Comsats University Islamabad, Lahore Campus

MBA 3rd Semester

Assignment Topic Daraz Case Study
Submitted To DR. Ghulam Hussain
Submitted By Taskeen Zafar (FA22-RBA-026)
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1. Describe/summarize the case in your own words.

This case study revolves around Daraz.pk, a prominent online marketplace and the foremost e-commerce
platform in Pakistan. The central theme is the difficulties Daraz confronts while trying to attract
international brands in a market that is becoming increasingly competitive locally and may soon see the
entry of well-established global players. The choices related to how to incorporate international brands have
significant implications for the logistics and supply chain management of the company.

Muneeb Mayer, the CEO of Daraz.pk, is pondering three different strategies for involving international
brands. The first approach entails creating an inventory of branded products via imports, a move that would
result in financial challenges such as import duties and inventory costs. The second option involves urging
brands to employ a distributor in Pakistan, from whom Daraz could source products, thereby introducing
another intermediary into the supply chain. The third possibility is to encourage brands to enter the Pakistani
market, import their inventory, and offer it for sale on Daraz without the need for a distributor. However,
this approach might discourage brands from investing in a new market.

The case also highlights Daraz's challenges with issues like late deliveries, product returns, and concerns
about product quality. Muneeb is anxious about the performance of the existing logistics models and the
potential impact of major global e-commerce players entering the market.

The study provides insights into Pakistan's e-commerce sector, which has witnessed significant growth
owing to increased internet penetration and the introduction of 3G and 4G mobile network services. The e-
commerce market in Pakistan was projected to exceed US$100 million in 2015. E-commerce activity is
primarily concentrated in major cities like Lahore, Karachi, and Islamabad.

Daraz.pk initially started as an online fashion retailer in 2012 but later expanded to encompass a wide range
of general merchandise, particularly high-value electronics. To alleviate the financial burden of maintaining
inventory, Daraz shifted its business model to a marketplace where sellers could set up virtual stores and
list their products. Daraz earns a commission for every sale through its website and offers online advertising
and promotions to larger brands.
Despite its success and a substantial customer base, Daraz has encountered intensified competition from
newcomers in the e-commerce industry. The company's long-term vision is to establish itself as the primary
destination for product searches in Pakistan.

To summarize, this case study provides an in-depth examination of the challenges and decision-making
process faced by Daraz.pk in its efforts to engage international brands. It underscores the pivotal role of
logistics and supply chain management in the context of a rapidly growing e-commerce market in Pakistan.

2. How this case relates to your classroom learning?

This case study about Daraz.pk's value chain and online retail logistics holds significant relevance to
classroom learning in several ways. Firstly, it provides valuable insights into the challenges and decision-
making processes associated with the management of an e-commerce platform. This aligns seamlessly with
topics covered in courses such as operations management, supply chain management, and e-commerce.

The case study underlines the trade-offs and considerations linked to various approaches for engaging
international brands. This connection is especially pertinent to the concept of strategic sourcing and vendor
management, both crucial components of effective supply chain management. Students can delve into the
advantages and disadvantages of each option and assess their impact on logistics, inventory costs, and
customer satisfaction.

Additionally, the case study throws light on the critical role of efficient logistics management within the
realm of online retail. It addresses issues like delayed deliveries, returns stemming from quality concerns,
and the management of surges in demand during sales events. These issues closely relate to discussions on
inventory management, order fulfillment, and the monitoring of supply chains. Students have the
opportunity to explore strategies for enhancing logistics performance, addressing quality issues, and
managing peak demand periods effectively.

Furthermore, the case study delves into market dynamics and trends within the e-commerce industry, not
only in Pakistan but also in India. This equips students with a broader perspective on the global e-commerce
landscape and the various factors influencing its growth. It aligns with topics such as market analysis,
consumer behavior, and international business.

Moreover, the case study traces the evolution of Daraz.pk from its origins as an online fashion retailer to
its current status as a general marketplace. This evolution underscores the significance of business model
innovation and adaptability in response to changing market conditions. It resonates with discussions
surrounding entrepreneurship, business strategy, and organizational transformation. In summary, this case
study offers a practical application of theoretical concepts typically acquired in the classroom. It empowers
students to analyze real-world challenges faced by an e-commerce platform and formulate strategic
solutions. By critically assessing the decision-making process and its ramifications, students can hone their
problem-solving and analytical skills, better preparing them for future roles in the fields of operations and
e-commerce.

