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‘We are extremely optimistic about Sri Lanka’s growth prospects’ Daraz MD Rakhil Fernando

04 Sep 2022

By Marianne David   E-commerce in Sri Lanka comprises only around 1% of the retail business potential within the country and there is massive potential for growth, says Daraz (Alibaba Group) Managing Director (MD) Rakhil Fernando, pointing out that the nascent industry has shown steady growth over the past couple of years, especially driven by external factors such as Covid-19.  “Daraz owns about 50% of the e-commerce market share in Sri Lanka and in this sense, Sri Lanka still has massive potential for growth,” noted Fernando, who joined the company in 2019. Over the past few years, Daraz has grown into a household brand name and, under Fernando’s watch, the team has grown from 500 to about 1,800 employees today. “Today we are connecting close to 80,000 businesses and sellers with over 4.5 million buyers visiting our app on average. It’s been an exciting journey of growth and learning while making the most of the growing digital economy here in Sri Lanka,” he revealed, in an interview with The Sunday Morning Business. In the course of the interview, he also spoke on the impact of the import ban, start-up culture in Sri Lanka, and the future of e-commerce, while emphasising that Daraz remained optimistic about opportunities and possibilities despite these difficult times. Fernando also called on the people of Sri Lanka not to lose hope: “Challenging periods also pave the way to critically assess what you do and amend your strategies and methods of doing things and they present opportunities to drive change and transformation. So my message to the youth especially would be to not lose hope, remain optimistic, and focus on what is within your control.” Following are experts of the interview:       You have a Bachelor of Science in Aerospace Engineering and close to a decade of experience in finance and banking. How and why did you get into e-commerce and how would you describe the experience?   I was based in Singapore and was presented with an opportunity to be a part of Daraz in 2019, when I was looking to move back to Sri Lanka for personal reasons. The past few years at Daraz have been incredible in terms of growing the brand from a lesser-known niche operator to becoming a household brand name and the team has grown from just 500 staff members at the time I took over to about 1,800 employees today. Of course, the company has had a strong foundation from the beginning and my mandate after taking over was to take the company to its next phase of growth. Today we are connecting close to 80,000 businesses and sellers with over 4.5 million buyers visiting our app on average. It’s been an exciting journey of growth and learning while making the most of the growing digital economy here in Sri Lanka.    As MD of Daraz, could you tell us about the e-commerce space in Sri Lanka and how it operates, how well Daraz has been received by consumers, and how it has grown?    E-commerce in Sri Lanka still makes up about just 1% of the retail business potential within the country and is still pretty much a nascent industry owing to several factors. Daraz owns about 50% of the e-commerce market share in Sri Lanka and in this sense, Sri Lanka still has massive potential for growth.  The industry has shown steady growth over the past couple of years, especially driven by external factors such as Covid-19, which had a direct impact on consumer behaviour and sentiment towards online buying and digital payment infrastructure. Of course, issues related to infrastructure and affordability of internet access as well as tech know-how also play a vital role in the growth of e-commerce, where ambition needs to meet timely implementation and even initiation in driving the industry forward. The growth of Daraz has been extremely encouraging even amidst the challenging market conditions of the past three years since I took over. The company has had many tailwinds over the past couple of years with our successful logistics operation, good assortment, and category management as it stands to be one of the most efficient and fastest-growing markets within the Daraz Group. Our user bases have grown steadily and we are now the biggest e-commerce brand name in the country, which stands witness to the success and customer confidence we have won over the years.    What kind of impact is the import ban having on your business and how do you plan to navigate the challenges posed, especially given Daraz’s aims to accelerate growth in South Asian/frontier economies?   The recent times have been challenging at most and we have nevertheless found prudent and innovative ways to navigate the changing landscape to continue to achieve our growth targets. From the Easter terrorism to the Covid-19 pandemic and the most recent economic crisis, followed by the humanitarian crisis, we’ve seen Daraz through many challenging phases and managed to grow the business to what it is today, despite a few setbacks. Of course, the import restrictions and the dollar crisis have an impact on the business and operations of Daraz, but we have set our focus on growing the assortment and adding variety to it by connecting with more local businesses and even reaching out to rural and home-grown smaller enterprises to also help them get onto the platform and find a larger market to sell to. We have looked into adding versatility to the platform by introducing services as well on the Daraz app and are looking to make it a one-stop-shop for our users, where the app becomes more of a destination for shopping, entertainment, and much more. We are constantly looking out for innovative solutions and collaboration opportunities that will not only help the retail sector of the country to grow, but will also afford far more exciting and engaging shopping experiences for our customers.    How do you view start-up culture in Sri Lanka, especially in the backdrop of the current economic downturn? What is your advice to new start-ups?   For a start-up in any type of economy, the first thing to understand is what the opportunity is. If there is an opportunity, a solution is out there. You may be unlucky at times because the solution you come up with could be wrong, or you may not have the resources to build the perfect product, but by not addressing a problem/opportunity, you remain a nonstarter.  