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Term Report (Daraz.Pk) Ter m Report (Daraz.pk) By M. Farhan Jawaid (18529) Supply Chain Management Submitted To: Sir Faisal Jalal TABLE OF CONTENTS COMPANY INTRODUCTION ................................................................................................................... 2 WAREHOUSING AND LOGISTICS .......................................................................................................... 3 CHALLENGES ............................................................................................................................................ 3 PAYMENT COLLECTIONS AND DISTRIBUTION TO SELLER........................................................... 4 DELIVERY OF WRONG PRODUCTS....................................................................................................... 6 ROLE OF IT ................................................................................................................................................. 7 CONCLUSION ............................................................................................................................................. 7 REFERENCES ............................................................................................................................................. 8 1 COMPANY INTRODUCTION Daraz.pk is the pioneer of the online retailing in Pakistan. It has its operations spanned over five countries including Pakistan, Bangladesh, Sri Lanka, Myanmar, and Nepal. Back to the date, Daraz.pk started as an online fashion retailer started by a group of friends wanting to tap into the online market in Pakistan. From an online fashion retailing company, soon daraz.pk evolved as an online marketplace for general items featuring branded products from different well-known brands in Pakistan. Daraz.pk entered the market when there were no established patterns for online retailing in the country, the consumers were less aware of the online channels and how to the things happen in an online setting. The sellers are spread over various geographical locations and so are the customers. Therefore, Daraz.pk’s model is highly dependent on the logistics and warehousing it performs. In addition to that, the suppliers/sellers in Pakistan mostly consisted of the people who gets involved into the unfair practices of selling their products for example, delivering something else while the ad was shown for something else, delivering low quality product, delivering used products and so on. Daraz.pk has suffered a lot due the wrong doings of the third-party sellers and for this very reason people start losing faith in the online shopping. The scars this left has yet not been recovered fully. In the following report, I would highlight some of the challenges daraz.pk has faced and/or is facing and how the company has been able to cope up with those challenges. Seeing the potential of Pakistani consumers, and no threat of established competitors, Chinese Alibaba group acquired the company for $14 million in 2018. Soon after its acquisition, Daraz.pk has undergone drastic changes in the way it operates and in the way its management is done/handled. 2 WAREHOUSING AND LOGISTICS For a better reach to its customers, deliver the product on time, and to have lower costs on products it is essential for any company to have the product in hand, acquire it in large quantities and procure it at places that is near to customers and the company owns or at-least could have a watch on. Primarily Daraz.pk completely operated on a 3PL model of logistics and warehousing, where the product was sold somewhere, procured by someone else, and delivered by any third-party logistics company. CHALLENGES Challenges in the warehousing and logistics are 3 dimensional. Few are mentioned below: . Firstly, the company required to have tones of capital to acquire its own warehouses . The company had to have another handful of investment to fill the warehouses . A team (trained and trustworthy) needs to be kept in charge for looking after the warehouses . Company was highly dependent on third-parties . A software to be incorporated with the third party handling the logistics . Product deliveries getting late . Packages were being lost . Finally, logistics companies’ failure to carefully handle the products. All added together, a huge amount of capital was needed to carry out the aforementioned activities. Fortunately, what came to daraz.pk was the acquisition offer from the well-recognized Chinese Alibaba group (pioneer in online retailing in China). The Alibaba group brought up with them the 3 experienced personnel, tones of capital, a software named Lazada Logistics Management Solutions, and trained not only the company’s staff but also the logistics company’s staff over handling of the products. Now, the company owns . Its own warehouses in more than 30 cities across Pakistan, . A logistic company named Daraz Express (DEX) for delivering the product from point of origin to the point of consumption at lower costs . On-time deliveries . Negligible package losses . A software tool incorporating the logistics data (Lazada) . A management having experience in online retailing . Collaborations with brands . A team to respond quickly to the conditions . Daraz Mall The set of above capabilities has enabled smooth running operations for the company, profit margin has increased and the company’s reputation has strongly grown. PAYMENT COLLECTIONS AND DISTRIBUTION TO SELLER One who sales his/her product wants the payment to be in hand at the earliest. Sellers were therefore eager to get their payments against the sold products, but the inconsistency remained in the processes. Yet on the other hand, it is difficult for an online setup to get the Cash-on-Delivery 4 (COD) payments under predefined framework/timelines, as the COD payment only comes into the hands once the product is delivered to the end customer. The payment is then sent to the seller once the logistics company pays Daraz and Daraz has completed its own payment cycles. The sellers in response were getting demotivated due to long payment cycles and other related issues. The company then defined a clear-cut method and timelines to pay their sellers against the sold products, and offered discounts to customer on paying digitally by collaborating with banks/digital payment platforms in Pakistan. The inception of DEX had also helped in better collection of the payments, as Daraz gets the amount of COD payments directly into their hands rather than the third-party logistics. In response, the company is now able to collect the due amounts in shorter cycles and pays the seller in a week or so. The below diagram is a demonstration of the cycle of operations for Daraz, which also shows the payment cycle. 5 Payment reaches to daraz, daraz keeps its Seller commission showcases the and forwards products the remaining amount to the seller If payment method is Buyer COD logistic purchases person the required collects the product payment Logistic company picks the Warehouse package from prepares the warehouse package and and delivers dispatch to the customer DELIVERY OF WRONG PRODUCTS Unfortunately, in Pakistan, many corrupt practices exist in retail business, and the place at which you have less visibility of the retailer then he/she might not take a second to go against your trust. So, does the sellers at Daraz.pk by delivering wrong products to the customers, delivering low quality products, and so on. The Daraz management was facing fierce backlash due to these corrupt practices of the third-party sellers and still the scars haven’t gone. In order to cope with wrong deliveries, daraz management have put in place a return policy, where the customers could return the product if it is not as per the defined ad on the website. 6 The issue of wrong deliveries has settled up to an extent, but no one could expect it to get fully resolved. Amazon.com had been facing the same issue though being the global leader in online retailing and even after operating for years earlier than any other online retailer. ROLE OF IT Online retailing is all about Information Technology, though it is about creating an account on the desired website, choosing the product, displaying the product, delivering the product, being cost efficient, incorporating the big data, identifying the loopholes/glitches and so on and so forth. A few of them identifiable are: . Website development, . Software application development for Android/Apple and other devices, . Incorporating the big data, . Collaborating with the partners and other channels involved, . Delivering the right thing to the right place, . Locating the seller and/or customers, etc. At any and every point in the selected organization, IT plays a vital role. It won’t be wrong to say that this organization is completely dependent on the Information Technology (IT), wherever and whenever its IT functions collapse or don’t cope up with the pace the company would suffer. CONCLUSION The well-thought idea of creating its own logistics services (Daraz Express – DEX) by Daraz management has returned to the company in many ways, some of which are evident while many 7 of the inherited benefits remains hidden. The company due to this has been able to perform smooth logistics operations without being dependent on any third-party (the product deliveries are not completely handled by DEX currently, but the major portions is handled by DEX), shorten the payment cycle for Cash-on-delivery (COD) parcels, reduced the amount of or risk of package losses, lower the cost of deliveries, on-time deliveries, safe handling of products, incorporation of data, and so on. REFERENCES About Us - Daraz.pk 8 .
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