Reasons for business failed on Daraz 2023

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The reason for the business failed on daraz 2023

You may have heard of many successful sellers who started from scratch and now have become huge names through the recognition given by the Daraz platform. But you will also find stories about many who were not able to maintain their equilibrium on the platform. The most common issues of business failed are discussed below. These become their main reason for leaving Daraz altogether. Although Daraz has now provided fixes to some of these some of the problems stay. Before starting your business online, you should keep these points in mind:

Blockage of Money

Like any other business blockage of money is the most important aspect. In physical shops that deal with person to person. The customer will pay you the money right away as he/she purchases a product. Even if you sell digital goods or any online service, the requirement of online payment to your bank account is necessary. But unlike the conventional way, Daraz has its scheme of paying the seller.

Daraz only pays once the product delivers to the customer. This means it can take days from when you have shipped the product depending on the location of the buyer. In case of a failed delivery. Which is not so uncommon for the seller. And the product returns. Although no money would be received. This takes time at the seller’s end. As the product stays out of the stalk unless recovered. In best-case scenarios, the product still appears as delivered in the system. And The revenue collects from the seller’s account. But only paid at the end of the week. This may be trouble for small enterprises that don’t have enough money to reinvest. And has to wait for the whole week to pass by. This inconvenience is the major reason why the business failed Daraz.

Biweekly payment to sellers

The biweekly payment issue has now been resolved. Because it leads many sellers to stop their business with daraz. The payment cycle was biweekly. This means after 14 days of the collected payment, the money transfers to the seller’s bank account. Which is now shortened to 7 days of the payment cycle, fair enough for most sellers.

Business Failed due to a decrease in sales due to competition:

Since the Covid times, the business has changed its patterns. Many industries have switched to online business models. This has created an increase in inflow in sellers who want to switch to eCommerce. The impact was an increased number of sellers dealing in the same category of goods. Due to increased competition, the seller has to minimize the profit margin to stay in the marketplace. Also now the customers disperse among the different shops. Thus sellers faced a decline in their sales.

Daraz increasing Commission rate

As Pakistan has a decreasing economy. As expected dollar rate increases exponentially. The service charges, advertisement, and keeping an online presence all take up a cost. The commission rate is increasing exponentially. Therefore, all the rates on the platform started to increase. Which shifted the customer’s behavior in buying the product from the market when accessible. In this catastrophe, only the manufacturers of the product can withstand the increased commission rates by daraz. For the rest of the small startups, their business failed, as it become hard to make a profit. But to sell on the purchase cost.

For more knowledge on rates and deduction read our article on “Daraz Charges from sellers“.

The business failed due to customer fraud

There are many stories where the seller has faced a huge downfall in the business which later leaned to the closure of their company. Other competitors when seeing sellers in the same category, they’re a way of cutting their business by being fake customers. These fake identities on the platform signed up as customers. They bought products from the seller in huge quantities. Later when the order ships, the recipient’s address is found fake. And the phone number given was either wrong or switched off. This was because their only want was that the seller off-shelf their product in the meantime. Thus most sellers were led off during the peak season of the product.

Although Daraz has a very well-established infrastructure. All the failed delivery parcels return back to the Seller. But till then a season of the sale had already passed by. And the sales were down again. This also blocked the money that they were putting in the business in expectation of receiving back the profit. This was never supposed to be paid. Instead, it was a loss of the packaging material. To learn about “how to claim against unjustified return” read here.

How to mitigate against such acts?

Unfortunately, these behaviors are still common and we need to learn as a nation to be a better humans. To improve our business skills and do all affairs fairly. This issue was very hard to deal with. No platform in the world has the authority to verify a customer’s authenticity until the order delivers. Although daraz has a special form accessible in the seller center. When a suspicious order (huge quantity of product) receives at the seller’s end. The seller is supposed to fill in the details for the platform to review. But the processing time is too long to make a difference. Because all sellers must ship the orders within a maximum of 2 working days. And deliberately canceling an order affects the scorecard.

We have seen many small businesses fail. Because their initial capital does not allocate or allow the seller to sustain this kind of loss. And these fake customers were mostly friends who tried to pull a prank. However, this is not solely because the platform allows this kind of customer behavior but it is a disadvantage for all the businesses that run their operations online. In a physical store, this kind of situation can never occur. As it is person-to-person dealing.

Counterfeit Product packed in a parcel

Recently there was a hype that sellers have sent the wrong products against what they have promised. But often sellers are innocent. They have video recordings of the original product packing. Often Daraz staff/delivery persons are guilty of the virtue. Those individuals deserve strict action against them. Sellers and customers are encouraged to report such happenings. But cases like these are rare and By now already sorted. Also, it is important to learn about “Packaging Guidelines“.

A bad Image in the eye of the Customer can lead to failed business

Since Daraz provides the opportunity for anyone to be an entrepreneur. Many sellers only signed up to scam and defame the platform. By sending counterfeit and fake products to the customers. The impression of customers that daraz sellers will scam the audience with their products is still in people’s minds. Most of the time even sellers who are selling original and good products will face fake comments by people. However, Daraz is constantly working to improve people’s perspectives for them. Policies are getting strict for sellers involved in such fraudulent acts.

A strict Score Card Rule stops a business from getting failed

To avoid fake allegations on the platform by customers, Daraz has made some strict policies for the sellers. Any seller who fails to obey or doesn’t match the criteria sees the consequences. The seller’s performance is measured each month. And email in the form of a score card. If a person’s cancellation rate/ returns from the customer increase, the seller is penalized. You might think that this is a very tough limit to reach. But small enterprises can easily cross these lines and be delisted. If you want to read more about being delisted click here.

Preference for Customer over Seller

All these policies give preference to the customer even when the seller is right. The seller has no choice but to think that the model of business failed for them. There may be fewer policies to provide justice to the seller. Campaign prices can often become unreasonable for sellers. But to make a place and rank on the front page they have to compromise. Most businesses couldn’t take the pressure and preferred to change their business model from Daraz to personal bases.

Brands that already had an Online Presence

All these policy obedience and on top of that the increased commission rates lead many sellers to choose their own. Businesses who had been successful in building a brand and already had established an audience of their own. The need for Daraz to take part in their operations was not needed anymore. All those brands switched to dealing with their customers personally. Read “How to build a brand?“.

Conclusion

Before taking your business online with daraz, it is important to first understand and learn from others. We have summed all the possible lessons and reasons for a business to be failed. This might look easy and all charmed up but getting in the process is cumbersome. It may not work for everyone, especially in these struggling times. It is crucial to consider all the possible consequences before signing up for the Seller program to minimize the chances of failure. If you know similar stories share them with us. You can reach us here. And comment down below your views. We love to hear your thoughts. Thank you.

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