3. Identify at least five major challenges which are faced by the Daraz.pk and suggest how these could
be addressed?

There are five primary challenges facing Daraz.pk, along with suggested strategies to tackle them:

Logistics and Delivery: Daraz.pk faces a challenge in ensuring efficient and punctual delivery of orders.
To overcome this challenge, Daraz can invest in bolstering its logistics infrastructure through partnerships
with reliable courier services and optimizing delivery routes. The incorporation of advanced tracking
systems and providing regular order updates to customers can enhance transparency and boost overall
customer satisfaction.

Quality Control: The document mentions issues related to late deliveries and returns due to quality
concerns. To address this, Daraz.pk can implement rigorous quality control measures. This may involve
collaborating with reputable suppliers and conducting comprehensive quality checks before listing products
on the platform. It is crucial to establish clear guidelines and standards for product quality and promptly
address any customer complaints or issues.

International Brand Engagement: Daraz.pk faces the decision of how to engage international brands in
the midst of growing local competition. One approach is to establish direct partnerships with international
brands, allowing them to import and sell their products on Daraz.pk. This necessitates building strong
relationships with these brands and offering incentives such as promotional opportunities and advertising
support to encourage their participation

Inventory Management: Effective inventory management is crucial for Daraz.pk to ensure a diverse range
of products is available to customers. Implementing a Vendor-Managed Inventory (VMI) system could
streamline this process. VMI involves close collaboration with suppliers to monitor stock levels, replenish
inventory as needed, and optimize product assortment based on customer demand and market trends.

Competition from Global E-commerce Players: Daraz.pk may face potential competition from major
global e-commerce players entering the Pakistani market. To address this challenge, Daraz.pk can
emphasize its unique selling points, such as offering a wide variety of local and international products,
competitive pricing, reliable customer service, and a user-friendly interface. Continuous innovation and
improvement of the platform's features and services can help Daraz.pk maintain a competitive edge in the
market.

In summary, by giving priority to logistics and delivery, ensuring stringent quality control, establishing
partnerships with international brands, implementing efficient inventory management, and remaining
competitive in the face of global players, Daraz.pk can effectively tackle these challenges and solidify its
position as a leading online marketplace in Pakistan.
4. What decisions you will take to bring the international brands on board and why?

There are three potential options for Daraz.pk, Pakistan's leading online retail platform, to engage
international brands. These options are:

Option 1: Establishing Daraz's own inventory of branded products through imports. This option provides
Daraz with greater control over the supply chain and establishes a direct relationship with brands. However,
it comes with financial burdens such as import duties and inventory costs, along with the need for substantial
investments in infrastructure and logistics.

Option 2: Asking brands to hire a distributor in Pakistan. This approach adds another entity to the supply
chain, potentially simplifying the sourcing process for Daraz. However, it may introduce complexities and
increased costs, and might limit Daraz's control over inventory, potentially impacting the overall customer
experience.

Option 3: Requesting brands to enter Pakistan, import their inventory, and sell it through Daraz without an
intermediary distributor. This option allows Daraz to maintain direct relationships with brands and control
over the supply chain. It may also encourage brands to invest in the local market, but it could be challenging
to convince them to enter a new market and make the necessary investments.

Muneeb Mayer, the CEO of Daraz.pk, must make an informed decision by evaluating the implications of
each option. Factors to consider include financial viability, operational efficiency, customer experience, and
long-term growth potential. Muneeb should assess the financial impact of import duties and inventory costs
associated with Option 1 and whether Daraz can absorb these expenses or pass them on to customers
without compromising competitiveness.

Moreover, Muneeb should analyze the potential benefits and drawbacks of working with distributors in
Option 2. He should consider the reliability, capabilities, and costs of distributors, as well as the impact on
inventory management and fulfillment processes.

