Rocket Internet merges ecommerce sites Daraz and Kaymu across Asia

Merged under a single brand name, the two ecommerce sites will continue to be separate in Pakistan and Bangladesh


Osman Husain June 24, 2016
Merged under a single brand name, the two ecommerce sites will continue to be separate in Pakistan and Bangladesh. PHOTO: REUTERS

German startup juggernaut Rocket Internet announced today the merger of its ecommerce marketplaces Daraz and Kaymu under a new entity Daraz Group.

Both Daraz and Kaymu operate in frontier markets in Asia. Daraz, which is a managed marketplace fashioned on the likes of Lazada, is currently operational in Pakistan, Bangladesh, and Myanmar. It raised US$55 million in series A funding in September.

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Kaymu is more of an open marketplace primarily targeting smaller businesses. Those businesses are free to list products on the site and source orders directly from consumers. Kaymu does not do its own deliveries or focus on authentic products alone. The startup is present in Pakistan, Bangladesh, Myanmar, Sri Lanka, Cambodia, Nepal, and the Philippines.

The new entity, Daraz Group, will unite the two companies under one roof. Operations like marketing, IT, and business intelligence for the group will be centralised in Karachi, Pakistan. Rocket Internet says the move will help “leverage synergies on the growth and cost side.”

In Pakistan and Bangladesh the two ecommerce sites will continue to be separate. In the other countries they’ll be merged under a single brand name.

“Is there overlap in their business model? Absolutely,” Bjarke Mikkelsen, co-CEO of Daraz Group tells Tech in Asia. “In the way we manage our sellers and customers it makes a lot more sense to have it under one roof.”

“We’ve been contemplating the move for six months.”

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Niroshan Balasubramaniam, the former managing director of Kaymu Asia, will now look after the group in markets where there’s only Kaymu. That means he is effectively managing Sri Lanka, the Philippines, Nepal, and Cambodia.

In other markets Bjarke will co-head the group along with Jonathan Doerr.

Bjarke adds that Kaymu is the larger company in terms of customer base and orders but Daraz is significantly bigger when it comes to gross merchandise value, or the total amount of cash consumers spend. He explains that the overlap between customers who transact on both Daraz and Kaymu is less than 10 per cent of their combined user base.

The opportunity to cater to both sets of consumers and upsell products is a key factor in Rocket Internet’s decision.

“The way we can target them now is much smarter,” adds Jonathan, co-CEO of Daraz Group. “There’s a huge potential to take these customers and move them up the value chain.”

Enticing for investors

With the combination of the two companies, will Daraz Group be more attractive for investors? “Absolutely,” says Bjarke. “We’re always talking to investors. But it’s not like we’re dying for funding or have any pressure [to raise money]. The whole point is that as a combined group we wouldn’t do it if it wasn’t more attractive.”

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He adds that they have enough runway to comfortably last another three years but hints there might be some major announcements in the near future.

Furthermore, the decision to centralize operations in Pakistan away from Paris means the group will also have considerably less overheads and be able to operate on a lean model.

Layoffs

Both Bjarke and Jonathan insist that there aren’t any plans of major restructuring or mass layoffs. They do, however, expect “natural attrition,” where employees feel they don’t fit into the larger picture anymore and voluntary resign.

Having said that, the group has made provisions for some trimming in the workforce – but only a few months down the road when the merger really starts to take effect.

“The most important thing is the synergies. That’s way more important than saving 10 per cent of the [employee] cost,” exclaims Bjarke.

Both the original founders of Daraz, Muneeb Maayr and Farees Shah, are no longer part of the company. Farees resigned in November and took up a role at iFlix. Muneeb left a few weeks ago to revive his desire of building companies and to set up an incubator.

“They’re still fans of Daraz and we wish them all the best,” adds Bjarke.

This article originally appeared on Tech in Asia

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