Bangladesh’s e-commerce sector is expected to grow 70 per cent in 2017 as the rollout of 3G internet 3-4 years back led to rapid adoption of online shopping, reports India-based Economic Times.
The size of Bangladesh’s e-commerce market is estimated to be $110-115 million ( around Tk 900 crore ) this year, growing from $65-70 million in 2016, said the report referring to RedSeer Consulting. The e-commerce size is still is a mere 0.7 per cent of the country’s total retail market.
Rocket internet-backed online marketplace Daraz, Foxconn-backed e-retailer Pickaboo, Bagdoom and Chaldal are among the leading startups in the country.
Internet penetration to 40 per cent of Bangladesh’s 165-million population has bolstered the growth of local e-commerce, F-commerce (merchants conducting online business through facebook pages) and e-grocery startups.
The size of Bangladesh’s e-grocery market is much smaller at $4-5 million, or about 0.03 per cent of the country’s overall grocery market. Even so, analysts are predicting that Bangladesh’s e-commerce market will surge to $20 billion by 2020 according to Goldman Sachs.
Bangladesh’s e-commerce market is ‘nascent but growing— similar to what India was probably seven years ago. It’s a good time for e-commerce players to be entering,’ said Shalini Prakash, venture partner at 500 Startups, which has invested in more than 50 companies in India since 2011.
Daraz, founded in 2014, dominates Bangladesh’s e-commerce market, selling electronics, mobile phones, large appliances and apparel. The company is growing at double-digit percentages every month, supplying to customers in neighbouring markets of Pakistan, Sri Lanka, Nepal and Myanmar.
The opportunity in Bangladesh prompted Delhi-based digital marketing company MoMagic Technologies to launch Pickaboo last year. ‘The Bangladesh e-commerce market is close to five years behind the Indian ecommerce market and is around 10-12 per cent of the size of the Indian e-commerce market,’ said Arun Gupta, chief executive of MoMagic.
Pickaboo, which clocks monthly revenues of $6,00,000, mostly sells electronics on its controlled marketplace and has plans to add leather accessories shortly, said the ET report.
‘When Flipkart was launched, they started selling books first— a category where what you see on the marketplace and what you receive is the same. In today’s world, electronics fall under this category with the probability of difference being low,’ said Gupta, adding that Pickaboo has a 20 per cent share of Bangladesh’s ecommerce market.
International Finance Corporation, the private sector lending and investment arm of the World Bank, has been tracking Bangladesh’s entrepreneurial ecosystem the past year and is bullish about the market. In its shortlisted 43 startups which they are actively monitoring, Chaldal tops the list as a potential investee company.
Chaldal delivers groceries using a network of small warehouses spread across Dhaka. ‘We launched Chaldal because we felt that there was a need to offer more variety of groceries to our customers and save time for the growing middle class,’ said CEO Alim.
Chaldal competes with Direct Fresh and Meena Click, the online extension of Bangladesh’s 15-year-old supermarket chain Meena Bazaar. Specialising in groceries and personal care products, Meena Click was launched three years ago. The company, which handles 4,000-4,500 orders a month in Dhaka and the port city of Chittagong, said it has doubled its business over the past year.
Another aspect about this nascent e-commerce market is that of the total online spending by customers, which is estimated to be about $50 million, 40 per cent of the transactions are through 15,000 small merchants selling through their Facebook pages.
‘Bangladesh’s e-commerce ecosystem, instead of developing around one or two big players, has several smaller merchants who sell online,’ said Ruchira Shukla, regional lead, South Asia, venture capital at IFC.
Bangladesh also has the advantage of a large and homogenous population of 165 million. Because of this, ‘once the business model is figured out, it can be scaled across several cities and the entrepreneur doesn’t have to worry about differences in language or culture,’ Shukla said.
The market is fraught with several other challenges too. ‘Logistics and the transportation system are still challenges in Bangladesh,’ said a spokesperson for Daraz, which said it has the largest delivery network in the country, with its own fleet operating in 20 cities. ‘Also, the stagnant traffic hampers fast delivery of products.’
The Chaldal team rented out a small grocery for two hours to click pictures of all the items it stocked to build their online catalogue.
Another big challenge lies in how to turn around the market despite a shortage of capital. This has forced some companies to resort to capital-efficiency to survive.
‘Part of the capital-efficiency comes from us having very little capital available in the ecosystem— we have had to innovate significantly beyond the practices in the Indian market,’ said Alim, who took inspiration from Big Basket’s warehouse to start their own in Dhaka.