationwide giving them access to new customers, while also giving customers access to new products. Currently, we are operating in 47 cities, but we want to be in the rural areas and that is going to be a big focus for us in the next year.
There are some new features in Daraz app like Gems, Daraz Live, etc. Can you tell us more about these features?
There is always a need to do something new to meet the expectations of customers. As a leader, we have been introducing new disruptions to the market. Our recently launched Gems feature is a loyalty program. I think that’s fairly a new concept here to reward customers. If a customer comes back very often and does something on the platform, they’ll get gems for it which can be used for their next shopping experience.
I think the biggest disruption right now is live streaming which is huge in China and South Korea. This feature allows sellers to showcase their products online. Customers can also directly chat with sellers. Through live streaming, sellers can instruct people on ways to use the products and shop as well. This adds more personalization to the whole online shopping experience. Along with the sellers, we also organize giveaways, tell people what our staff are doing, and educate people about how to join and work in Daraz. All these are also a part of branding.
The upcoming months seem to be big for Daraz with the recently completed Dashain campaign as well as the upcoming 11.11 and 12.12 campaigns. How was the Dashain campaign and what are you planning for this year’s 11.11?
The Dashain campaign was a big success. Now our focus is on the 11.11 campaign. There will be a huge change in 11.11 this year. Before 2018, Black Friday had all the focus, but now, 11.11 has established itself as the biggest sale day of the year worldwide.
11.11 is when anything is possible, it’s where we together with our sellers achieve one month’s sales volume in a single day.
For this campaign, we have been preparing for an entire year with our sellers and logistics partners. We are also hiring 1,000 people for the upcoming campaigns. There will be a lot of deals, discounts, lots of payment partner discounts, new innovations and presentations through live streaming. We are going to make it the biggest sale day in a year and as we say, ‘Today’s achievement is tomorrow’s baseline’, we’re going to make it bigger and bigger.