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Monday November 20, 2017 11:44 AM

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The future of business is digital

In Bangladesh, electronic commerce has grown at a tremendous speed.

Young consumers are buying and selling through the internet, and relying more on this platform than ever before.

E-commerce is giving a new dimension to doing business, purchasing products or services, and shaping the business environment worldwide. However, the major barriers of e-commerce in Bangladesh are consumer behaviour, culture, and perceptions.

In 2013, 3G was introduced in Bangladesh, and it increased internet usage, and because of that, commerce usage grew at a rapid growing pace.

Aggressive sales and marketing of smart-phones have also helped the growth of internet usage and e-commerce. Businesses in Bangladesh have realised that Bangladeshis are quite enthusiastic about technology, and at the same time passionate about online shopping (especially during Eid festivals).

With constant and numerous barriers to urban living in the capital, consumers have increasingly favoured online shopping, with an increasing supply of virtual businesses.

These online entrepreneurs are inspired by convenience, competitive pricing, the range of products, dedicated services, improved payment security, on-site delivery and flexibility, and demand from buyers and sellers.

E-commerce has witnessed a boom in online shopping websites, particularly in the businesses-to-consumer and consumer-to-consumer category. The government of Bangladesh has taken many steps to improve e-commerce’s infrastructure.

A point to note is that high-speed internet access, connectivity, and cheaper internet are not the only ways to bring success for e-commerce. The shift in consumer behaviour is another major factor.

The stats and the facts

The changing habits of using technology in Bangladesh are going to be the major reasons for the growth in the country’s e-commerce sector over the next three years. Predictions place our growth of e-commerce from 36% as of now, to 40% in the next few years.

Currently, the monthly value of the country’s electronic shopping stands at $10 billion (Tk1,000 crore) which is rising rapidly. In Bangladesh, over 80% e-commerce traffic comes from Dhaka (35%), Chittagong (29%), and Gazipur (15%).

Like India, the majority of internet users in Bangladesh are male; approximately 83% relative to the 17% female users.

Another research done by Kaymu found 90% of e-commerce customers are between the ages of 18-44 years, and within them, 25-34 year-olds constitute the most frequent purchasers.

Modes of payment are broken down into 95% cash on delivery, 2% wire transfer, 2% mobile banking, and remaining 1% on credit cards. Most of these online shoppers purchase consumer electronics and mobile phones. Facebook is also playing a major role to expand this sector in Bangladesh. Large numbers of young entrepreneurs are selling their products through their Facebook pages.

Where we go from here

Bangladesh has made rapid progress in internet development and connectivity, and has contributed to the massive growth of the sector.

High-speed internet access, connectivity, and cheaper internet are not the only ways to bring success for e-commerce

The ICT ministry took some effective policy initiatives and made some infrastructural improvements, which have also played a major role in the progress of e-commerce.

As 80% of e-commerce traffic in Bangladesh comes from three big cities — Dhaka, Chittagong, and Gazipur — there is enormous scope for other major cities to bring more customers to this platform.

Also, 57% of e-commerce buyers are male, and 31% are female, and 12% of the total population has never shopped online, so there is a need to increase awareness of e-commerce among some of these groups.

Currently, the majority of e-commerce users in Bangladesh are in the age group of 19-40 years, and they are tech savvy and comfortable making online purchases. Vendors need to penetrate the market outside this core group, by creating trust and providing more product variety in their offers.

In my research, I also found that 72% of online shoppers are in the income range of Tk15,000-Tk65,000 per month, so the rest of the 28% of customers who are earning below and above that range are not shopping online. So, there is a potential market that e-commerce vendors can tap into to expand the market size.

I also found that 62% of customers (male and female) buy clothing and around 40% buy electronic products, while there are also buyers for cosmetics, shoes, and food items, so the vendors need to create value and demand of other products.

On the other hand, services are also being purchased online — top services being sold online are bus tickets, tickets for sports events, movies, and cultural shows.

The majority of e-commerce users (about 60%) think that navigation and product ordering is relatively easy through the various websites which are currently available.

About 30% of users feel that the quality of navigating and product ordering experience is average, and can be improved.

This would suggest that minor operational improvements could make the experience more user-friendly. Improving the user experience in this regard could attract other potential segments such as the above-40 age group, who might just be shying away from online shopping.

Some 62% of shoppers preferred online purchasing, because it allowed them to avoid crowds or traffic jams, one-fifth of them admitted to saving time, and around 80% liked home-delivery services.

A good number of customers have doubts about e-shopping, because of the lack of the touch-and-feel factor. Therefore, e-commerce vendors should pay attention to these issues and work on them to expand the market.

Since the nation’s GDP, per capita income, and consumer buying power have increased, it has led us to believe that consumer perception has slowly changed so products which were considered luxury items are now being considered as necessities.

Therefore, customers are now treating many luxury items as necessities, and are becoming more comfortable to buy these products from e-commerce sites. This, in itself, is another consumer behavioural change.

E-commerce has much more potential for growth. Customers are behaving positively towards online shopping, so to move the progress forward, all stake-holders should keep working to add more value to the process, and the customers.

Abdul Baten is Assistant Professor at the School of Business, ULAB.

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