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Friday, 21 October 2016 00:01 - - {{hitsCtrl.values.hits}}
Daraz Sri Lanka Country Manager Saurabh Chauhan – Pic by Sameera Wijesinghe
By Devin Jayasundera
Popular online marketplace Kaymu.lk announced its merger with Daraz, one of the leading e-commerce platforms in South Asia. Both Daraz and Kaymu will operate under the single domain name Daraz.lk.
The merger intends to provide the best of both worlds in the online retail space according to Daraz Sri Lanka Country Manager Saurabh Chauhan. The company intends to integrate the eBay-like open marketplace model of Kaymu with the more stringent genuine product selection of Dayaz which generally targets upscale consumers.
Currently, Sri Lanka’s online channels account for only 1% of the Rs. 300 billion retail market, indicates Chauhan. This is significantly lower than India where it accounts for 6%. However, he believes that with more consumer acceptance, online transaction volume will increase by 3% over the next three years.
Showing signs of a positive consumer trend towards e-commerce, the conversion rate (the percentage of website visitors that actually buy online) has been steadily stepped up in Sri Lanka. “In emerging markets the conversion rate varies between 2.5% and 3%. What we have seen in Sri Lanka is that the conversation rate is improving year-on-year. The latest conversion rate is close to 3%. We have seen that a high number of buyers that come to the website are actually potential buyers,” Chauhan told Daily FT.
According to a Kaymu report released in 2014, 60% of e-commerce transactions are concentrated in Colombo, Kandy and Galle. As a result, logistics companies are confined to these areas and are reluctant to move into low e-commerce penetrated areas. Chauhan believes that this is a significant obstacle for the company to expand its operations.
“There are very few players who provide island-wide logistics services,” says Chauhan. “Sometimes when we have to cater to northern and eastern markets like Trincomalee it can take a very high delivery time which impacts the customer experience negatively. That is the core challenge that we are currently facing in Sri Lanka,” he added.
However, with a new wave of delivery companies springing up in the country, the problem of logistics is expected to ease out in the future. “Over the past two years the logistical landscape has really improved. We are actually seeing new companies come up and that has really helped us to divide our shipments between a higher numbers of players to ensure a good balance in quality,” said Chauhan.
Daraz and Kaymu are both backed by Rocket Inc, a German startup incubator company which has also interests in other locally well-known e-commerce sites like Lamudi and Carmudi. The company recorded Germany’s highest IPO in 2014 and is known as a startup factory for churning out cloned e-commerce companies in emerging markets closely modelled on established US tech companies.
However, in the recent past the company has shown troubling signs. According to a Bloomberg report, Rocket Inc’s stock price has plummeted by 53% in the last two years due to a lack of investor sentiment in the company’s ability to turn a profit.
