The world outside Yousuf Najmuddin’s Karachi warehouse was a cacophony of impatient drivers and insistent hawkers one Wednesday in August. Inside, there was an industrious calm as workers moved between floor-to-ceiling shelves in search of mousetraps, child safety locks, or other home improvement products. Najmuddin’s office was in a back corner — a small, air-conditioned room. There, his laptop pinged every other minute to announce new orders through Daraz, Pakistan’s largest e-commerce site, owned by Chinese tech giant Alibaba.
Najmuddin is one of Daraz’s top sellers. But his laptop doesn’t ping as often as it used to, he told Rest of World.
When Alibaba acquired Daraz in 2018, the deal inspired optimism for how the Chinese e-commerce leader’s know-how could transform Daraz and, with it, Pakistan’s wider tech sector. In the five years since, the platform has experimented with new marketing and promotional strategies, including shopping livestreams and even cricket broadcast rights. It remains the go-to platform for online shopping in Pakistan, with around 27 million monthly active users, according to Daraz Pakistan’s managing director, Ehsan Saya.
But despite these efforts, and amid Pakistan’s ongoing economic crisis, Daraz also faces challenges. While Saya told Rest of World the company is growing and operating more efficiently than ever, it has posted ever-bigger losses for years, according to the most recent publicly available company documents from 2022. Daraz’s other markets, including Sri Lanka, Nepal, and Bangladesh, are also struggling to recover from economic setbacks, while Myanmar is in its third year of a civil war. In February, the company laid off 11% of its global staff.
Rest of World spoke with Daraz sellers and executives as well as analysts, and found that despite ambitious experimentation and operational improvements under the tutelage of its new owner, the company is still far from unlocking the full potential of its 527 million people-strong markets
Najmuddin, for one, has noticed. “I used to get around 500 orders a day, but these days the number is around 300–400, as the market is slow for some time now,” he said.
Berlin-based startup factory Rocket Internet launched Daraz in 2012, with the hope of proving the e-commerce business model in Pakistan, attracting investors, and then selling the company. “Their model was to show minimal traction, then raise capital and add more people to the cap table, and ultimately make it large enough to be acquired,” Muneeb Maayr, co-founder and former CEO of Daraz, told Rest of World.
It was slow going at the start. Back then, Pakistan had just 2.1 million broadband subscribers and had yet to introduce mobile 3G connectivity. Few people knew what online shopping was. Daraz began with fashion products and later expanded to electronics, lifestyle, and other categories.
But investors considered the company promising: In 2015, Daraz announced that it had raised $55 million — more than all tech startup funding in Pakistan combined up to that point. Flush with venture capital money, Daraz attracted users with sales events and other discounts.
Najmuddin opened his online shop in 2016, selling homewares as a side gig. At the time, he worked in accounting. “This guy visiting my boss was talking about how he is earning good profit through selling shoes on Daraz,” Najmuddin said. Within about two years, he had quit his day job.
Then, in May 2018, Alibaba acquired the company for an undisclosed sum. “Alibaba’s acquisition of Daraz in 2018 was part of a larger strategy to strengthen its position in emerging markets beyond China,” Hammad Khan, the co-founder of AlphaVenture, a digital agency specializing in e-commerce, told Rest of World. Alibaba had acquired a controlling stake in Southeast Asian e-commerce company Lazada in 2016, and later in 2018 it bought the majority of Turkey’s Trendyol.
Alibaba brought Daraz the technical, logistical, and marketing lessons it had learned competing its way to the top of China’s domestic market. “The biggest thing you get is learning,” Saya, the managing director, said during an interview at Daraz’s headquarters, on the 18th floor of Karachi’s upscale Sky Towers. “It took about a year after the acquisition for us to also understand the tools that we had and what to do.”
The company introduced a digital wallet and invested more in its in-house logistics arm. Ahmed Tanveer, who started working for Daraz in 2012 and rose through the ranks to become the chief operating officer, was impressed by Alibaba’s logistics system. “How you pick [products], how you pack, and generally the level of detailing and controls really changed the game for us in how we looked at operations and how to become efficient,” he told Rest of World.
Revenue climbed, reaching 6.5 billion rupees ($40.1 million at the time) in the year ending March 2021, up from 1.46 billion rupees in the 12 months ending June 2018 ($13.3 million at the time), according to filings with the Pakistani regulator.
Another idea brought over from Alibaba was shopping livestreams, a concept the tech giant pioneered in China, where it is now a $480 billion market. In 2021, Daraz started signing social media personalities to promote products, and it recently announced that its Live & Affiliate influencer program had generated 4.4 billion rupees ($15.7 million) in revenue.
People were liking it and visiting our profile, but it had literally no impact on orders.”
Several sellers told Rest of World, however, that livestreaming hadn’t benefited their business. Iram Sharif, who runs a small jewelry brand named GetNoticed, showcases her products on Daraz Live multiple times a week, but is still waiting on her first conversion. “I have even started getting a decent number of views now, often in excess of 500, but that doesn’t really translate into sales,” she said.
