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As the ramifications of the COVID-19 crisis continue to be felt across the world, entire industries are struggling under the weight of demand downturn, labor shortages, and inability to maintain their supply chain processes.
However, demand downturn has not been the issue of primary concern for all industries. One such industry would be E-Commerce, which has seen an unprecedented rise in orders for certain businesses and growth of the overall consumer base owing to the lock-down in place.
E-Commerce can be defined as buying and selling commodities or services through an electronic medium. A distinction is sometimes made between e-commerce which is done through business websites or mobile applications, and f-commerce, which uses Facebook as the platform to facilitate sales.
The E-Commerce industry in Bangladesh began to flourish circa 2013 with the Bangladesh Bank lifting its previously established restriction on international purchases via consumer credit cards.
In 2018, Alibaba, the China-based global e-commerce giant, acquired Daraz Group, one of the leading e-commerce companies in Bangladesh, launched initially by Rocket Internet. It was a strategic play to open up South Asian Markets and cast important limelight on the sector. [1]
While this was a huge boost to the growth of e-commerce, other factors also played a defining role, such as the gradually improving access to the internet and rising smartphone usage across households.
The 3 types of e-commerce most prevalent in the country are: business-to-business (B2B), business-to-consumer (B2C), and consumer-to-consumer (C2C). Some of the notable players are shown in the figure:
Globally, the biggest countries in terms of e-commerce sales were The United States of America (USD 8,640bn), Japan (USD 3,280bn), China (USD 2,304bn), Korea (Rep) (USD 1,364bn), and the United Kingdom (USD 918bn) in 2018. [2]
The market valuation of the E-commerce industry is contested by different sources such as Statista and the e-Commerce Association of Bangladesh (e-CAB), however, the latter estimates it to be around Tk 8,000 crore with an annual growth rate of approximately 50 percent. [3] It also estimates there are currently around 500 websites and 2000 Facebook-based companies present in the industry. [4]
The pandemic has caused a large surge of demand to wash over the e-commerce industry in a way that it was, from a capacity standpoint, not equipped for.
The mandated lockdown and rampant fear of infection has changed consumer spending patterns. Marginal Propensity to Save has risen as households hold back on consumption on luxuries and raise consumption for essentials.
An estimated increase of around 3-4 times of pre-pandemic orders for necessities [5] and a sharp decline in orders for luxuries has left businesses with the latter product portfolio to either adapt and start offering groceries and essentials for sale or suffer large losses from a lack of orders.
e-CAB spokespersons have raised concerns regarding this shift in the pattern of purchases, stating that only around 100 websites are actively providing necessities online. [6]
Convenience in meeting orders in the time of the pandemic has become paramount for online businesses as they experience rapid growth in the number of customers and orders.
However, this sudden scale-up has been met with a general lack of preparedness in terms of capacity, mobility, and resources for these same companies as they struggle to capitalize on the demand surge.
Companies such as Chaldal.com, which is one of the larger B2C businesses specializing in grocery delivery, have attempted to improve their own capacity significantly through the employment of more delivery men. The average order size rose from an average of BDT 1300 to BDT 3,750. [8] The company must now deal with over 5,000 orders a day and is unable to meet them without slashing convenience and setting maximum order limits or lengthening delivery times.
Such an upsurge also highlights the incommensurate supply in comparison to demand and it makes the situation difficult for online businesses as they attempt supply-chain rearrangements in crunch time.
3rd Party Logistics in Bangladesh does not sell online groceries and essentials such as Paperfly, despite being a market leader, has experienced a dramatic fall in orders in the ballpark of 90%. Labor shortages have risen up and workers have temporarily migrated out of Dhaka. [8]
Further constraints on deliverymen mobility have arisen due to the heavy scrutiny by law enforcement who have directives as such. Order cancellation and delays are increasingly common due to such stringent movement. In addition to this, worker safety and provision of proper masks, PPEs, and otherwise, have become added liabilities for businesses.
An e-CAB study involving 1,100 of its member companies, has determined a loss of BDT 666 crore directly to the industry as a whole, with a significant loss in f-commerce sales and sales for businesses not involved in the sale of necessities. [8] Therefore, it is important for the industry to avail the stimulus package put forward by the government to cope, scale up, and/or innovate.
The crisis has made way for businesses like AjkerDeal.com and PriyoShop.com who are e-commerce giants, to diversify into the online groceries market, helping to secure employment for their own workers and providing much-needed service for the community.
The same type of diversification has been undertaken by companies such as Kotha who operate through their mobile app and now provide essentials on the platform.
Bikroy.com, which is the largest online marketplace for C2C customers has introduced a category called Essentials as they attempt to help local suppliers find markets.
Foodpanda, Uber Eats, and Pathao which focused their core business on food delivery have also joined the fray to scale up and deliver groceries, medicine, and other items to their customers through listing suppliers of such products on their respective apps.
The crisis has spurred innovation in the e-commerce sector as well.
E-courier has spotted the vacuum in online grocery and introduced the first BOT-based messenger shopping in the city. A BOT is a software application that runs automated tasks over the internet and is such, capable of aiding customers with their shopping.
Hellotask Ltd, a supplier of cleaning and home-making services, has undertaken the ambitious project of turning apartments’ basements into groceries where only dwellers of the apartments will be the buyers. [8]
Pet Service platforms such as PoshaPets have switched to online services and are providing over-the-internet veterinary services. [9]
While the crisis has sparked a skyrocket in demand for certain parts of Bangladesh e-commerce, the industry as a whole is suffering along with most other industries. When the crisis eventually subsides or is deemed to be in a controlled state, industries will reopen fully. This will mean that while some consumers will revert back to traditional systems of shopping, the growth of the e-commerce sector will normalize and sustain. After all, the core selling point of e-commerce will always continue to be customer convenience.
The stimulus package of Bangladesh is already working to mitigate damages and the way forward for businesses will depend on capital availability and labor readiness. However, with such major strides taken in terms of the increase in the volume of online shoppers, a post-COVID-19 boom for the sector seems to be on the cards.
Sartaz Zahir, Content Writer at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: [email protected].
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