E Commerce Market in

Bangladesh: Condition,
Standing and Strategy of Local
Companies While Facing the
Global Giants
Institute of Business Administration (IBA), University of Dhaka

Term Paper Report

on
E Commerce Market in Bangladesh: Condition,
Standing and Strategy of Local Companies While
Facing the Global Giants

Course Name: Managerial Economics

Course code: E 501
Semester: Summer- 2018
Batch: 30th (Executive MBA Program)

Submitted to:
Sheikh Morshed Jahan
Associate Professor,
Institute of Business Administration (IBA), University of Dhaka

Submitted by:

Sayed Abu Sufyan ZR1801005

Sourav Saha ZR1801009
Md. Saniat Islam ZR1801010
Md. Sajidul Islam ZR1801018
Abstract

Recently, with the proliferation of using computers to access to the Internet, the World Wide
Web has provided a new means to conduct online business, namely E-commerce. This means
is not only efficient with its timely and accurate transactions, but it is also affordable to
everybody engaging in selling or buying business, from individual consumers to firms. E-
commerce accounts for hundreds of billions of dollars in sales annually all around the world,
and that figure is growing rapidly. For the significant improvement of economic productivity
of Bangladesh in goods and services both in government and private sector is increasing day
by day. The introduction of e-commerce is must for all people who are involve with business
sector.

To left behind all of its economic backwardness, Bangladesh has easily entered to IT world
and it is hopeful for us that, ecommerce already made inroads in our society, indeed into our
psyche. With the help of ecommerce Bangladesh can be benefited in many ways like the
expansion of business, reduction of communication difficulties, competition against the
exporters of countries, exportation of quality goods in foreign countries etc. By seeing the
booming economic condition of Bangladesh, global e-commerce players have already started
and also planning to start their operations in Bangladesh. American e-commerce giant
Amazon and retail heavyweight Walmart will start operations in Bangladesh within a couple
of years as the global companies are increasingly making foray into the market. With the
launch of their operations, the market ecosystem will change and the local players will feel
the heat.

This report entails a qualitative exploration considering the current situation analysis and
future of e-commerce market setting in Bangladesh compared to the worldwide e-commerce
business. This study is descriptive and qualitative by nature, but intends to provide useful
insights into the current market mechanism of e-commerce business setting. At first, this
report will provide an overview of e-commerce market, its market structure and competition
with respect to traditional theory. Then, a brief situational analysis of e-commerce market
will be presented from Bangladesh’s perspectives. Finally, this report attempts to provide
some strategical recommendations that can be adopted by the local e-commerce firms to
maintain their market position against global e-commerce players.
Table of Contents
Abstract .................................................................................................................................................................. 0
1.0 Introduction .............................................................................................................................................. 0
2.0 History and Evolution of E-commerce ...................................................................................................... 0
3.0 Market structure and competition: e-commerce business setting ......................................................... 2
3.1 Classical theory of Market structure and market competition ........................................................... 2
3.2 Current market structure of e-commerce business setting ................................................................. 4
3.3 Infrastructure of the E-Commerce Market........................................................................................... 5
3.4 Products ................................................................................................................................................ 5
3.5 Linking market competition of e-commerce to traditional theory ..................................................... 6
4.0 E-commerce market: A Bangladesh perspective ..................................................................................... 8
5.0 Emergence of E-Commerce in Bangladesh ............................................................................................... 9
6.0 E-Commerce in Different Sector in Bangladesh ..................................................................................... 10
7.0 Kind of e-commerce business in Bangladesh ......................................................................................... 11
8.0 Growth of E-Commerce in Bangladesh .................................................................................................. 11
9.0 Global E-commerce: current trends and further growth ....................................................................... 13
10.0 A comparative study ............................................................................................................................... 16
10.1 E-Commerce Market Status of India .................................................................................................. 16
10.2 Impact of Global Player in Indian Market ......................................................................................... 16
10.3 Impact of Global Player in Bangladesh E-Commerce Market ........................................................... 17
11.0 Challenges of E-Commerce in Bangladesh ............................................................................................. 17
11.1 Challenging factors of e-commerce ................................................................................................... 18
11.2 Major legal issues ............................................................................................................................... 18
12.0 Recommendations .................................................................................................................................. 19
12.1 Policy requirements ............................................................................................................................ 19
13.0 Conclusion ............................................................................................................................................... 21
References (HARVARD STYLE) ............................................................................................................................. 22
1.0 Introduction

