Why Alibaba buying Daraz is good news?

A brief follow up from last week. Reliance JioMusic—Saavn deal is not what I understood. First, Saavn will keep its brand identity. It might be something along the lines of Jio-Saavn but the name will live on. And the founders will continue to lead it. Second, and perhaps more importantly, Saavn will not be an over top the service for Reliance only as I thought it would be. Rather it will be available to everyone just like before.

This paywalled article from The Ken has more details.

Why Alibaba buying Daraz is good news?

I don’t have any insights on whether this is actually going to happen or not. It does make a lot of sense though. Regardless, I think Alibaba’s potential entry is a fascinating news. I concluded in eCommerce Impediments:

I do believe that this is more than $1B industry. But ecommerce players will have to change their approach if we want to be there rather quickly. Or maybe Jack Ma can do something about it.

The Jack Ma reference was part sarcastic and part optimistic. There is only one way for startups to operate in any market eCommerce included and i.e. by targeting a small niche and owning it. That rarely happens though. The allure of ease with which you can start a business on the Internet deludes the fact how difficult it is to actually run one. So startups rush towards expanding their offerings. And end up taking a bite their mouths can’t swallow. And that’s precisely what’s happening with eCommerce players in Pakistan. I laid out the challenges in broader strokes in the aforelinked article.

Keep that in mind and the fact that we are already a huge market for Chinese products. It makes a lot of sense for Alibaba to venture into Pakistan. A population of about 200M is alluring, to say the least. There might be a political angle as well. The recent Pak-China Economic Corridor is certainly encouraging for Jack Ma’s team. And if one thing you can be sure of any Chinese company is that they play well with their government. That’s almost required by law. Xi Jinping will certainly be more welcoming to Pakistan than say India which he sees more of a rival than a friend.

I mentioned 200M people of Pakistan. I don’t assume all of them will be Alibaba’s customers. At least not immediately. But they might be. I will go on and say that Alibaba is the only player who can further expand the market. Current eCommerce players have spread themselves too thin in the most concentrated parts of the country. And now they have little or nothing left to expand into new cities. Yes, by virtue of being on the Internet they are everywhere, to begin with. But further you are from the main cities more bottlenecked their distribution is. And then there is all so big challenge of online payments.

Alibaba can solve both these problems in one stroke. I am particularly excited about AliPay. In other words, Alibaba can open up the market. And that’s precisely what eCommerce in Pakistan needs right now. From Tacking Uber.

Secondly, in Pakistan, distribution is still a thing. Actually, its the main thing. People are not experience buyers. While they might appreciate you they don’t necessarily buy you for that. Why? Because they are not used to it. Hence most businesses are competing on distribution and that’s exactly the reason why startups are having a tough time. To open up the market startup needs to be a force in itself first.

This is also a good news for the rest of the players as well. It will take the brass tacks off the equation. You will know, for once, who the biggest player in the market is. Once that’s gone we might get our focus right. And start paying attention to the only thing that truly matters if you are true to building an Internet business. And that’s customer experience.