How "Daraz" works and makes money
Daraz is the leading marketplace for all kinds of goods available in Nepal.
Started by the name ‘kaymu’,it was later changed into ‘daraz’ which has perfectly suited Nepali marketplace.It is a sister organization of Alibaba group of companies working jointly in Asia.
Daraz has connected peoples with any store they want to shop from.All you need is a smartphone and a internet.
So how does this company works? For this we will have to classify the kind of market strategy available in Nepal. The first kind of market is where you go and buy stuff.These marketplace has space and keeps the materials in their store place.It requires to stock up the materials and sell them accordingly,if the stuff runs out,they buy from the manufacturer and if the stock doesnt sell out they will have to bear the loss.The perfect example of this market is Bhatbhateni in large scale and normal ‘kirana’ pasal or cloth store in medium scale.
The second type of market strategy uses technology and link it with the seller/buyer. The perfect example of the market is Daraz. Daraz doesnt stock up goods or have huge place to keep goods.All they have is a workplace from where the employees handles the system,server and communicates with the customer. What Daraz did is,they built a system from where the seller puts their products and buyer search for them and orders it.
How does this work?
- Suppose Ram wants to sell clothes from his store.He opens his account in Daraz seller section,publish an image gallery with price and description of the products and Daraz publishes it in their system.
- Again suppose,Hari who is resting in his house wants to buy clothes but doesnt want to go out. So what Hari does is,he opens Daraz app and search for clothes where he finds the product listed by Ram and orders it.
- After the order is placed,Daraz calls Hari and confirms the order..
- Then,Daraz,through their servers lets Ram know about the order placed and Ram prepares the product. The delivery guy from Daraz will collect the product from Ram’s place.
- After collecting the product,Daraz will pack the product and sends another delivery guy to courier service.
- The courier will then send it to Hari’s place and he can collect it.
What we can understand from this is,every small role is divided and all role is equally important for buying and selling of goods.
So,where did Daraz make profit in between all of these?
Daraz doesnt take money from the seller for signup,monthly rentals, or takes any hidden charges.As of now,Daraz dont even take money for packaging of the goods.
- Daraz takes a small portion of your sales as a marketplace which is pretty nominal.Suppose,if Ram sells clothes of Rs 1500 from Daraz,then he wont get Rs 1500 after the product is sold.He might get something between Rs 1300 to Rs 1450 depending on the policy of Daraz.
- Also,Daraz gets some of its revenue from advertisements and sponsers as well.
- This is where the huge turnover comes in,the delivery cost of Daraz ranges from Rs 50 to Rs 150 which they collect from the customer.How does this help earning? There are average of 1500 sales daily throughout the country,Daraz waits for 2 days and delivers them altogether.Since,the price of delivering in bulk will be far less than delivering in single unit,Daraz will have the rest as profit.
As a simple calculation
1500 product * 3 days=4500 products.
4500 products * delivery charge(Rs 60 on average)=Rs 270000.
Delivery charge deduction as a result of sending in bulk=Rs 30000 to Rs 100000
Profit=Rs 30000 to Rs 100000 or can be more.
This is just a rough calculation,the prices and profit might vary as a result of market demand.
As a whole,this not only benefits Daraz,but also benefits the seller,the delivery guy,the buyer,the courier market, and all other employees involved with Daraz.