In evaluating Option 3, Muneeb should assess the market attractiveness for international brands entering
Pakistan and the potential barriers they may encounter. He should also consider the value proposition Daraz
can offer to international brands, such as a large customer base, effective marketing, and a reliable online
platform. Exploring potential partnerships or collaborations with brands to mitigate risks and share
investments is also essential.

Ultimately, the decision should be based on a thorough analysis of the trade-offs between cost, control, and
market reach. Muneeb needs to align the chosen strategy with Daraz's growth objectives, customer
expectations, and competitive landscape. Regular monitoring and evaluation of the chosen approach will
be crucial to adapt to market dynamics and optimize the value chain.
In summary, selecting the most appropriate option to engage international brands on Daraz.pk requires
careful consideration of financial implications, operational efficiencies, and market attractiveness. By
evaluating these factors and aligning the decision with the company's strategic goals, Daraz can maximize
its potential for growth and success in the highly competitive e-commerce market in Pakistan.

5. What distribution and logistics arrangement are made by Daraz.pk? Figure out the problem and
suggest how these problems could be overcome?

As per the provided document, Daraz.pk, Pakistan's prominent e-commerce platform, has established a
distribution and logistics system for order fulfillment and product delivery. The case study delves into the
challenges and trade-offs associated with these arrangements and proposes potential solutions.

Daraz.pk was originally launched as an online fashion retailer but later transitioned into a comprehensive
marketplace encompassing various product categories, including electronics and home appliances. To
manage the distribution of these products, Daraz.pk adopted a marketplace model where third-party sellers
can create virtual stores on the platform to list their products. This model positions Daraz.pk as an
intermediary, connecting buyers and sellers without holding the inventory directly.

One of the key challenges encountered by Daraz.pk in its distribution and logistics operations is the
occurrence of late deliveries and product returns due to quality issues. This situation underscores the need
for enhancements in the efficiency and dependability of the supply chain. To address these challenges,
Daraz.pk can consider the following solutions:

Strengthening Supplier Partnerships: Daraz.pk should cultivate robust and dependable relationships with
suppliers and brands to ensure a consistent supply of quality products. This may involve rigorous supplier
assessments, the establishment of clear quality standards, and the provision of training and support to
suppliers to meet these standards.

Implementing Effective Inventory Management: Efficient inventory management is vital to minimize

stockouts and ensure timely order fulfillment. Advanced inventory management systems can be employed
to gain real-time visibility into stock levels, forecast demand, and automate replenishment processes.

Enhancing Last-Mile Delivery: Improving the efficiency of last-mile delivery is crucial for enhancing
customer satisfaction. Daraz.pk can explore partnerships with reputable courier and logistics companies to
ensure reliable and timely order delivery. Technologies like route optimization and real-time tracking can
be employed to streamline the delivery process.

Implementing Quality Control Measures: To address the issue of product returns due to quality concerns,
Daraz.pk should establish robust quality control procedures. These measures can include quality checks at
various stages of the supply chain, from sourcing to warehousing, and before dispatching orders. Clear
quality standards should be communicated to sellers, and products not meeting these standards should be
rejected or returned to suppliers.
Customer Feedback and Continuous Improvement: Actively seeking customer feedback regarding
delivery experiences and product quality is essential. This feedback can help identify areas for improvement
and facilitate corrective actions. Regular monitoring of key performance indicators related to distribution
and logistics can help track progress and prompt necessary adjustments.

By implementing these solutions, Daraz.pk can enhance its distribution and logistics arrangements, leading
to improved customer satisfaction, reduced returns, and increased operational efficiency. However, it is
important for Daraz.pk to continually evaluate and adapt its strategies to meet evolving customer
expectations and keep pace with the dynamic e-commerce industry.

6. What extra steps you would recommend the management on special sales occasions like 11.11, big
Friday?

During special sales events like 11.11 and Big Friday, the management at Daraz.pk needs to take extra
measures to ensure the success of these events and to maximize customer satisfaction. Here are some
recommendations:

Robust IT Infrastructure: It's crucial for the management to guarantee that the website and mobile app
can handle the increased traffic during these events. This involves optimizing server capacity, improving
load times, and conducting thorough stress testing well before the event.