Muhammad Rashid, whose Daraz store Usman Brothers sells small household items like earwax cleaning tools, had a similar complaint. “We had a great start in terms of traffic, as viewership crossed 8,000,” he told Rest of World. “People were liking it and visiting our profile, but it had literally no impact on orders.”
Daraz unveiled its most eye-catching new marketing strategy in October 2021. As Pakistan’s cricket team was preparing for the ICC T20 World Cup, the biggest tournament of the year, the company announced it had acquired exclusive rights to stream the event. An e-commerce platform going into broadcasting drew attention. “At the time, nobody thought you could get 10 million views on a digital platform apart from YouTube, but Daraz delivered that,” Ghulam Jilani, a growth marketing consultant, told Rest of World.
It’s unclear, however, whether those viewers became shoppers. “We are not using this as a way to drive sales,” Wali Khan, who at the time was in charge of sports and entertainment at Daraz Group, told Pakistan Today after the tournament. “We just want to make the shopping experience better.”
In August, vans from collection points across Karachi arrived at a Daraz sorting center in the Korangi industrial area, not far from the company’s HQ. Alongside a facility in Lahore, this was one of Daraz’s first automated sorting centers, opened in 2022 in partnership with Alibaba’s logistics subsidiary Cainiao. Workers unloaded the cargo — the only step in the process where humans are involved. The packages then moved up a conveyor belt past scanners, before dropping down chutes to get sorted. Alibaba’s influence was hard to miss: Nearly all hardware labels and software interfaces were in Mandarin Chinese, a language few of the staffers could understand.
The sorting centers have a combined capacity of up to a million packages a day, but they only come close to that during shopping festivals.
Indeed, 2022 was a difficult year for e-commerce, as Pakistan became mired in a severe economic slump. In May, when reserves of foreign currencies had run so low that Pakistan could afford less than two months of imports, the government banned sourcing nonessential luxury goods from abroad, severing e-commerce supply chains. Electronics, which account for more than a third of Pakistani e-commerce by value, were suddenly near impossible to find. The month after, inflation shot above 20%, where it has remained ever since. Almost 40% of Pakistan’s 247 million people now live in poverty, according to the World Bank.
For the year ending March 2022, Daraz Singapore, the holding company for all its regional entities, posted a loss after tax of $143.2 million, over a quarter more than the year before. Daraz went through a round of layoffs in February to “prepare the company for the current market reality,” Daraz Global CEO Bjarke Mikkelsen wrote in a message to employees.
“2022 was a challenging year for industries worldwide. Keeping the changing business landscape and economic conditions in mind, we have adapted our strategy to achieve efficient and sustainable growth,” Mikkelsen told Rest of World in a written statement. “2023 has been very positive for us so far across all markets despite the inflation, and we are confident that the year will be closing on a good note.”
Daraz is trying more approaches to make its business profitable, including selling a wider variety of products. “Traditionally we have been electronics-focused, but due to import bans last year, our access to inventory was restricted. So we decided to direct our energies towards fashion, beauty, and home and living,” Muhammad Ammar Hassan, Daraz Pakistan’s chief marketing officer, told Rest of World.
The company has launched its own private label brands across a few categories, such as Maahru for unstitched lawn fabric — a sheer textile used to make women’s clothing — and Zeest for pulses, an increasingly important part of Pakistani diets, as meat prices have risen. The company also aims to use its customer data to provide services to other brands. “We are the fourth largest platform in the country [after Google, Facebook, and TikTok] and have an abundance of actionable insights,” said Saya, the managing director.
We haven’t even scratched the surface yet."
In March, Alibaba reorganized, splitting itself into six units. Daraz is now part of the Alibaba International Digital Commerce (AIDC) Group, along with Southeast Asia’s Lazada, Turkey’s Trendyol, and AliExpress, a global platform. Daraz Pakistan’s management hopes the change will unlock economies of scale and other efficiencies. “Let’s say both Lazada and the five markets of Daraz need black T-shirts. So if we can do group buying from a manufacturer and get extremely cheap prices through economies of scale, it has the potential to bring in additional growth,” said Hassan.
At the end of 2023, Pakistan’s inflation remains above 25%, large-scale manufacturing has declined year on year for 13 months straight, and one U.S. dollar is worth about 281 rupees, nearly two-and-a-half times as much as on the day Alibaba announced its Daraz acquisition. According to e-commerce analytics firm ecommerceDB, online shopping has just a 2.9% share in Pakistan’s overall retail market, much lower than Indonesia’s 8.8% or China’s 26.4%.
Raza Matin, co-founder of Brandverse, which helps companies sell online, told Rest of World that Daraz requires no drastic course correction. But, he said, it is still struggling to make itself part of people’s regular shopping routine. “Behavioral change in how consumers purchase everyday items, and not just high-involvement purchases, remains the challenge,” he said.
Najmuddin, the home improvement goods seller, remains optimistic. “We haven’t even scratched the surface yet,” he said. “Pakistan is still a developing country, where large parts of the population are still not familiar with the concept of e-commerce. But that’s inevitably going to change as more people come online.”
