Chapter 10 rightly discusses a most important part of marketing: Designing Value. It also discusses ‘What does it mean to understand the customer?’ Daraz, one of the most popular and recognized brands in Pakistan, with digitalization at the core of its operations, understood that value cannot be created and communicated unless the consumer has been educated about the whole online shopping experience. With this insight in mind, the e-commerce giant launched a campaign featuring real-life Daraz customers in a nationwide TVC giving recommendations as well as educating the viewers on the key shopping tools. It did not stop here but raised the trust level with easy return and refund. In addition, it empowered the sellers and even introduced Daraz University – a platform where local sellers can learn online about viable and profitable ecommerce business practices. It created value, and it communicated value by placing the customer, in this case both the sellers and the buyers, at the heart of its business proposition and enhancing the trust among all three through education (Dr. Aamir Khan, Case Advisor).
Daraz is a term that every Pakistani today is well-aware of, and not just because they are the pioneers of e-commerce in the country, but also because Daraz since its inception has been working towards bettering the lives of Pakistani denizens. It began this impactful journey by making the term online shopping in Pakistan synonymous to Daraz.
The first online shopping service that the denizens of Pakistan witnessed was founded in 2012, as Pakistan’s first online fashion e-commerce marketplace. In 2018 the Daraz group was acquired by the Chinese e-commerce giant – Alibaba. This acquisition opened doors for interaction with teams across the globe from different cultures and countries, making Daraz a culturally diverse employer. It also provided the employees with new learnings and opportunities for career growth and increased international exposure. The Alibaba partnership further provided Daraz an access to the former’s advanced systems and technology which added value to the experience for the company’s employees.
With time as Daraz transformed into an eco-friendly employer by moving towards solar solutions to save energy and smart trash disposal. At the same time, as a business it revamped the Pakistani consumer behavior to shift from in-store purchases to online buying. Presently, Daraz is shaping the world of app marketing with the Daraz app for the local buyers and sellers.
As the world gets more and more digitalized, numerous mobile applications compete for space within the users’ smartphone but only few win the race. While generally people are very selective in downloading and allocating space to these applications, those which win are the ones that people find to be the most relevant and needed to their lifestyles. Daraz brought about a shift in the local buyer and seller behavior as it moved towards app marketing from promoting its online marketplace eco-system.
For the company, the main objectives of app marketing are derived from its business’ Unique Selling Proposition (USP) and business innovation goals which are development of Convenience and Choice platforms. Both objectives are measured by the two of the most important metrics for app marketing:
App Downloads: The number of unique downloads of the Daraz mobile application. This represents Daraz’s USP of being a platform of consumer choice.
Monthly Active Users (MAU): The number of customers who actively use the app on a month over month basis. For Daraz, an active consumer base represents the convenience it provides for online shopping.
Daraz’s app marketing strategy is divided into two core bifurcations: Acquisition based marketing and Retention based marketing. The company strictly ensures that within each division there are separate channels ensuring a spectacular performance that is driven by results.
Acquisition Marketing is the process for prospecting and acquiring customers. In the world of digital marketing, customer acquisition is the process of bringing new users and
consumers to your business/application via downloads and purchases. The goal of this process for Daraz is to create a systematic, sustainable strategy for constantly growing the user and consumer base through a given period of time.
Retention Marketing is a marketing process that focuses on the current consumers of the Daraz app with strategies in place to bring back users who have already purchased with Daraz through continuous engagement with them on a month - on - month level.
By placing these strategies at place, Daraz was able to direct the growth towardsits app while keeping an eye on the changing consumer behavior locally of its sellers and buyers.
With the online marketplace Daraz’s primary focus was on its two key stakeholders: the sellers and the buyers. But as it shifted towards app marketing, the fundamentals changed, and it focused primarily on buyers. And with this shift, Daraz was determined “to give a strong enough reason to its audience to download the application”. Undeniably, it is by educating the shoppers towards online and app-based shopping that Daraz enjoyed the unprecedented growth it experienced, but one wonders what all has the company been doing for its buyers?
Building the Buyer Trust
While Daraz provided the online customers with an easy and personalized solution for online shopping with its assortment of approximately 20 million, the one facet that made online shopping a cumbersome business process in Pakistan was the lack of trust customers had in online shopping itself. As a result, customers were hesitant to purchase online. To cater to this dilemma, Daraz used customer insights to rescue its business model. According to the insights gathered by Daraz, Pakistanis depicted a generalized behavior when it comes to trusting brands in the country. The local consumers showed the tendency to trust brands that are big in stature, operations, and scale.
Hence, Daraz decided to showcase the true size and scale of the company and its business in Pakistan through a nationwide campaign. The campaign amassed huge success for Daraz where the business witnessed a 53% growth in new customers in 2020 vs. 2019, a 41% growth in installs during the campaign period compared to non-campaign period and an 18% improvement in positive App rating month over month that year. By instilling the trust in Daraz for the buyer, the company changed for itself how shoppers in Pakistan viewed it, online shopping and App-based shopping.
Apart from the campaign mentioned above, Daraz built the buyer trust further by digitizing and automating delivery for shortened lead times and increasing the trackability of orders which strengthened the confidence of customers in Daraz and encouraged them to buy more from Daraz and its sellers.
Creating A Smart Shopper
While Daraz built consumer trust, it faced yet another hurdle – lack of customer awareness with respect to having a wholesome online shopping experience. Shoppers in Pakistan are still in the nascent stage when it comes to the level of education and awareness on how to smartly shop online. Often the buyers of Daraz ended up with below par experiences with a handful of sellers on the Daraz app because of their lack of knowledge on how to smartly utilize the key features made available for shoppers to ensure a good shopping experience.
