E-commerce: Doom follows boom

Pickaboo, an online shopping store, suffered a blow when its competitor Daraz used creative promotion models to hit the market.

Pickaboo started in 2016 and fared quite well by providing buyers with good service and authentic products. But at the beginning of 2019, its good days began to fade away.

A well-known home-made food delivery company, Cookups, temporarily closed last year after being in business for almost three years.

A shortage of funds and the inability to set up a customer base resulted in its temporary closure, as reported by Future Startup – a leading media for startups and entrepreneurs.

On top of that, the dedicated cooks were struggling to maintain consistency of taste and quality. The company, however, started services again later.

Bangladesh lags behind India and Pakistan in terms of e-commerce revenue generation. According to Statista, India and Pakistan are projected to earn $40,845.4 million and $3,282 million respectively from the e-commerce sector in 2020, while the figure is $2,455.4 million for Bangladesh.

Vietnam is also projected to earn around 38 percent more than Bangladesh this year.

There are some e-commerce ventures that did well, but many failed. Although the number of ventures is growing, the overall e-commerce sector has been in a sorry state because of inadequate investments, lack of unique business models and creative ideas.

Waseem Alim, chief executive officer (CEO) of Chaldal.com, said, "E-commerce entrepreneurs have not been able to turn the sector into an industry due to insufficient investment. India has invested around $100 billion in the sector while ours has not even crossed $100 million."

Echoing Waseem, Evaly CEO Mohammad Rassel said investors are not quite confident about investing in this sector because there has been no proven success story so far.

"Companies need long-term heavy investments in order to sustain themselves," Rassel said.

He pointed out that sales generation is a major problem in this business.

"Extensive promotion is required to generate sales, and this is not possible without large-scale investments," the entrepreneur said.

Overall investment falling

Although local investment in this sector is rising, overall investment is declining.

"The overall investment dropped from $27 million in 2018 to $15 million in 2019. On the other hand, local investment grew from $2 million in 2018 to $6 million in 2019," said Asif Rahman, founder and CEO of AR Communication, at an event recently.

Why is this happening? The tendency to follow competitors instead of coming up with new ideas and business models could be a possible reason.

Nazim Farhan Choudhury, managing director of Adcomm, told The Business Standard, "Startups that hit the market with creative ideas and business models have definitely succeeded. They are growing as well. However, many others focus more on traction, and less on conversion and demand generation.

"We need to go beyond just driving traffic to the website. Businesses run promotions for traction but when visitors land on the websites, how do you convert them to buyers? How do you keep them in your system? That needs focus."

Nazim said one reason could be the lack of adequate investments.

"Even if investments are made, they are mostly spent on traction rather than conversion. Investment is required for the back-end engine to convert visitors into buyers."

Nazim mentioned another reason – a lot of people do not know much about the e-commerce sector.

Too many copycats

Studying the market, knowing the competition and planning for the long-term are important to sustain a business. But not many entrepreneurs do a feasibility study before launching their companies.

Nazim said, "Everybody has the same thing. When one platform starts selling something, others also start offering the same thing. Not many different, unique ideas are coming out."

Sajid Amit, associate professor and director of the Centre for Enterprise and Society as well as the executive master of Business Administration at the University of Liberal Arts Bangladesh, said some of the early players in the sector had disappointed buyers with bad service such as poor delivery infrastructure and online fraud.

"If people had a bad experience with Foodpanda, they would not have used Pathao Food or Uber Eats," he said.

Emphasising the importance of the impression a company gives in its initial days, Sajid said people do not download and use an e-commerce app again once they delete it.

"So, what you do in the beginning has a big impact on people. A good delivery infrastructure is crucial. And there is already an infrastructure; they just need to expand it," he added.

According to the E-Commerce Association of Bangladesh, supply chain management in the sector is still underdeveloped. This is mainly because a third party does the delivery. Thus, it often takes too long to deliver the products.

Facebook commerce or F-commerce is another reason why e-commerce is struggling. Sajid said F-commerce has taken away some attention from e-commerce.

"F-commerce requires low investment while e-commerce needs high funding. In a study, we found that 35 percent of students spend four or more hours on Facebook. When they spend such a long time on Facebook, diverting their attention from that social media platform to an app or a website is not easy," the academician explained.

However, Bangladesh plans to transform into a digital economy in 2021 under the e-Government Master Plan for Digital Bangladesh. As e-commerce is an important block in the growth of the digital economy, issues in this sector need to be addressed instead of just seeing the number of ventures growing.