DIU Blog

E-Commerce Business and its potentiality in Bangladesh

E-commerce (electronic commerce or EC) is the buying and selling Platform for product and services, over an electronic media, primarily the Internet. In the early stages though the E- Commerce sector were not a well-known network for transforming business but after Covid-19, it has shown its significance to a large extent. Evidence supports that the number of transactions over the E-commerce sector has been soured up more than 40% over the past few decades. Thus Bangladesh has been showing great opportunities, however it has some challenges as a fast growing nation.

Some assume that E-commerce first emerged in Bangladesh in the year of 1999 by Munshi
Technology Limited. They started by exporting different handicrafts products and leather goods. Eventually different E-commerce initiatives and website based platforms were visualized like click.bd.com after changing their final name as Ekhoni.com in the year of 2014. New regulation has been introduced by Bangladesh Bank in the year 2019 for online transactions and for a period of time Winmax internet has been launched as well. To ease the legal transaction payment gateway infrastructure was developed for the first time in the country in 2010 with the establishment of ‘SSLCOMMERZ.’ That time, Brac bank and Dutch Bangla first come forward to collaborate to advance the payment Gateway system which has now been the largest one in Bangladesh.

In terms of inventory level, there are two sorts of business models in the e-commerce sector of Bangladesh. One is the ‘retail or inventory lead’ model, and another is ‘Marketplace or Zero
Inventory’. First category business involves wholesale business and second category of business includes vendor and consumer business. Escrow Services has been introduced by Bangladesh Bank for protecting consumer rights and fraudulent activity. This law provides that no advanced payment has been required for placing an order.

Current scenario witnesses that E-commerce has been involved in excessive advertisement and by 2020 the e-commerce sector has began to transform into full-fledged businesses. There are more than 2500 e-commerce platforms in Bangladesh, of which 1% are large businesses, 4% are medium businesses, and 95% are small businesses. Of these, 1,600 ecommerce entrepreneurs are currently e-Cab members, of which 27 percent are women, and 73 percent are male entrepreneurs.

The growth of the e-commerce industry in Bangladesh is lagging far behind and is not up to the mark compared to neighboring countries due to some acute challenges though the potential to grow is immense.

Till now, the approximate market size of this e-commerce industry is only 1.5 – 2.0 percent of the total retail market of Bangladesh whereas nearby country Indonesia holds roughly 20 percent. Experts say this e-commerce market can grow at least 20 times within five years if can respond to its rising demand properly.

Some major setbacks as follows –

1. Fewer smartphone users with internet connectivity. Out of 100 million unique
   mobile phone users, only 42 million use smartphones and the internet, which means
   – 42% smartphone penetration. Data source: Daily Star.
2. Inadequate buyers and sellers to grow core e-commerce marketplace. There are
   only 20,000 active sellers and 1.5 million customer base doing online shopping
   every month. Data source: Daily Star & GSMA study.
3. Poor user experience. Consumer dissatisfaction due to inability to deliver the
   correct product on time.
4. Lack of trust in authenticity and legitimacy of products. Lack of commitment on
   buyer and seller side.
5. Inefficient logistics and cost-effective ecosystem.
6. Convenient, safe, and effective Digital payment.
7. Insufficient legal law against deception/fraud arising from online transactions.
8. Wrong perception about e-commerce. It’s not about selling cheap products with
   vouchers and discounts.

Therefore, after analyzing the challenging factors stated above, there are some recommendations in this area to respond to its potential –

1. Govt. should take the steps to make smartphones ultra-affordable and ensure low-
   cost internet connectivity collaborating with smartphone manufacturers and mobile

operators.

2. In order to grow our core e-commerce marketplace, we need to bring more
   customers and more sellers on board. To onboard more sellers in this platform, we
   need to introduce a seller stimulus program extensively. E-commerce operates in a
   business model that will only be sustainable and profitable when it is operated on a
   large scale.
3. We should not just think about extending the product lineup/categories, rather
   should think about customer experience. We should be able to deliver quality
   products on time. Some users prefer to go to the mall and some prefer to go to the
   market. We need to be able to provide solutions for both of them.

Sensitivity: Internal

4. We need to ensure that, buyers will receive authentic, legitimate, and quality
   products on time from sellers to build up trust and reliability.
5. Need to drive logistics efficiencies and build a cost-effective ecosystem that can be
   scaled up. We need to invest in infrastructure and logistics, build multiple
   fulfillment centers to ensure faster delivery.
6. We need to ensure convenient and safe digital payment to make our customers’ life
   easy.
7. Insufficient legal law against deception/fraud arising from online transactions.
   Consumer protection law should be there, especially governed by Bangladesh
   Government itself.
8. We need to break the perception that e-commerce is about cheap products with
   vouchers, unrealistic discounts, and fraudulent schemes. That kind of business is
   not sustainable. Actually, e-commerce is about good services, helping people to
   lead an easier life with meaningful digital engagement.

To conclude, it can be summarized that E-commerce has been a common buzz in all sorts of
business industries in a very short period of time. Though, a number of challenges and factors are highlighted yet those can be overcome by numerous way stated above. If Government and some other infrastructural support has been provided unconditionally then it will open up different revenue paths for both individual as well as Government which will ultimately contribute to the country’s economy and individual development.

Writer’s Profile: Umme Kulsum

Author’s personal goal is to build a long-term career at university in a position that offers opportunities for career growth and to keep up with cutting-edge teaching technologies. Now author has admitted in University of Sains Islam Malaysia for acquiring Ph.D degree. Her interest area is Accounting related cutting edge theory and its application. Author has published nine papers regarding her teaching interest in all well recognised journal (scopus Index including Daffodil International University journal) and tried to give her endeavor to continue in the next level. At the same time the author has joined and participated in renowned conferences like ‘International Summit on Employability Soft Skills’ and many more. To increase the self development skills authors has also participated a range of workshops and achieved certificates for the purpose.