A closer look at e-commerce in Bangladesh

Dhaka,  Thu,  17 August 2017
Published : 06 Feb 2017, 19:08:21

A closer look at e-commerce in Bangladesh

Sajid Amit 
With recent growth of Internet usage, 3G roll-out in 2013, and the vigorous marketing and sales of smart phones, e-commerce usage continues at a rapid pace. Businesses have realised that the Bangladeshis are quite enthusiastic about technology and at the same time, avid shoppers. However, with the numerous barriers to urban life in Dhaka city, citizens have increasingly resorted to online shopping, with an increasing supply of virtual businesses to match.

In light of the exciting growth prospects of e-commerce, the Centre for Enterprise & Society (CES) at University of Liberal Arts Bangladesh (ULAB), conducted a mixed-methods research study to assess the existing state of perceptions, usage trends and demand among retail shoppers in Bangladesh. A quantitative survey was conducted among 400 shoppers who purchase physically at malls and a qualitative survey comprising of 15 key-informant interviews were conducted with industry experts. Within this conceptual framework, a shopper survey was conducted to consider the most high-potential customers as respondents and to understand their buying behaviour and expectations. This is in line with global surveys conducted by Nielsen, USNEWS, and McKinsey & Company.

THE SALIENT FINDINGS OF THE SURVEY: About half the shopper respondents surveyed (49.3%) said that they possessed either somewhat high or very high level of knowledge on e-commerce. This is an encouraging statistic and even though the depth of this knowledge can be questioned, it points to very successful marketing efforts by the e-commerce industry in Bangladesh. 

     The majority of the respondents (72.0%) go online using their or their family members' mobile phone 3G connections rather than WiFi connections. Respondents in the age groups between 19 and 24, and 25 and 40 spend the highest amount of time online. Respondents at Dhanmondi malls spend more time online than respondents in Uttara, Mirpur or Gulshan. 

Regarding device usage, level of education does not have a significant correlation with using mobile phones as the device of choice for browsing the web. However, income does have a correlation with laptops as a choice of device with which to browse the web.

There appears to be a preference to shopping at malls rather than shopping online. When asked to compare, a higher percentage preferred shopping at malls rather than online. 

About 70.8% of respondents visit e-commerce sites between one and five times a month. Higher income groups and Dhanmondi respondents are the most likely to visit e-commerce sites compared to respondents in other locations. Moreover, 69.3% respondents reported to purchasing products online one or two times a month. It appears to be the case that the ratio of purchases to visits is relatively high for Bangladeshi e-commerce customers.

Transaction sizes for e-commerce purchases are still relatively small. About 70.5% of e-commerce users spend less than BDT 5,000 a month.

Facebook-based e-commerce, otherwise known as F-commerce, has considerable momentum and potential in Bangladesh. About 29.3% reported using a website compared to 43.5% who said they used a Facebook Page for purchasing products online. 

Ease of navigation of online/FB sites, product availability, ease of ordering, customer support feedback point to areas of intervention and attention from e-commerce entrepreneurs. Among these parameters, product availability (44.0% reporting products are usually or always available) and frequency of receiving customer service when sought (less than 25%) merit closer attention. The latter could be a perception problem but is an aspect of service that can hinder or promote business growth in the long-run. 

Re-visits and purchasing during re-visits did not generate sufficiently high statistics for e-commerce shoppers. It is possible that more needs to be done to render e-commerce sites more attractive to potential customers. However, digital marketing appears to be effective as a quarter of respondents click on websites advertised, which is high for online advertisements. 

Customers are generally satisfied with delivery charges. However, time taken to deliver appears to be another area for improvement. This is of course difficult, given challenges such as traffic jams to urban life in Bangladesh. 

In terms of overall satisfaction, slightly less than half the respondents report to being either satisfied or very satisfied. A silver lining is that very few respondents (16%) reported to instances of encountering fraud. This is important as e-commerce and virtual transactions are inherently trust-based, particularly in a country like Bangladesh, with relatively low levels of information technology (IT) and financial literacy. 