Scalable Logistics Network: With the expected surge in orders, the logistics network should be ready to
efficiently handle the increased volume. This may require partnering with additional third-party logistics
providers, expanding warehouse capacity, and implementing advanced inventory management systems.

Pre-Event Marketing: The management should invest in extensive marketing campaigns to create
awareness and excitement about the upcoming sales events. This can include targeted advertisements, social
media promotions, and collaborations with influencers to reach a wider audience.

Exclusive Deals and Discounts: To attract customers, Daraz.pk should negotiate exclusive deals and
discounts with brands and sellers participating in the event. These special offers can incentivize customers
to choose Daraz.pk over competitors, resulting in higher sales and increased customer satisfaction.

Smooth Checkout Process: The checkout process should be streamlined and user-friendly to prevent cart
abandonment and ensure a smooth shopping experience. This includes optimizing the payment gateway,
offering multiple payment options, and implementing a secure and efficient order confirmation process.

Customer Service Support: Increase customer service support during the sales events to handle inquiries,
resolve issues, and provide assistance to customers. This can involve extending customer service hours,
increasing the number of support agents, and implementing live chat functionalities.
Gamification and Interactive Features: Incorporate gamification and interactive features into the sales
events to engage customers and enhance their shopping experience. This can include interactive contests,
lucky draws, and rewards programs that encourage customer participation and engagement.

Post-Event Analysis: After the sales events, conduct a comprehensive analysis to identify areas for
improvement and gather customer feedback. This analysis can help the management understand customer
preferences, identify supply chain bottlenecks, and make data-driven decisions for future events.

Continuous Communication: Maintain open and transparent communication with customers throughout
the sales events. Provide regular updates on order status, delivery timelines, and any potential delays.
Promptly address customer concerns and keep them informed to significantly enhance their experience.

Post-Event Follow-up: After the event, follow up with customers to gather feedback and show appreciation
for their participation. This can be achieved through personalized emails, exclusive discounts for future
purchases, or loyalty programs to encourage repeat business.

By implementing these recommendations, the management at Daraz.pk can create a seamless and enjoyable
shopping experience for customers during special sales occasions. This will not only drive higher sales and
revenue but also strengthen the brand's reputation and customer loyalty in the highly competitive e-
commerce market.

7. Conduct the SWOT analysis of Daraz.pk.

SWOT Analysis of Daraz.pk

Strengths:

Market Leader: Daraz.pk is the pioneering and dominant e-commerce platform in Pakistan, boasting a
robust brand presence and a substantial market share. This positions it as a strong contender in the industry.

Diverse Product Range: The platform offers a wide array of products, spanning categories such as fashion,
electronics, and home appliances. This diversity attracts a large and varied customer base, fostering
opportunities for cross-selling and upselling.

Strong Logistics Network: Daraz.pk has built a dependable logistics network that ensures efficient order
fulfillment and timely deliveries. This infrastructure provides Daraz.pk with a competitive edge by
delivering a seamless shopping experience to its customers.

Marketplace Model: Operating as a marketplace, Daraz.pk allows third-party sellers to list their products.
This model results in a broad product selection, increased customer choice, and revenue generation through
commission fees.
Customer Engagement: Daraz.pk has effectively implemented customer engagement strategies, including
sales events, discounts, and promotional campaigns. These initiatives cultivate customer loyalty and
stimulate repeat purchases.

Weaknesses:

Quality Control: Being a marketplace, Daraz.pk depends on external sellers for product quality. Ensuring
consistent quality across all products can be a challenge, potentially leading to customer dissatisfaction and
reputation damage.

Logistics Challenges: While Daraz.pk has invested in a robust logistics network, surges in order volume
and demand can strain the system. Addressing logistics challenges, including late deliveries and quality-
related returns, is essential to maintain customer satisfaction.

Limited Geographic Reach: Despite its significant presence in major cities, Daraz.pk's reach in rural areas
may be limited. Expanding the customer base beyond urban centers presents a growth opportunity.

Opportunities:

Growing E-commerce Market: Pakistan's e-commerce market is rapidly expanding, fueled by increasing
internet penetration and evolving consumer behavior. Daraz.pk can leverage this trend by expanding its
customer base and product offerings.

