How did the advent of the pandemic impact the digital marketplace? Can you walk us through the trend shifts that were incubated? Have those shifts helped businesses in the digital sector to grow?
The advent of the pandemic brought in unprecedented disruptions, especially in the supply chain aspect, which did not just affect the restaurant business, but our operations as well.
During the first phase of the lockdowns, nobody was prepared. There is a common misconception that delivery businesses profited from people ordering online more.
However, the reality was quite grim, even after a global shift in trends and people adapting to the online world more and more.
We literally had a negative trajectory during the first half of 2020. A lot of restaurants shut down as employees started leaving the metropolitan to go back to their families. So, during March-May, our business decreased by almost 50% with the lockdown.
But, we quickly tapped into the grocery market to play our role in addressing people’s needs, as we saw grocery and retail shops were initially limited to operational hours till 2 pm.
People who physically visited open markets for groceries were also starting to shift online as the fear of Covid-19 spread amongst communities.
We started signing up with superstores like Shwapno, Unimart, Meena Bazaar, starting our initial grocery delivery phase as the restaurant business shrank, and we received a good response from the consumers.
However, to bring in more consumer convenience and have control in providing real-time data on our inventories while assuring quality, we decided to hold our own inventory, despite it being a very capital-intensive move. We started thinking about quick e-commerce that ended up as Pandamart.
It took us six months to launch that, and fast forward to the present, Pandamart just celebrated its first anniversary, becoming one of the largest online grocery platforms.
We only got a business boost during this year’s lockdown. We saw a boost in orders only after April of this year for both food and grocery, and the trajectory has been almost consistent since then.
The difficulties that our riders had faced initially during the lockdown also vanished as even the law enforcers provided support in ensuring the delivery of commodities to the common people.
But has the consumer confidence of the sector been the same, in the aftermath of the e-commerce scam scandals? What about investors?
Definitely not. A lot of consumers had lost huge amounts of money from rogue e-commerce platforms that grew suddenly in numbers and in such a short amount of time ran scams.
This definitely has been a blow to the industry at such a crucial point in time when we were seeing digital adoption speed up. People were constantly being exposed to these scam stories as people started sharing their suffering through different platforms.
And it’s not just them, Bangladesh has been seen as a ripe FDI destination for investors who have been scouting the market for a while and this definitely reached them. However, this one series of events really does not represent the reality of the local market, which has great potential.
A thing like this has not happened in any of our neighboring countries including India, Sri Lanka, or Pakistan. They have seen the e-commerce sector grow in the last few years.
We are lagging behind in terms of growth as they have had no such barriers. Our GDP per capita is bigger, and we have a better economy. So, why shouldn’t our e-commerce be bigger than ours? It should be.
The good thing is that we have seen few investments coming into the sector such as that of Shopup. We have also seen bKash becoming the first unicorn of the country with SoftBank of Japan investing in the MFS. So, we are hopeful.
What do you think would incubate the confidence of stakeholders again and help the sector to grow?
There is a need for synergy that we have seen over the last few months in the aftermath of the e-commerce scandals, with the intervention of the government and associations such as the e-CAB that has taken significant initiatives in putting the sector back in its original trajectory.
We have seen all stakeholders work together to put an end to the possibility of any such rogue e-commerce rising up.
We also need to ensure that we highlight the businesses of the sector that have been here for years and the practices that have led to consumers still trusting the online marketplace. These genuine e-commerce businesses are actually investing in the sector and helping it grow.
However, with big investments coming into the sector, it would be essential to ensure that such a growing sector with all its barriers that are unique to the market, businesses are not over-regulated and policy framework ensures the sustenance of the businesses as well.
When we are competing for global investments with Pakistan, India, others, we need to ensure a balanced form of regulation.
In addition to the regulation, we need to ensure that there is someone to oversee the implementation of the guidelines, which is crucial. Otherwise, there might be more rogue e-commerces that will scam people despite the SOPs.
Can you give us an example of how over-regulation might impact the sector?
If you look at the guidelines or the SOP introduced into the sector, it has increased the cost of business to a certain extent.
Now, if you keep adding one guideline after another, which keeps adding up and trickles down to the consumer level, it will definitely impact the momentum of the sector.
Do you feel there is a tug of war between foreign and local businesses of the sector?
I do not feel so, and I hope there is nothing like that. The way I see this, it’s an ecosystem.
When a foreign player comes in, there is market standardization as well as competition. When a foreign player brings in technology, the local players bring in specialization to the already existing product or service instead of copying it, as they know it’s the only sustainable way.
This helps the market evolve. So, I do not feel there should be any tug of war as you say it. Moreover, localization takes time for international players where the local players have the advantage. And the market is quite big and still new.
What about the restaurant owners association and their allegation of Foodpanda charging a high commission rate to restaurants?
So, their demand is bringing down a commission to 10% which is absurd and cannot be sustainable for aggregators. Restaurant owners make a profit, even if it’s small, for every order, we generate for them, while we lose money in small orders of basket size Tk100-150.
We have been burning money since the start of our inception just to grow the market. If I take away the incentives for consumers, the momentum of the sector will definitely slow down. The restaurants need to sustain as well as aggregators.
If you check out with the RJSC, they have the data on our commission rates which can be checked to verify we have lower commission rates than other markets.
Aggregator commissions are relatively low in Bangladesh compared to that of the other markets such as Pakistan or India. Globally, not even taking Singapore into account, if you look at neighboring countries Pakistan and India, aggregator commission starts from 30-35%, which is the point of sustainability for aggregators.
Ideally, the food cost should not be 35-40% of your selling price, which is true for the majority of restaurants. However, the problem of the restaurant industry lies in the restaurant supply chain, which is very fragmented.
Furthermore, if we cover 64 districts, our average food price is not more than Tk300 per order with the basket size being very small, where I have to pay the rider and I am not even taking other expenditures into account such as subsidization, marketing technology, platform.