People create start-ups and then end up questioning where the market is or where the growth will be at and if it’s worth the effort and some don’t even really quantify the market. Many people build products based on their personal needs and usually the scalability is limited. Sri Lanka is a rather small market and the recent economic downturn has made things visibly even more daunting for many start-ups. I would advise a start-up, or any business for that matter, to take time to understand the customer and build value propositions that match the needs of your customer – this would be a foolproof method to ensure that your business remains relevant throughout all challenging periods. You need to also ensure that the people you’re creating a start-up with are aligned with you and contribute something to the equation. Also, don’t get stuck on the percentage of the company you own. You are better off with a smaller portion of a high-valued company rather than 100% of a company that doesn’t make that much in terms of financial returns. Also, Sri Lankan start-ups, especially in this economic landscape, should be mindful of taking in investors who can create long-term value. This is the biggest mistake I’ve seen a lot of businesses make when raising capital. You tend to get so excited about investors coming in that you don’t think about what value they will eventually bring in the long run. You have to choose investors who will stay with you through the journey. If not, you end up locking up a percentage of the company with people who don’t bring value in the long term and it will hinder future fundraising rounds.   Sri Lanka is a small market. What are your projections for the future of e-commerce here and how do you view the growth opportunities?   We are extremely optimistic about the growth prospects in Sri Lanka. As a Group with a presence in some of the fastest-growing frontier markets in the South Asia region, Daraz has seen continuous growth and efficiency in the Sri Lankan operation and has quite ambitious growth plans for this market.  This does not mean we are just simply setting lofty goals and pursuing them, but we are very critical of our KPIs and growth targets within the company and we monitor our performance against these KPIs constantly. Given the circumstances in the market and the challenges in the operating environment, we have taken a critical look at our business and have prioritised operational efficiency and cost optimisation, logistics, and digital payment infrastructure growth, among others.  We have grown our app user base exponentially over the past few years and have about nine million Sri Lankan users registered on the app already. Currently, our focus is to consolidate this growth while tapping into our strong foundation and superior technology to provide amazing user experiences that would ensure long-term user confidence and reliability.  We are also looking to on-board more sellers onto the app and are especially targeting the small and medium local businesses to provide them greater reach and enable them to take advantage of the evolving digital payment ecosystem in the country.   Could you tell us about the Daraz Connect initiative to empower rural entrepreneurs, the Daraz Future Leaders Programme – especially in the backdrop of increasing skills migration and the brain drain – and the Daraz Cares online donation platform?   Our key focus with Daraz Connect is to try and bridge the rural-urban divide when it comes to e-commerce participation and to upskill rural, home-based, and/or small-scale entrepreneurs to bring their businesses online. This is achieved through dedicated Daraz Connect resource centres that serve as outreach hubs that provide free education and knowledge on seller on-boarding to potential businesses outside urban areas of the country. Daraz is predominantly a workplace for the youth and the average age of our employees is about 26 years. Therefore, as an employer, we hold the responsibility of being custodians of a very young workforce and have initiated varying career growth and learning opportunities within the company for our staff members. The Daraz Future Leaders Programme is one such prominent initiative that provides an opportunity for graduates to join Daraz and accelerate their career growth through multiple learning and development opportunities afforded through exposure to a cross-section of the business and its operations. Through Daraz Cares, we aim to create, fund, and implement solutions for Sri Lanka’s urgent challenges and pressing development needs. Every day, Daraz strives to deliver on its promise to make it personal and promote generosity of spirit which translate to initiatives that aim to enhance and transform the experiences of sellers, buyers, and the wider community. Daraz Cares provides everyone that visits the platform an opportunity to be a part of the meaningful work of the company towards uplifting communities and driving change through the power of technology.   What is your hope for Sri Lanka even as it undergoes its worst economic crisis to date? What message do you have for the country’s leaders and its people, especially its youth?   The next 6-12 months are inevitably going to be extremely challenging for all of us, but at Daraz we remain optimistic about the opportunities and possibilities that emerge through these difficult times and we will stay vigilant on how we can rearrange our priorities to suit the changing environment and also stay open to innovative ideas that drive change within the communities in which we operate. For example, we turned the recent fuel crisis in the country to our advantage by accelerating our efforts to convert the major part of our delivery fleet to bicycles, thereby driving the sustainability agenda of the company while also addressing the immediate challenge of fuel scarcity. Challenging periods also pave the way to critically assess what you do and amend your strategies and methods of doing things and in this sense, they do present opportunities to drive change and transformation – be it businesses, institutions, or even individuals. So my message to the youth especially would be to not lose hope, remain optimistic, and focus on what is within your control to make the most of what is available right now. That is always more productive than resorting to blaming circumstances or a group of people for the challenges you may be going through.


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