Are Daraz pick-up points a good business strategy?

One of the biggest challenges faced by the e-commerce industry is fulfilment. That is making timely deliveries. But what if a customer misses a delivery? Of course, it would be inconvenient for him unless he was doing it deliberately, but it would be more inconvenient and unfriendly for the business because deliveries incur costs and once a customer misses a delivery, this cost doubles.

It is perhaps to minimise such deliveries that AliBaba Group-backed Pakistan’s largest online shopping store Daraz has launched Daraz pick-up points across the country to facilitate customers. Customers who have placed orders online on Daraz will be able to collect their orders at these pick-up points.

This expansion in the business includes 47 Daraz hubs across the country, and 10 Daraz Dukaans in Karachi have taken on an added function whereby customers can opt to collect their orders from these locations instead of having them delivered to their homes.

This gives them the flexibility to pick up their order at any given time of the day which could be before work, after work or whenever they want. But the service is limited to prepaid orders only. That is to say only those customers are eligible for this service that pay online when they place the order, limiting the scope of the service because a majority of the orders are paid in cash.

A major chunk of Pakistani population is unbanked and undigitised, leaving them with no options to make online payments. And for those that have bank cards or digital wallets to make these payments, security of payments remains a concern.

Consequently, a majority of Pakistani consumers prefer to pay in cash to the dispatch guy delivering their consignment. About 90pc of e-commerce payments in Pakistan are cash-on-delivery (CoD) and Daraz is no different. A bulk of payments in cash aren’t good for an e-commerce business. It affects their cash flows. Consumers would miss deliveries because riders would come at times when nobody was at home to receive the order. Though the delivery was missed, the company incurred the charges to deliver that product and would have to deliver it again, incurring more charges. But the payment would only be received when the consumer receives the product because he chose CoD.

For Daraz, introducing these pick-up points is a smart business strategy. It encourages users to pay online, while also minimising deliveries and saving some of the costs associated with it. Not only does the digital payments improve cash-flows, pick-ups by customers from these locations also ease away the pains associated with the logistics.

Daraz also plans to activate more Daraz pick-up points before its November 11 sale event. And for all the CoDs, home delivery is still an option.  “Over the next six months, we aim to partner with 100s of stores across the country to make it even more convenient for our customers to pick up their order,” said Daraz Head of Localisation Kassim Shroff.

In 2018, the online platform launched Daraz hubs in 19 cities including Karachi, Lahore, Islamabad and all other major cities to help customers place orders and return products with the assistance of Daraz representatives who are present at the Daraz-owned brick-and-mortar stores. The agents also help ensure that customer queries and issues are resolved quickly.