Key Challenges to Start E-Commerce Business in Bangladesh

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Bangladesh has made significant development on the path of digitalization in recent years. However, the internet penetration rate is still low compared to the developed countries. As a result, in Bangladesh, an eCommerce business faces a lot of challenges even before its inception. In addition to internet access, other bureaucratic and resource-related challenges are a constant headache for many eCommerce startups. Let’s take a deeper look at them.

The state of eCommerce in Bangladesh

Up until 2006, the state of eCommerce in Bangladesh was almost non-existent. The handful of eCommerce sites were exclusively used by the upper-class people with businesses being strictly niche-based. With rapid digitization, the number of eCommerce sites saw a rapid jump of over 70% in 2007, and the growth trajectory has been upward ever since.  

At present, there are about 2000 independent eCommerce sites in the country with another 50000 being F-commerce based. Combinedly they are delivering over 30000 products every day. However, the majority of the transaction is limited to Dhaka, Chittagong, and Gazipur only.

The limitation is seen in the transactional aspect as well. There are about 5 million debit cards and 1 million credit cards in circulation. Out of these only, 1% of the people use them for POS transactions. Rest is limited to ATM usage only. This prompts the issue of lack of online transactions, which is one of the key pillars of the eCommerce ecosystem.

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Key challenges of eCommerce platforms in Bangladesh

Product Sourcing

Leading international e-commerce platforms like Amazon, eBay, and Rakuten are not available in Bangladesh. Therefore, there is the challenge of product sourcing.

Depending on the customer choice, many eCommerce platforms resort to sourcing products through imports. The entire process and customs together increase the price of the product significantly. As a result, there is a lack of demand in the first place.

Local dropshipping can be a good option in this regard. However, maintaining product quality and brand reputation becomes a significant challenge with dropshipping.

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Finding the right customer base

The first and foremost issue faced by any eCommerce startup is choosing the niche. It is almost impossible to incorporate everything under a single domain unless you are one of the big players.

That being said, there is also a lack of market data. What kind of product are customers interested to buy online? What products sell more? And which niche has the largest online transacting customer base? All of these essential data aren’t readily available.

While on average, people under 30 prefer to shop online, that also presents the unique challenge of tailoring the product to their needs. Categorizing a customer base while the majority of the country is interested in offline shopping is a key challenge.

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Low conversion rate

One of the positive aspects of eCommerce is that there is no geographical boundary to your customer base. Anybody from anywhere can view your products and if you have an international shipping option can even become a customer.

On average a successful eCommerce looks at about 1% to 2% conversion rate of the total hits on a product. However, it’s not even 0.2% in the case of Bangladesh.

The dire situation can be attributed to a lack of potential lead generation and poor conversion measures. While the local target market itself is small, there is also a general disinterest in buying products online. As a result, eCommerce sites are failing to generate and convert leads.

Customer retention

Another problem pertaining directly to lead generation is customer retention. Big e-commerce platforms across the globe ensure over 30% customer retention with the likes of Amazon boasting a whopping 93% retention rate.

However, Bangladeshi eCommerce platforms fail to register even a 10% retention rate. The situation is mostly because there is a lack of after-service policy with targeted marketing. As a result, there is no free-flowing pattern in the purchasing parity of the customer.

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Existing competition

The existing eCommerce market is still grossly niche-based. That in itself makes the business prospects tough for new eCommerce platforms. Combined with that, there are already established eCommerce platforms like Chal Dal, Daraz, ClickBD, etc. Market saturation and competition are other key challenges that a new eCommerce platform has to face.

Lack of trust

Why is there a lack of general distrust among people buying products online? The inclination towards offline shopping patterns is coupled with a lack of trust among the people about products sold online. There are countless instances of faulty products or fake products being delivered. Sometimes, the seller resort to not sending products altogether taking advance payments. There are countless litigations regarding such fraudulent activities.

Unless there is a proper framework to regulate the eCommerce platform and ensure the rights of the consumer base, it’ll become problematic for eCommerce to make any strong footing alongside the offline market.

Read Online shopping boomed but many falling prey to fraudsters

Lack of adequately trained personnel

Digital marketing and offline marketing are not the same. In digital marketing and eCommerce, you are targeting customers through an email campaign, vouchers, SMS or maintaining a database, client tracking, product inventory update. All of these aspects might be completely new to a regular product marketer.

Many eCommerce platforms in Bangladesh pointed out that there is an acute shortage of competent people when it comes to running and maintaining an eCommerce site. Not just site maintenance, there seem to be issues regarding product management and delivery. While it’s easy to set up a platform, lack of management means they aren’t enough positive headway for the business.

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Bottom Line

Even after all its constraints, Bangladesh has made considerable strides in going digital in almost every sphere of life. While the existing situation is still in its nascent stage, there is a huge untapped opportunity in the eCommerce platform. Proper regulation and intervention by the government can help to build an effective environment for the eCommerce platforms in Bangladesh.

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