International Expansion: Daraz.pk has the opportunity to expand beyond Pakistan's borders and tap into
regional and global markets. This expansion can lead to increased revenue and exposure to a broader
customer base.

Strategic Partnerships: Collaborating with international brands and forming strategic partnerships can
enhance Daraz.pk's product offerings and attract a wider customer base. Such partnerships can also mitigate
challenges associated with international sourcing.

Threats:

Intense Competition: The e-commerce industry in Pakistan is becoming fiercely competitive, with major
global players entering the market. Daraz.pk faces the threat of losing market share to competitors with
larger resources and established brand identities.

Regulatory Environment: Changes in government regulations and policies can impact e-commerce
platform operations like Daraz.pk. Adapting to evolving regulatory requirements and ensuring compliance
is crucial to mitigate risks.

Counterfeit Products: The presence of counterfeit or low-quality products on the platform can harm
Daraz.pk's reputation and erode customer trust. Implementing stringent quality control measures and
actively combating counterfeit goods is essential to maintain customer confidence.
In summary, Daraz.pk has solidified its position as a market leader in Pakistan's e-commerce industry. While
it possesses strengths, including market leadership and a diverse product range, it also grapples with
challenges related to quality control and logistics. However, the company has opportunities for growth
through the expanding e-commerce market, international expansion, and strategic partnerships. It should
also remain vigilant regarding threats posed by intense competition, regulatory changes, and counterfeit
products. By leveraging its strengths, addressing weaknesses, and capitalizing on opportunities, Daraz.pk
can maintain its status as a leading online marketplace in Pakistan.

8. If you have to start an online business what lessons you learnt from this case study?

This case study of Daraz.pk, an online marketplace in Pakistan, provides valuable insights for those
embarking on an online business venture. Here are some key takeaways:

Market Potential Assessment: Before launching an online business, it's essential to evaluate the market's
potential and growth prospects. Analyze factors like internet penetration, e-commerce trends, and consumer
behavior to gauge the demand and feasibility of your products or services.

Adaptation to Market Dynamics: Daraz.pk's initial focus on selling apparel online showcases the
importance of aligning your business model with consumer preferences and market dynamics. Staying
informed about industry trends and evolving consumer needs is crucial for making informed decisions.

Embracing the Marketplace Model: Daraz.pk transitioned from managing its inventory to operating as a
marketplace where third-party sellers can list and sell their products. This approach reduces financial
burdens and broadens the range of available products. Consider the advantages of a marketplace model,
including scalability, reduced inventory costs, and increased variety for customers.

Building Trust and Customer-Centricity: Trust is a cornerstone of e-commerce success. Daraz.pk built
trust by offering return and exchange policies for apparel purchases, which alleviated customer concerns
about online shopping. Prioritize the establishment of trust through excellent customer service, transparent
policies, and reliable product quality.

Logistics and Supply Chain Management: Logistics significantly impact the success of an online
business. Daraz.pk faced challenges related to late deliveries and quality issues. To ensure efficient order
fulfillment, invest in robust logistics infrastructure, establish partnerships with reliable logistics providers,
and implement effective supply chain monitoring systems.

Engaging International Brands: Daraz.pk had to decide how to engage with international brands. When
considering global expansion, carefully assess various options, such as building your inventory, partnering
with local distributors, or encouraging brands to enter the market directly. Evaluate the financial
implications, market entry barriers, and potential competitive advantages of each approach.
Digital Marketing and Social Media Utilization: Daraz.pk harnessed the growing influence of social
media for customer engagement and advertising. Develop a robust digital marketing strategy, leverage
social media platforms to reach your target audience, and employ online advertising effectively to promote
your products or services.

Continuous Adaptation and Innovation: The e-commerce industry is dynamic and highly competitive.
To remain at the forefront, continually adapt your business strategies, innovate in terms of product offerings
and customer experiences, and keep up with emerging technologies and market trends.

By incorporating these lessons from the Daraz.pk case study, prospective online entrepreneurs can gain a
deeper understanding of the e-commerce landscape and make well-informed decisions to build a successful
online business.