In September 2020, the e-commerce giant launched a campaign featuring real life Daraz customers in a nationwide TVC who gave recommendations as well as educated the viewers on the key shopping tools and insights offered in the Daraz app and explained them in great detail. The TVC covered features like checking “Seller Ratings” to have a trustworthy review of the seller, using “Seller Chat” to get complete information on the product and ordering from dMall to avail authentic products with easy 14-day return policy.
After the campaign Daraz experienced a steady 30% growth in buyers, a 37% increase in orders and a 64% in Gross Merchandise Value (GMV) for its DarazMall channel. Apart from that, the campaign was a stellar success for the company because it showed that the products related complaints decreased by 40% Month on Month in the year 2020.
Strengthening the Customer
Apart from building the buyer trust and educating them to shop smartly, Daraz has also strengthened customers through various initiatives including:
Easy return and refund process for customers within 7-14 days
Virtual refunds for all orders below Rs. 750
Option for return pick-ups in Karachi, Lahore and Islamabad
With the above-given initiatives Daraz was able to decrease the quality return rate to less than 2% with complaints per order going down to as low as 0.7% in 2020.
But would we expect this e-commerce giant to stop here? Definitely not and as it has been proved it did undertake take other key steps to make sure customers have a smooth experience on Daraz. The first major initiative was to ensure that sensitive categories were restricted and sellers that do not comply with company policies were actively delisted from the platform. Additionally, Daraz also enforced what it calls the scorecard system. The scorecard system is a systematic process to be followed by sellers where they have to maintain a certain threshold to be able to continue selling.
While App marketing initiatives required Daraz to focus more on the business’s customer, one is left wondering if Daraz remembered to be true to its roots and operate as the sellers’ marketplace that it is. Being the revolutionary giant, the organization is, and while it sparked a change in the buyer behavior, it did ensure to empower its other set of partners and stakeholders – the local sellers.
Empowering the Sellers
Since Daraz is a seller marketplace, it provides a platform to local entrepreneurs to start their business online from any geographic location in this digital era and reach out to a customer base of millions through Daraz App. With Daraz and its app, sellers have access to a user base of millions who visit Daraz for anything starting from entertainment to shopping for essentials along with a wide category to sell in.
It is this simplicity of starting a business online and the ease of finding customers that is represented by the numbers Daraz achieved in 2020 with respect to its seller base. It has a total of 90,000 registered unique sellers on Daraz out of which an average of 30,000 active sellers on a monthly basis. Alongside, 50,000+ sellers also signed up on Daraz during this time.
Being a responsible business entity, Daraz is amongst those handful of local e–commerce companies that understand the importance of equipping the most integral part of a marketplace – sellers – with knowledge. Daraz staunchly believes in empowering the platform’s sellers which is why it took the initiative to provide them with access to world class technology supported by Alibaba Group. This tech support includes provision of insights into business performance and Daraz University - a platform where local sellers can learn online about viable and profitable ecommerce business practices. With Daraz University, the company empowers small and big entrepreneurs to educate themselves on online selling and buying.
One of the pitfalls of online shopping for a seller is order cancellation. Canceled orders amass a huge loss for sellers and often deters businesses from operating online. This dilemma was one that Daraz was quite aware of and hence, to strongly support its sellers and to build their confidence, Daraz increased its financial inclusion and introduced prepayments. This move led Daraz to experience an 85% growth in digital payments in 2020 vs. 2019. With 33% customers paying through digital payments with a year on year increase of 1.5 times and an order growth of 1.9 times in the year 2020, Daraz was able to provide its sellers and brands the security of less order cancellation as there is a higher chance of orders being cancelled with cash on delivery.
Supporting Pakistan through the COVID Pandemic
As consumers across the globe grappled with the Coronavirus pandemic, so did the consumers in Pakistan. With the shift towards online selling and buying and the lack of understanding of it thereof, Daraz was quick to support its sellers during the Covid-19 pandemic. For its huge seller base, Daraz launched the Humqadam Program. The program was designed to provide unequivocal support to 5,000+ Small and Medium Enterprises (SMEs) by special initiatives such as 0% commission for a period of two months.
Not forgetting its buyers during the coronavirus pandemic, Daraz enabled the customers to stay at home and shop online when the brick and mortar market was under complete lockdown. Daraz’s dMart and dFresh services ensured that customers could easily order groceries while at home. The initiatives were such a huge success that throughout the year 2020, the grocery category had one of the highest years on year order growth of 59%.
During the daunting times of the pandemic, Daraz steadfastly stood up and besides for the Pakistani populace that struggled economically. Daraz collaborated with 30 partner Non-Government Organizations (NGOs) with an average donation per person of $17. Donors popularly sponsored meals and ration packs. The platform was also open to international donations through a partnership with Visa and Mastercard. In April 2020, Daraz witnessed a growth of almost 400% in the charity and donations that were made online through the Daraz App for COVID affectees, enabling them to support Pakistan as always.
Questions to stimulate conversation on the case
- How did Daraz ensure that customers trust its online business model?
- How did the Daraz prepare sellers to sell online especially during the COVID-19 pandemic?
- What factors in the online marketing environment not mentioned in the case could assist Daraz in enabling its sellers and buyers?
Links and media
Website: https://www.daraz.pk/