THE WAY FORWARD: Clearly, the level of awareness-generation, marketing, and advertising activities conducted by e-commerce entrepreneurs have been successful, given that already, about half the respondents surveyed professed possessing high level of knowledge on e-commerce. However, awareness-generation is not the same as behavioural change communication (BCC) activities, and it is to this end, that e-commerce entrepreneurs must focus their attention to. Video tutorials and e-commerce fairs ought to be introduced and organized on a more frequent basis. 

E-commerce entrepreneurs will do well to adopt tactics deployed by other digital finance players such as mobile financial services companies who deployed effective BCC programmes in partnership with development agencies, often instructing customers on how to use services through television advertisements, radio programmes, and by deploying agents. 

Across the findings, it appears as if the age groups -19-24 and 25-40 - are the most avid consumers of e-commerce. As also borne out by the KIIs (key informant interviews), comfort with mobile phones and the internet render it easier for these groups to conduct online shopping. This is a group towards whom more focused services are necessary, particularly, the 25-40 age group, since this is the working professionals' age group, and this group, with regard to some of the findings, appear to be lagging behind the 19-24 age group. 

E-commerce platforms will do well to assess demand for products and services sought by the 25-40 age group, and develop partnerships with large high-profile employers so that their employees can avail of discounts on particular products and brands. For instance, food retailers could develop partnerships with conglomerates allowing the latter to source food items for their cafeterias at discounted rates. Multi-product retailers could offer discounts on office supplies and stationary to large local corporates. Approaching this age group from an institutional level will eventually pave the way for retail sales.

Dhanmondi respondents far outstrip respondents in other areas of e-commerce familiarity, demand and usage. It is important to both cash in on this, and develop channels with which to offer products and services to the youth in Dhanmondi. Since Dhanmondi is an area where universities, schools, and hospitals/pharmacies proliferate, e-commerce providers can consider developing partnerships with the said institutions to sell products at discounted rates that universities, schools and hospitals/pharmacies routinely require. In the US, for instance, Amazon.com has had tie-ups with university libraries to enable book rentals since the price of textbooks can be quite high in the US. This is something e-commerce platforms in Bangladesh can consider with respect to private universities in Bangladesh. 

Another important criterion for e-commerce players' success is revisits by users. It appears statistics for revisits are not sufficiently high. This is an area where e-commerce platforms can invest in. There are various strategies adopted by e-commerce players overseas to generate revisits: loyalty schemes, award mechanisms, credit cards dedicated to e-commerce platforms, membership discounts, and of course, by ensuring a continuously developing inventory and communicating the same to current and potential customers. 

Targeted advertisements are also used that enable e-commerce providers to showcase to visitors, products they once clicked through or viewed, on other online platforms, via digital ads. These are techniques that can be adopted by Bangladesh-based e-commerce players in the long run. Of course, re-visits also depend on the user experience. User interface design and ease of navigation, ease of ordering the product, and very importantly, ensuring that a product being advertised is actually available on the site, are essential to generating more revisits. 

Delivery services constitute another area that merits closer attention since in Bangladesh, this tends to be outsourced, and is often at the head of consumer dissatisfaction, not only in terms of delays in delivery, but whether a product actually reaches a customer. An issue in the e-commerce sector is that of capital as most organizations do not possess sufficient capital, as borne out by KIIs, to invest in their own delivery systems. Several problems arise from third-party delivery and cash collections. This will be resolved as more angel investments and venture capital make their way into Bangladeshi e-commerce businesses. Simultaneously, bank lending ought to be encouraged to develop this sector.

Consultations with e-commerce entrepreneurs surveyed for this study also identified expectations from the public sector. Although the respondents were unanimous in acknowledging the support of the government in developing the e-commerce sector, notwithstanding the setting up of the e-commerce Association of Bangladesh (ECAB), they had long-term suggestions that had to do with popularising use of internet at the rural level, perhaps through primary and secondary educational institutions. 

Other recommendations posited by the e-commerce entrepreneurs include lowering price of internet usage; a designated subsection for ecommerce businesses at the upcoming IT Park; and lastly, protective measures to dissuade foreign competition in this sector, to allow the local players to grow. 

The writer is Director, Centre for Enterprise 

and Society at ULAB. 


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