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Alibaba has entered Bangladesh's burgeoning food delivery market by purchasing HungryNaki, the country's first on-demand delivery platform, demonstrating the Chinese multinational's ongoing efforts to grab a bigger share of the local e-commerce market.

Officials of Daraz, a concern of Alibaba Group, and HungryNaki yesterday announced that the former had taken over all of the latter's tangible and intangible assets for an undisclosed amount.

HungryNaki will continue to function as usual with its existing employees as a separate brand with an independent food delivery platform owned by Daraz.

The development comes at a time when the local food delivery is expanding rapidly but still remains largely untapped. Daraz, which has operations in Bangladesh, Pakistan, Nepal, Sri Lanka and Myanmar, was acquired by Alibaba in 2018 in a surprise move.

Alibaba's financial service subsidiary Ant Group also bought a 20 per cent stake in bKash, the largest mobile financial service provider in Bangladesh, in the same year.

Daraz has long been considering a takeover of HungryNaki, even before the Covid-19 pandemic had emerged.

"We aspire to be a one-stop solution for all our customers' needs," said Syed Mostahidal Hoq, managing director of Daraz.

"So, getting into the food delivery business is a natural move," he added.

HungryNaki is the pioneer in food delivery services in Bangladesh and has a loyal customer base.

"Therefore, we believe that instead of building our own delivery business from the ground up, acquiring HungryNaki is ideal considering these two factors," Hoq said.

By investing in infrastructure, technology and human resources, Daraz has the ability to take HungryNaki to new heights.

Launched in 2013, HungryNaki, serves more than 500,000 customers across Dhaka, Chattogram, Sylhet, Cox's Bazar, and Narayanganj through its network of over 4,000 restaurants.

It was a success story till 2018. After that, it came under severe competition when two new players -- Shohoz Food and Pathao Food -- entered the market.

The following year, Uber Eats arrived and soon gained popularity with its solid service.

However, Uber Eats abruptly left in June last year as the ongoing pandemic made a serious dent in its business.

The brutal heat of the pandemic was also felt by HungryNaki.

In the early stages of the coronavirus outbreak, the business had declined over 70 per cent due to restaurant closures, said AD Ahmad, CEO and Co-founder of HungryNaki, earlier.

In a bid to survive, HungryNaki provided full Qurbani services during the last Eid-ul-Azha.

Replying to a question regarding the sale of the platform to Daraz, Ahmad said it was really a moment of joy for a home-grown company to be able to attract a global company as a buyer.

Industry insiders were, however, critical, saying the development set a bad precedent as it shows that local startups can't survive on their own.

Some said the move would create uneven competition in the market, where over half a dozen of e-commerce platforms are operating.

"It would have been better if Daraz had just bought a stake in HungryNaki instead," said an industry insider, preferring anonymity.

Usually, acquisitions like this cost a lot of money, but HungryNaki was sold at a very low price, he said.

"This is frustrating as only Alibaba is the winner in this case," he added.

Other market players think this move will create uneven competition in the market.

"Daraz's recent acquisition provides market validation for the emerging consumer technology sector in Bangladesh," Hussain Elius, co-founder and CEO of Pathao, told The Daily Star yesterday.

"However, it also illustrates how the lack of an enabling policy environment cedes the market towards colonisation."

"To build a truly digital Bangladesh, we need to allow local champions to emerge, grow, thrive and build the critical digital infrastructure of the country."

DARAZ TO FACE STIFF COMPETITION

Daraz has big dreams for HungryNaki.

"We want to be the second leading market player in six months and the leading one within a year," said Daraz Managing Director Hoq.

But to turn the dream into reality, the e-commerce giant will have to face a gruelling battle with other competitors.

"Consumer discount battles will start, leading all players to bleed more than before," said Maliha M Quadir, founder of Shohoz.

Daraz is likely to face fierce competition from Foodpanda and Efood.

Foodpanda, a subsidiary of Berlin-based Delivery Hero, began its journey in Bangladesh in December 2013 with limited operations in Dhaka.

Through its seven-year journey, Foodpanda has expanded its operation to all 64 districts of the country, a first among its peer companies.

The local food and grocery delivery market has potential for growth as most of the market is still offline and would greatly benefit from digitalisation, said Ambareen Reza, managing director and co-founder of Foodpanda Bangladesh.

The market will also benefit from the high internet penetration and fast smartphone adoption rate in the country.

Efood, the food delivery arm of local e-commerce platform Evaly, is one of the fastest-growing food delivery platforms in the country.

In less than a year since its inception, Efood now makes around 10,000 deliveries per day from 4,700 restaurants to customers in eight cities, including Dhaka, Chattogram, Cox's Bazar and Sylhet.

Other potential competitors include Pathao Food, which has 9,000 registered restaurants and operates in Dhaka, Chattogram and Sylhet, and Shohoz Food, which has 5,000 registered restaurants.

DARAZ'S GROWING DOMINANCE

After Daraz's integration with Alibaba, it mainly brought changes to the technological side.

As a part of that vision, in early June, Daraz announced its plans to invest Tk 500 crore by 2021 to set up logistics infrastructure and hubs that would help expand its foothold across the country.

A big chunk of that investment has already been utilised for different purposes, including the purchase of over 100 vehicles to help Daraz mail products to all districts.

"We are equipped with the logistic infrastructure that Alibaba uses," Hoq told The Daily Star in an interview last year.

And now, Daraz has its own logistics facilities all over the county.

The e-commerce platform is now building a sorting centre and warehouse with an investment of about Tk 150 crore. It will employ 2,000 people.

Daraz currently makes over 65,000 deliveries per day.

According to experts, the annual food delivery market stands at Tk 1,200 core.

Some 20,000 people work as freelance delivery persons, and another 5,000 are employed by the platforms. Around 1.1 lakh food deliveries are made each day.