Bjarke Mikkelsen had a well-paid banking job in London. But he was not happy. The job did not allow him to make a difference in the lives of millions of people; and that he was vested in.
Eventually, he began researching various business models around the world, and realised that South Asia is a potent market well-developed for e-commerce with a large target group.
Bjarke is the founder and CEO of Daraz Group. Although Daraz started its journey as an online fashion retailer in Pakistan, it is now the leading e-commerce marketplace in South Asia, with a presence in five countries (Pakistan, Bangladesh, Sri Lanka, Nepal, and Myanmar) and over 500 million customers - experiencing the highest growth in Bangladesh and Sri Lanka.
During Bjarke's recent visit to Bangladesh, he spoke at length with Arafat Reza of The Business Standard about how the pandemic has impacted their growth, how he plans to further expand their business in Bangladesh, and what they are doing to improve user experience, among other things.
A new chapter in Daraz Group's history was written when it was acquired by the Chinese e-commerce giant Alibaba Group in 2018. Can you tell us what led to this acquisition?
John Michael Evans, the President of Alibaba, was a senior director at Goldman Sachs, where I previously worked as an executive director.
I contacted him, we started talking, and eventually, the relevant authorities at Alibaba were impressed with our management team, the business model, and the markets in which we wanted to expand. So, there were a lot of good reasons to do something together.
I thought we could bring them in as a smaller investor and then form a partnership, but they said they wanted to buy the entire company much sooner than I expected. That was the beginning of our journey with Alibaba.
You reportedly lead a team of over 10,000 employees. How do you successfully manage such a large and diverse team day in day out?
Having a personal connection with everyone involved is important to me, as is constantly innovating with the mindset that what is good enough today will not be good enough tomorrow.
Then, I want to make sure that we keep every promise we make. I also want to make sure we are held accountable. Finally, it is about the generosity of spirit, which means always going above and beyond our responsibilities, both internally by helping our colleagues and externally by giving back to the community.
Running a business is actually not that difficult. You can run the business when you have an established team and you have a plan backed up by vision. But what is most important and challenging is building a connection with everyone involved. I think we have been able to do so both internally and externally.
We trust each other, and our customers trust us, this has resulted in exponential growth for our company in a short period of time.
What has been the impact of Covid-19 on Daraz thus far?
When there were widespread lockdowns, there were initially short-term logistical issues due to disruptions in the supply chain and deliveries. But on the other hand, because of the emergence of the pandemic, more people are now ready to adopt digital services.
Around 14 million shoppers visited our platform during our recent 11.11 campaign. It is by far the highest we have ever experienced. Compared to the same day of last year, it is more than 130 percent higher at a group level. We had approximately 5 million visits from Bangladesh, nearly doubling the number of orders.
Daraz initiated a seller stimulus programme during the pandemic. In what ways do you believe it has helped sellers?
For all new sellers who wanted to come on board, we expedited the onboarding process, making it easier for the sellers with more help and support, and a zero commission fee for the first three months.
A lot of sellers came to the platform during the pandemic. One interesting statistic of our 11.11 sale is that we had more than 20,000 sellers and 55 percent of them came on through the stimulus package. So, that is a big success story for us.
What steps are being taken to improve the overall customer experience?
Customer service is a topic that is often misunderstood. We think of it as the end-to-end supply chain. One, you will have to focus on product quality. Two, you need to focus on seller operations.
One of the things we have spent a lot of time and money on this year is ensuring that Bangladeshi users can have the full experience of using our app in Bangla, which means that not only the navigation and categories but also the reviews, product content, and everything else are translated in the native language for them.
This is something we have learned from Alibaba. I am confident that being able to provide users with a fully localised experience in their native language will go a long way toward ensuring our long-term success here.
To reach the rural areas, we created a new version of our app called Daraz lite, which is less than 5 megabytes in size.
We are also building more than 100 Daraz villages in collaboration with a2i where we provide internet and infrastructure to a village so that people can come in and learn about e-commerce. They can also come in to place orders or become sellers. In the next phase, we are looking forward to creating more than 1,000 Daraz villages.
How can consumers be protected from scams in the e-commerce industry?
The recent e-commerce scandals that have taken place in Bangladesh are out of the ordinary, to say the least. But, if I had to find something positive in this, I would say that it has demonstrated to the market here that e-commerce cannot be about making quick money or unsustainable discounting. Rather, it needs to be about building long-term services that add value to sellers and customers.
To prevent such incidents from happening, some regulation and supervision are required. It has to be done in collaboration between the private sector and the government.
Daraz also engages in CSR partnerships. What significance do such CSR programmes have for countries in South Asia in particular?
CSR is important irrespective of the pandemic. I think of our initiatives not only in terms of CSR, but also in terms of ESG (Environmental, Social, and Governance) factors. First of all, there is the environment. 95 percent of our small packages are delivered by bicycles. We have not bought a single motorcycle in one and a half years. We are also using denim fabrics for packages instead of plastic.
As for the social component, this is similar to CSR. Here, we are trying to focus more on education and it will stay as our main focus in the coming years. Among other things, we are also doing blanket donations during the winter.
Finally, there is the governance element, which requires us to ensure that data is protected and that we always operate in a way that protects our ecosystem.
You have recently said in an interview that Daraz is still a loss-making business and to become profitable or break even, you need to continue to become more efficient. How exactly are you planning to achieve this? And finally, what are your plans for expanding your business in Bangladesh?
It takes time to become a profitable e-commerce marketplace, and this is not unique to us. It happened to platforms such as Amazon as well. It takes time to build the necessary infrastructure, user base, and seller base. Then finally, comes the question of profit.
There are two components that we are focusing on in terms of how we intend to get to the point where we can make a profit. One, driving down the logistic costs because it is the biggest cost that we have in the whole ecosystem. Then, we want to offer more value-added services to customers and sellers that we can charge for.
We absolutely love Bangladesh, and it is a wonderful market with enormous potential for us. We want to scale the business here. We already have plans in motion to achieve this.