In Bangladesh, purchase habits are changing
E-commerce has well and truly arrived in Bangladesh, with hundreds of online shops offering products across various categories. Rapidly growing 3G mobile and broadband penetration, affordable smart-phones (the likes of Infinix and Symphony), and easy-to-access mobile internet are driving this surge of e-commerce activity.
Most of these e-commerce shops are relatively small, specialising in specific product categories and operationally premature compared to worldwide e-commerce leaders. While setting up a web or Facebook shop might take a few hours and sound deceptively simple, scaling up e-commerce requires a certain expertise and know-how.
The biggest local e-commerce platform in Bangladesh, Daraz.com.bd, is successfully running its online shop for over three years now. The secret behind its success is the business model Daraz runs on.
Daraz isn’t merely an online shopping mall alone; it’s a medium bringing sellers and customers together — it’s an online marketplace.
Online marketplace as trustee between seller and customer
Instead of buying products and selling them to customers (retail model), Daraz acts as a trustee between seller and customer (marketplace model). Thousands of sellers (screened by Daraz) list their products on the portal.
Daraz drives 100,000 prospects every day to its website and mobile application.
Every customer that places an order on Daraz is protected by a 100% purchase protection policy: 100% genuine products, safe andsecure payments, and easy and free returns. Only upon completion of a successful transaction will Daraz release money to the seller.
Many products on Daraz are sold by multiple sellers. This incentivises competitive pricing
Supporting this effective business model is the smart, hi-tech software that Daraz has developed with one of its investors — Rocket Internet — over the last three years. It provides the customer a secure and convenient shopping experience.
Why does Daraz have the biggest selection of products?
Daraz is currently showcasing more than 150,000 products, expected to swell to over 250,000 products by year end.
And yet, this is just an instance of Daraz scraping the surface. Daraz envisions breaching a million products in the near future.
The Daraz business model has three advantages which directly influence its huge product assortment:
1. Local stores as well as big malls are encumbered by the limitation of space alongside logistical considerations.
That’s why stores normally specialise in one or two product categories. Daraz is a digital mall and sellers can showcase as many products as they want. Since warehouse space is not as expensive, sellers can sell as many goods as they want. There is no limit.
2. Daraz has thousands of sellers with new ones joining every day. All these sellers contribute to a constantly growing assortment of goods.
3. Daraz generously invests in their sellers and helps them learn and grow. Thanks to training and seller education processes, Daraz sellers constantly grow their product assortment.
Daraz stands for 100% authentic, genuine, and original products.
To ensure compliance with these stringent standards, Daraz has a dedicated quality check team routinely screening sellers and products.
Customers are protected by Daraz Purchase Protection in case their experience does not live up to Daraz standards and values.
How does Daraz manage offering the best prices?
The prices on Daraz are defined by the seller. Therefore, to understand how pricing works in favour of both the seller and customer, we need to appreciate the conditions amenable to competitive pricing that are available to sellers on the Daraz platform.
The Daraz business model has four advantages which directly influence pricing on the website:
1. Selling online on Daraz means that sellers do not incur the costs associated with a physical store. That helps them to sell with lower average costs and optimise the product price.
2. Daraz draws millions of visitors to its platform every month. That means massive growth for and added visibility/publicity to local sellers.
3. When sellers sell their wares on Daraz, Daraz’s brand power and reach becomes theirs by extension.
Many products on Daraz are sold by multiple sellers. This incentivises competitive pricing. Sellers are directly competing with each other ensuring Daraz offers price-competitive solutions to consumers.
4. Daraz provides sales analytics and other product related data, helping sellers to optimise their product and price structure.
If the past three years have seen Daraz Bangladesh achieve the level of success it has, it seems all but certain that the next three years will see it rise further still. Digitisation has taken a hold of Bangladeshi commerce with Daraz at the forefront of this transformation. The only way to go from here is up.
Dr Jonathan Doerr is the CEO of Daraz.