Electronic commerce or e-commerce, as it is more popularly referred to, is defined as any form of trade or exchange of goods, services and information using electronic means.
A study on e-commerce published by the Centre for Enterprise and Society at the University of Liberal Arts, Bangladesh has found that e-commerce has been rapidly gaining acceptance globally, particularly since the dot-com boom and bust in the 90s.
The level of international acceptance and popularity among businesses, especially small businesses and entrepreneurs, is largely due to the ability of e-commerce to go beyond international boundaries and enable activities within the virtual marketplace. This enables entrepreneurs to do business internationally at relatively low cost.
Consumers also report of higher satisfaction levels in availing of goods and services through e-commerce portals from the convenience of their homes or offices.
Moreover, e-commerce businesses, by avoiding expenses on logistics such as physical spaces, smaller work force, and occasionally, lower inventory levels, are able to offer lower prices on products and services, contributing towards greater customer satisfaction. The advantages of e-commerce then can be broadly classified as follows:
It is because of the aforementioned advantages that the e-commerce sector is expected to fare particularly well in developing countries. This is perhaps more inevitable for a developing country like Bangladesh in which traffic jams and consequent restricted physical mobility can constitute a significant barrier to business growth. In the context of Bangladesh, although some e-commerce businesses have risen to prominence, the sector is still considered to be at an embryonic stage, and its contribution to economic growth is expected to increase exponentially, after the ongoing phase of customer familiarization and comfort with e-commerce increases, and a reasonable market penetration is achieved.
Global Impact of e-Commerce
Globally, e-commerce surfaced at a time when dotcom businesses were losing traction in developed countries. One of the first formal e-commerce applications was undertaken by CompuServe for its US and Canadian markets. Subsequently, modern-day powerhouses such as Amazon.com, eBay and more recently Alibaba.com, were established.
The tremendous growth potential of e-commerce is evident in countries such as India as well, where the market is worth about US$12.6bn as of 2013 and rapidly growing. In the US, the total value of the e-commerce sector is about US$294bn.
The popularity of e-commerce is largely driven by the expanding reach of the Internet. All over the world, the scale of global trade being carried out on the Internet is increasing. In the Asia Pacific Region, countries such as Japan, China and India are leading the way with regard to online trade, with an average yearly growth rate of 143% over the last decade. However when it comes to the use of Internet for online shopping purposes, country-level data vary considerably. While in China, online shopping constitutes 20% of Internet usage, in South Korea, the proportion is about 50 percent of Internet usage.
E-commerce in Bangladesh
By now, the growth story of Bangladesh has become well-known. The country’s annual GDP growth rate of about 6% over the last decade is reflected across sectors. The story of mobile phone adoption in Bangladesh is also a case study in its own right and not too far behind is the unfolding story of Internet penetration and usage.
Presently, several established business houses have opened up online portals while others are starting anew as exclusively online businesses, in part, due to the latter’s relatively less capital intensive nature. Interestingly, these trends are not limited only to Dhaka, the capital city, but semi-urban, and to an extent, rural areas as well. The Bangladesh Governments’ initiative to provide a solid Internet backbone, encouraging a well-grounded telecommunication sector, connecting all government offices, and opening up IT Parks are all leading indicators that point to the e-commerce sector’s growth potential.
With recent growth of Internet usage, 3G roll-out in 2013, and the vigorous marketing and sales of smartphones, e-commerce usage continues at a rapid pace. Businesses have realized that Bangladeshis are quite enthusiastic about technology and at the same time avid shoppers (especially, during Eid festivals).
This report was first published by the Centre for Enterprise and Society at the University of Liberal Arts, Bangladesh.
