Daraz, one of the largest e-commerce companies in Bangladesh, has recently had its biggest promotion event 11.11. The platform posted Tk 190 crore in sales during the daylong campaign. On the occasion of its single largest promotion, we spoke to Bjarke Mikkelsen, founder and CEO of Daraz Group. He shares his vision and thoughts for Daraz in Bangladesh with Shahriar Rahman from The Daily Star.

DS: How did Single Day go in Bangladesh and other regions?

Mikkelsen: It was a very good day for us. We had a total of about 14 million shoppers that came to the platform on the date. It is by far the highest that we've ever had. At a group level, it is more than about 130 per cent higher compared to what we did last year on the same day.

In Bangladesh, we had about 5 million people coming to the platform and also almost doubling the number of orders. What excited me most was that we had 20,000 active sellers in Bangladesh who were selling on the platform on the day. Interestingly, out of them, 55 per cent actually joined during the pandemic.

DS: The pandemic accelerated the growth of the e-commerce industry in Bangladesh. How was Daraz able to fare during this period?

Mikkelsen: During the pandemic, understanding the need of the market, we initiated a seller stimulus programme. As we all know, during the lockdown, SMEs were suffering immensely. Our stimulus programme enabled these sellers to sell on Daraz commission-free for three months.

We provided all kinds of special support to those who were struggling in the market. There was a lot of handholding to make sure they could make the best out of the platform. So, for me, it was the biggest success that, out of our 20,000 active sellers, actually 55 per cent came during the pandemic. It just shows that our stimulus programme of trying to help businesses through the pandemic actually worked right. I think this is just a proof that the digitalisation strategy of the Bangladesh government has started to bring about the desired impact.

DS: What are Daraz's key priorities in the coming days? What strategy would it follow as the market is slowly maturing in Bangladesh?

Mikkelsen: The core strategy is still the same: it is about growing our core e-commerce marketplace. In order to grow our core e-commerce marketplace, we need to bring more customers and more sellers onboard. We also have to make sure that they all have a good experience and that they trust the services that they receive.

When you see services like the dMart, the Daraz Mall or Digital Sheba, it is all part of that strategy. It is just about thinking in terms of user experiences instead of thinking in terms of categories. We made that shift a couple of years ago. This was actually one of the big learnings from Alibaba.

We agreed that we should not just think about our categories like electronics, fashion or home appliances. Instead, we should really think about user experiences. Some users prefer to go to mall and some prefer to go to the market. We need to be able to provide a solution for both of them. So, when you see these channels and these concepts on the platform, it is all part of our long-term marketplace strategy to create an integrated community on our app, but with different user experiences.

We also want to continue to drive logistics efficiencies and really build a cost-efficient ecosystem that can be scaled up. It is because we are still a loss-making business and we're not going to make any profits for probably at least another three to four years. In order to become profitable or break even, we need to continue to drive down the logistics cost and become more efficient.

We are also focusing a lot on digital payment. We are doing quite well in digital payments. More than 55 per cent of our sales during this campaign were digital payment. We will continue to integrate this digital ecosystem and allow customers to store credits on our platform which is going to be convenient, safe and efficient.

DS: In 2020, Daraz announced investment of Tk 200 crore in strategic infrastructure and logistics. How has it impacted business and operation?

Mikkelsen: We are still investing a lot in infrastructure and logistics. Part of it is going into building the biggest fulfillment centre in Bangladesh. We are also building the biggest sortation centre. We spent most of our time, energy and capital in the last couple of years so that we can scale up this business because e-commerce is far from being mature. We think that e-commerce can be 10-20 times bigger over the next five years. That is why, we have invested in building a foundation that can allow that scalability.

A good portion of the investment is going into salaries. In Bangladesh, we employ 8,000 people. Of them, 5,000 are managing the logistics side, 2,000 warehouse operators, and about 1,000 work in our Dhaka headquarters.

DS: How big is the e-commerce industry of Bangladesh right now?

Mikkelsen: We were looking at the numbers a couple of days ago about the e-commerce market size. In Bangladesh, it is probably between 1.5 per cent and 2 per cent of the total retail market. In Indonesia, it is more than 20 per cent and is expected to grow up to 35 per cent by 2025. If we are only less than 2 per cent, then there is a lot that can be done.

We are now starting to see integration of e-commerce services as a part and parcel in people's lives. We are also trying to break free from the idea that e-commerce is about cheap products. It is not about discounts or vouchers. E-commerce is about services and helping people so that they can have an easier life and can have meaningful digital engagement. It is about having an experience that you can share.

DS: The recent fiasco in the e-commerce industry has led to a lack of confidence in e-commerce among the mass people. What is your opinion?

Mikkelsen: Ups and downs are normal in any businesses. Unfortunately, what happened here was not normal. But I always believe in market correction. There might be lack of confidence now, but in the long term, people will eventually see that e-commerce is not about unrealistic discounts or a fraudulent scheme.

Everyone now knows that those kinds of business are not sustainable. E-commerce is and should always be about services. This noise in the market is sort of a catalyst of the fact that we need to shift the focus from discounts to enriching the lives of customers through the digital ecosystem of e-commerce platforms.

DS: In order to bring more transparency and accountability to the e-commerce industry, the government has introduced several regulations. What's your thoughts about them?

Mikkelsen: I think regulation is good and it is really good that the government is focused on this now. I think we are all a bit late and should have had these discussions five years ago. But what makes me very optimistic is that the discussion is happening with the private sector.

I think the government also needs to recognise that e-commerce is still at its infancy in Bangladesh. There's a misconception because we are showing good numbers, but it must be kept in mind that e-commerce operates in a business model that will only make money when it is operated in a very large scale. It will take years for us to get there. So, whatever regulation is put in place, it needs to recognise that and allow us to scale up.