Digikala

Interview with Saeid Mohammadi, Digikala Group’s co-founder and CEO:

Could you tell us about your background and how you got into the tech industry?

For my twin brother Hamid and I, entering the tech industry was unanticipated. My background is within mechanical engineering, and Hamid has an industrial engineering background. Following our education, we both worked in the industrial sector. In 2006 I moved to Dubai for a project with a friend; at the time, Souq.com was launching, and billboards around the city were promoting this new e-commerce platform which was later acquired by Amazon. I was intrigued as this was my first encounter with e-commerce. When I returned to Tehran, Hamid and I started to discuss the idea of e-commerce in Iran.

How would you describe the Iranian tech sector?

Comparing the state of the Iranian tech sector today to where it was 10 or 15 years ago is difficult. The tech sector 15 years ago was characterised by low internet penetration, poor internet connections, a missing national tech ecosystem, and only four or five very basic internet businesses. There are now thousands of start-ups working in a wide range of industries, including e-commerce, fintech, health tech, smart logistics, online taxi services, food delivery, and many more.

How did Digikala come about?

We realized there was a genuine need in the market in Iran. People wanted to be able to research brands, models, and features before buying a product, but despite a clear need, this content was not available in Persian.

We then managed to gather around 20,000 euros from personal savings for initial funding. Hamid sold his car for extra money, and I used funds that I had allocated for my wedding ceremony. This was risky, but we knew that there was an opportunity. Fortunately, our older brother had an office in Tehran that our team of seven could use rent-free, and after just a few months we realized that our model of combining product reviews with online shopping was effective and gaining a lot of traction.

After one year we reached break even and using a bootstrapping method we were able to grow the business organically for the first seven years using only our initial funding and the Company’s profits. After that came a transformational growth phase during which we were supported by world class international tech investors in combination with local family offices which allowed us to scale substantially at the expense of profitability to start with, but it was important to reach the next phase, the introduction of the marketplace, which is now 2/3 of our GMV.

Could you describe Digikala in a few sentences? What makes Digikala unique?

Digikala is now more than just an online store or an e-commerce platform. Thanks to our continuous investment in our own infrastructures, Digikala now covers the entire value-chain of e-commerce. Whether quick commerce, social commerce, or e-commerce, our solutions span from cutting-edge fintech and payments solutions under DigiPay, to a 360 logistics infrastructure under DigiExpress that enables 95% of parcels and shipments to be done in-house. This is very unique. We have now truly developed an entire value-chain of e-commerce in our group.

What are some of your achievements to date with Digikala?

Our greatest achievements can be seen from two perspectives.

From the first perspective, the most important achievement is that Digikala has become a leading brand in Iran's tech sector in terms of top of mind for example. According to an IranTalent report, the leading job site and online recruitment service in Iran, working at Digikala has become an ambition for everyone looking for a job.

From the second perspective, the Digikala marketplace platform has developed to become an important infrastructure for the country. The platform is dominant on the demand side with 40 million monthly unique users, which represents half of Iran’s population. On the supply side there are more than 308,000 sellers. This is a significant accomplishment and a great contribution to local communities.

What are some challenges that you have faced as a tech entrepreneur? How did you overcome them?

Being a tech entrepreneur in Iran, specifically within e-commerce, presents unique challenges. A market characterised by low purchasing power, economic challenges, and importation bans with competition from a grey market, for example, poses significant risks to e-commerce platforms. Our focus on building an entire value-chain of e-commerce has helped us weather these challenges.

How does the cooperation with Pomegranate work?

Pomegranate has been a very supportive investor and has proved to be a significant contributor from a knowledge perspective. Our seven years of partnership demonstrate how perfectly our shared visions line up. The CEO of Pomegranate is a valued member of our board who shares similar points of view in strategies and the vision for Digikala.

For us that do not speak Persian, is there a meaning behind the company name?

Digikala is a combination of the words "digital" and "products" in Persian. This name was inspired by the product categories we chose to focus on in the early days of Digikala, such as digital cameras, which were our very first products to be sold and delivered via the platform. When Digikala's business model changed from retail to marketplace, the combination of the words was also the narrator of our new business model. In fact, for this transition in our business model, selling digital products has become selling any product digitally.