KARACHI: Restaurants in the United States are known to lure customers in with food and then sell them liquor, which has a far higher profit margin than food.
Daraz seems to be doing something similar these days: it’s letting its customers watch the ICC T20 World Cup free of cost on its app, which is otherwise an online shopping platform.
As a result, it’s expecting the number of active monthly users of the app to “more than double” on a month-on-month basis to 30 million in November. The shopping app, which claims to be the biggest player in Pakistan’s ecommerce market, had 15m active users in October.
“We’re expanding in scope. We don’t just want to be a one-dimensional shopping app. This can be something that repositions Daraz,” said Daraz Group Chief Commercial Officer Jan Poter while speaking to Dawn in a recent interview.
But what does live-streaming cricket matches have to do with a shopping app meant for the buyers of meat, t-shirts, cell phones and books?
Despite eye-popping numbers, online platform still running in loss
It’s supposed to be a prelude to something else. Based on an innovation in online shopping originally introduced and popularised by the company’s sponsor in China, Daraz recently launched an “in-app shoppable live stream”.
What it means is that a seller in Zainab Market can just open his phone and sell his products while customers watch him live. The user doesn’t have to go out of the live stream to add products to their shopping cart. “Selling online through clicks was last year’s story. Today’s story is live-stream selling,” he said, adding that no other online shopping platform offers in-app shoppable live-streaming right now.
This business segment is getting so popular in China that Mr Poter believes it’ll soon constitute a 20 per cent share in the Chinese ecommerce market. “It’s super-engaging like TikTok. People always come back for the experience.”
Mr Poter said Daraz has a 40-45pc share in Pakistan’s “addressable market” that he believes is worth around $1 billion. The app has about 100,000 sellers offering 25m products for sale, up from 15m products in the same month last year.
He said the average number of orders ranged between 4,000 and 8,000 a day back in 2017. “Now the daily average is 11 times higher,” he said. The average item value hovers between $7 and $13, although there’re multiple items in a single order.
“Historically, we’ve had a high average order/average item value because the share of electronics (in total sales) was higher. We want this number to come down,” he said, noting that the company is pivoting more and more towards selling groceries and fashion and lifestyle goods.
But unlike its relatively small and new competitors like Airlift and Pandamart that promise to deliver groceries within hours (if not minutes), Daraz’s D-Mart takes considerably longer. It may deliver your groceries the same day in case you place the order before a certain cut-off time. But in other cases, groceries arrive the next day.
“What a lot of people don’t think about is the infrastructure that you need and how costly that is. Can you ever be profitable with something like that?” he said, noting that his company is trying to achieve “assortment breadth,” not quick delivery.
Despite eye-popping numbers, Daraz is still running in loss in Pakistan. Mr Poter expects it to achieve breakeven “in a couple of years” while emphasising that the company is investing money for long-term returns.
“It’s a deliberate strategy. If we decide, we can become profitable tomorrow at the expense of certain growth that we’re pursuing. It’s about pushing just a few buttons, creating a few tweaks here and there. But the idea is to build a robust customer base. We’ve achieved close to triple-digit top line growth in the last couple of years,” he said.
Published in Dawn, November 14th, 2021