After a stuttering start, Rocket Internet’s Daraz ecommerce marketplace is finally poised to take off

Just last week, the German startup dynamo Rocket Internet announced it raised its first round of investment for ecommerce marketplace Daraz. The site, originally launched in Pakistan in 2012, had expanded into Bangladesh and Myanmar earlier this year, following Rocket’s strategy of entering markets which it deems are underserved but hold potential.

The news couldn’t have come at a better time for the company.

For almost two years Daraz plodded along, trying unsuccessfully to capture the online fashion retail space in Pakistan. Performance was middling, at best, and customer service inferior to offline retail. Online shopping in the country had barely begun to make headway and consumers needed cogent reasons as to why they should alter their purchasing habits. Simply bombarding them with advertisements on their Facebook feeds or chasing after them as they browsed the web would serve as an irritant, rather than a compelling reason to transact online. Yet it continued to burn exorbitant amounts of cash on marketing, warehousing, employee headcount, and logistics.

More questionable was its delayed decision to move into higher volume categories such as smartphones, home appliances, laptops, and tablets. It had already, by incessantly spending money, raised enough brand awareness in the local market and should have aggressively scaled into all available product categories. From an outside perspective it seems Rocket Internet itself wasn’t sure of how best to position Daraz – comparisons to Alibaba, Tmall, and Amazon are drummed up now, but Daraz was a far cry from these aggressive giants in its formative years.

It’s difficult to ascertain who was calling the shots. The Samwer brothers – Rocket Internet founders – are known for their ruthless approach towards replication of successful models and strategy. Their conviction is to hire a bunch of well-educated, well-trained corporate executives who’ll subscribe to this view of scaling aggressively, sometimes even without rhyme or reason. It seems any localization of model or business strategy to account for variations of culture is not a priority. Daraz could very well have been fashioned after Jabong – Rocket Internet’s fashion-centric marketplace in India, which, by the way, isn’t exactly killing it either.

Structural overhaul

Thankfully, as Daraz entered new markets, there was the foresight to appoint a management team that would oversee the ventures as a group, rather than relying on individual co-founders in each country with little cohesion between them. Unsurprisingly, Bjarke Mikelssen, co-CEO of Daraz, tells Tech in Asia that growth in Bangladesh and Myanmar has been a lot faster when compared to the same trajectory in Pakistan. The fact that Daraz is now operating as a consolidated group helps, as well as the fact that they’ve adopted best practices from other ventures within Rocket’s family. The startup has also, from day one, had a clear focus on all product categories rather than a niche vertical, such as fashion.

There are rumors that Daraz is looking to expand its footprint into other countries. Bjarke declines to confirm or deny them, but says “it’s always on the strategic agenda to look for interesting markets around us.” When pressed further, he reveals it could be “Sri Lanka or Nepal”, but their key focus right now is to consolidate operations within the countries they’re currently present.

See: Want to be a co-founder at a Rocket Internet startup? Here’s one way

New investors, more responsibilities

The spiel of consolidating and strengthening operations is a constant theme throughout our chat. Bjarke seems confident, optimistic, and upbeat about the company’s future. He describes Daraz as a “super interesting project”, and says that with investment has come a “lot more responsibility,” presumably to deliver returns and create value for shareholders.

This investment round we’ve done is a milestone for us. Its very important for us, both internally as a company, as well as externally [for our shareholders]. The direction has always been that we want to be the number one marketplace for frontier markets. We’ve been focused on streamlining the machine and make sure people have a good shopping experience.