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“We are on the right track and Nepal is one of the fastest growing markets”

Daraz, one of South Asia’s leading e-commerce marketplaces with its presence in five countries – Pakistan, Bangladesh, Sri Lanka, Nepal and Myanmar – and with access to over 500 million customers focuses on scaling Daraz’s offerings in four main areas – e-commerce, logistics, payment infrastructure and financial services – to provide a seamless end-to-end business solution to the region.

The Post’s Krishana Prasain spoke with Bjarke Mikkelsen, Founder and CEO of Daraz and Aanchal Kunwar, Managing Director of Daraz Nepal, about Nepal’s e-commerce market performance, challenges and current economic impact on sales in detail online.

Excerpts:

How is the e-commerce market doing in Nepal and abroad?

Aanchal Kunwar: E-commerce is doing well globally, thanks to the pandemic. Daraz 11.11 sales last year reached Rs 360 million, a 100% year-on-year growth. The growth we have seen in the Nepalese market is significant, but it also comes with great responsibility, primarily executing safe delivery of goods during a pandemic.

Bjarke Mikkelsen: The last two years have been years of growth for us and we expect the same to happen this year. We focus on customer and seller experience, retention and relevance to our customers.

Where does Nepal rank in the e-commerce rankings of South Asian countries?

Bjarke Mikkelsen: If we look at the total retail market share, it is still below 1% in Nepal, which is very low. The biggest growth for us will be if we capture 10% or 15% of the retail market over the next 5-10 years. I see potential in every segment, such as linens, cleaning products, pet food in the lifestyle segment, and other niche categories that have the potential to grow. So we want to make sure that we don’t just focus on one category but on every segment.

What are the challenges of the Nepalese e-commerce market?

Aanchal Kunwar: Educating customers and vendors is one of the biggest challenges. For example, in the offline market, when a customer searches for a bucket of a particular color, they buy a bucket of a different color if they cannot find the color of their choice. But when he orders the same product online, he expects the same product to be delivered to him. If someone orders a yellow bucket, online sellers must deliver a yellow bucket.

We have dealt with numerous customer complaints about receiving a different product than what they placed an order for ranging from 5% to 1%. But it remains a challenge.

Bjarke Mikkelsen: We need more high-quality sellers to come through our Daraz University to provide a better customer experience, but getting more sellers through the process is one of the challenges.

Three years ago we had difficulties in handling logistics and digital payment, but this has been resolved with our own logistics called Dex where we deliver 70% of the ordered goods ourselves and it is also profitable for customers .

Where do you see Nepal in five years in the e-commerce sector?

Bjarke Mikkelsen: I’m very optimistic because the growth we’ve had in the past has been solid. We are on the right track and Nepal is one of the fastest growing markets. We want healthy growth with a healthy ecosystem where people use e-commerce platforms for the right reason and not just for discounts.

Aanchal Kunwar: The Nepalese market is very good at adopting new things such as the use of digital payment, which has increased from 10% to 50% this year. The more people understand e-commerce – both sellers and customers – it will be adopted by more people in the years to come.

Nepal still does not have an e-commerce policy. Is it difficult for an e-commerce business to operate?

Aanchal Kunwar: We work closely with the government. We have internal and external legal teams. But there are a lot of gray areas as there are no proper laws in place. We follow government guidelines and directives and ensure that our operations are within their understanding and parameters.

Bjarke Mikkelsen: We have been here for 6-7 years and spent a lot of time educating and lobbying to make our business work. But I think we have now reached a point where politics is more crucial.

If we want to transform e-commerce into a billion dollar industry in the next two years, we need a framework.

What are your marketing strategies for Daraz Nepal?

Bjarke Mikkelsen: We are moving to more performance-based marketing strategies. We want to build trust in the type of value proposition our marketplace provides to our sellers or customers. We need to think differently and speak differently to our customers and vendors. People who buy from our platform do not know that we have a return policy which is an important policy to earn the trust of our customers.

The country’s economic indicators are not performing well and the government has stopped importing luxury goods. What impact will this have on e-commerce?

Aanchal Kunwar: This will impact many businesses, including ours, as we operate cross-border and import our products mainly from China and India. But we have no control over it.

Bjarke Mikkelsen: E-commerce, in fact, can do very well in tough economic years. Alibaba’s best years in China came during tough times in the country. Turkey has a terrible macroeconomic level with 20% inflation with a collapsing currency but at the same time e-commerce has exploded in the last two years because people know they can always get the product at the best price.

So, from an e-commerce perspective, there may still be a bright future. We also want to do our part to make sure we can support the whole economy by creating jobs.

Inflation is on the rise globally and in Nepal as well. Will this impact orders?

Bjarke Mikkelsen: Prices are rising everywhere. We are in a good position to be more competitive in terms of price in general. But we expect people’s shopping habits to change. There will be less demand for high value lifestyle products and much more for essentials like groceries, household products, etc.

What are Daraz’s future plans?

Bjarke Mikkelsen: Our strategy is quite simple because it’s about providing a basic e-commerce solution; create a market for sellers and customers and continue to expand our customer and seller base. We will continue to invest in our logistics and payment infrastructure. We also plan to provide financial services with installment payment options.