E-commerce to grow further, but needs policy support: Daraz MD

Shamim Jahangir

2 June, 2021 12:00 AM printer

E-commerce to grow further, but needs policy support: Daraz MD

Daraz Managing Director Syed Mostahidal Hoq

E-commerce is on the constant rise in Bangladesh market. During the pandemic, an increasing number of people are taking online shopping service. Daraz is a leading online shopping platform in Bangladesh. Its Managing Director Syed Mostahidal Hoq was recently interviewed by Daily Sun Business Editor to talk about the e-commerce sector and its growth in the country.

Daily Sun (DS): How is Daraz performing in Bangladesh online market?  

Syed Mostahidal Hoq (SMH): In 2020, the market size of the e-commerce sector was around $800-900 million, out of which, Daraz dominates more than 65 percent in terms of orders, 50 percent in terms of volume, and 40-45 percent in terms of value. Every day we make more than 1.5 lakh deliveries from Daraz. The company registered 130 percent growth in 2019 and 70 percent growth in 2020. However, the growth rate was the same in 2020 in terms of the total number of orders we received.   

DS: What reasons do you think are behind such growth of e-commerce in Bangladesh?

SMH: There are so many factors responsible for the growth here. Connectivity and smartphone penetration has increased in the last 2-3 years because of government steps and policy-wise support, which have contributed to the growth of the e-commerce sector. We receive almost 95 percent orders through the mobile apps. This pandemic has, of course, expedited the growth as people now prefer online buying instead of going to the malls. The traders are also focusing on online market and offering good services as they are not getting adequate customers offline. All these factors combined have helped the e-commerce sector grow in our country. 

DS: The government is going to place a budget for the FY2021-22. Do you have any expectations in the budget for the e-commerce sector?

SMH: Yes! In order to sustain the growth, we need tax exemption support as this is a growing industry. We need patronisation from the government. With the supports, we hope to make better contribution to the country’s GDP and economy.

DS: Daraz says it is the no: 1 online shopping platform in Bangladesh. Why do you think Daraz is the best?

SMH: The main reason is the top-notch experience provided by us to the customers relying on high-end technology. Daraz is built on the latest technology used by Alibaba. The customers will never get the same kind of experience they enjoy on Daraz in any other platform because our app is built on AI technology that offers a personalised experience to the users. Second, we have a product base of 1.70 crore – no other e-commerce site is even near to us. Third, our very own full automated logistic network is very strong, and we are capable of delivering our products throughout the country. Owing to all these reasons, we are far ahead of the competitors operating in the country.

DS: Although you claim the products are delivered in three and half days, a recent report suggests that you delivered an order after 16 days, and also the delivered product was a different item from the ordered one. How did it happen?

SMH: The processing of the products is done manually, and the warehouses of the supplier are not under our control. As we deliver more than 1 lakh orders every day, it’s very usual that there can be some mistakes. Nobody can guarantee that there will be 100 percent precision when you are dealing with such a large number of orders.

Mistakes, in many instances, are unintentional. These things can happen. We are still constantly trying to cut down the rate of such errors, which is now below 0.5 percent. Also, whenever there is an error, we have a team at Daraz who promptly respond to the customers’ complaints. We also score the sellers, which helps us keep track of the quality service the customers expect from us. As far as delay is concerned, it may happen in case of imported products or network disruption. Otherwise, we always deliver within our promised timeframe.

DS: How do you deal with such unexpected situation?

SMH: We are the only e-commerce site in the country that offers an instant refund if the customer is not happy with the product quality. We do this because customer service is of the utmost importance to us. In the last one and a half years, all our projects have focused on improving customers’ experience. We have established such a large logistics network just to ensure a better customer service.

DS: Is Daraz’s service available in the upazilla levels?

SMH: We have our set-up in some of the upazillas as well. But we usually provide our services in most of the upazillas through the third parties.           

DS: Daraz has recently acquired HungryNaki. How is its performance in the Bangladesh market?

SMH: We took over HungryNaki in February. We do not make alchemical changes overnight all of a sudden, rather we make progress gradually. We also have the same plan for HungryNaki. As Daraz is operating all around the country, eventually HungryNaki will also be expanded throughout the country. We are also working on the technological development of HungryNaki. Of course, it will take time.

DS: Daraz can be hailed as a first-generation e-commerce site. What will you say to the newcomers in this sector?

SMH: The market of this country, as well as the retail industry, is huge. So, there are lots of opportunities here in e-commerce sector in Bangladesh. I would suggest any new entrepreneur to have a clear understanding of his/her business USP and try to ensure a good customer service. Then, everyone should know about his/her customers target and what kind of value his/her business will add to the customers. A major financial backing is also a vital component as it takes quite a lot of time to generate profit in the e-commerce sector. As an entrepreneur, you must have that commitment to sustain that long.      

DS: You said that Daraz is still not profitable. What is the main reason behind this?

SMH: We take commissions from the sellers. But, as this is still a growing industry, most of our services are subsidized. Owing to such subsidized service, we are currently not making profit. When e-commerce will be part and parcel of everyone’s life and 25 percent of the population will be e-commerce customers, we might earn some profits. I think it will take at least 5-6 years more to move towards that.

DS: Do you think the sector needs policy support by the government?

SMH: Yes. We want policy-wise, and tax-related supports from the government as the additional VAT and tax increase our liability.

DS: Thank you.

SMH: Thank you.