E-commerce platform business which is a term for business transaction that is performed via
internet. Using e-commerce, consumers can exchange goods or services electronically
without any hassle. Now a days, numerous numbers of companies are selling their tangible
and intangible goods through e-commerce.

It is almost certain that more than just equilibrium prices are affected when e-commerce
spreads in an industry. Market shares are very likely to change; given the reduction in
consumer search costs that e-commerce can bring, any firm’s price advantage will be
multiplied in terms of market-share gains. Higher cross-price elasticities imply differential
impacts on firms depending on whether they are at a cost advantage or disadvantage relative
to their competitors. It is also quite likely that these market share changes can be drastic
enough to lead some firms to exit from the market entirely. On the other hand, lower search
costs can lead to a market-expansion effect that induces new entry into the industry.
Presumably, though, these entrants may differ on average from industry incumbents because
e-commerce has raised the return to being relatively efficient. In such ways, e-commerce can
have important entry and exit consequences as well.

2.0 History and Evolution of E-commerce

The history of e-commerce is actually a relatively short history. It began less than fifty years
ago and its humble beginning look nothing like the kind of electronic business transactions
that we see today. Even up until the 1990s, online business wasn’t a reality for the average
person.

The development of e-commerce was one of those things that happened slowly and then
suddenly. At its very basic level, the term refers simply to any commerce that takes place
electronically. This includes ATM and credit card transactions as well as the ability to do billing
and invoicing through electronic methods. The technology allowing this kind of commerce
took hold in the late 1970s and grew steadily throughout the 1980s (Lee, 2005). It was during
this time that people started to use credit cards on a regular basis and the set the foundation
for electronic commerce to get a toehold in society.
However, it wasn’t until the development of the internet that e-commerce started looking
like the type of business that we know today. For most people talking about it now, the term
refers to transactions, which take place completely through the web. When we search for an
item on sites such as eBay or Amazon and then pay with a credit card or online checking
account, we are conducting the kind of e-commerce that most people think of when the term
comes up. That wasn’t made possible until the average person began to use the internet in
the 1990s.

Two things happened in the mid-1990s to make this kind of e-commerce a possibility. First,
computer security was strengthened enough to make consumers and businesses feel
comfortable with conducting these types of transactions online. Second, the average person
began to gain familiarity with the web and started using it for everyday activities such as
online shopping. Combined with the fact that web design was improving and the speed of the
Internet was increasing, e-commerce had a platform for development. In 1995, Amazon.com
was launched and we really started seeing the type of e-commerce that we’re used to today.

With the evolution of online-based market, marketing is now progressively mixing the
information technologies. Business market is now differentiated on different set-up via
electronic business. The worldwide business is rapidly heading towards Business-to-Business
(B2B) through e-commerce. Most of the businesses are increasingly advertising their products
through online and promote their goods or services.

In Bangladesh, e-commerce business started when first payment processor vendor SSL
COMMERZ started their business in 2010. In addition, with the advancement of WIMAX
technology during that time internet speed got better and many of the online business
platforms started, for example cellbazar, ajkerdeal, rokomari, bikroy.com, akhoni which is
now Bagdoom etc.
3.0 Market structure and competition: e-commerce business setting

3.1 Classical theory of Market structure and market competition

Market structures define the different ways companies are structured within the
marketplace. The different market structures are based on the characteristics of a market
relative to the buyers and sellers and the relationship between them. Competition is another
difference between the markets as is the capability of entering and exiting the market.

Perfect competition is where many firms sell the same product and they have no control over
the price of their product/service. They must charge the market price or buyers will buy a
lower priced substitute. There are also many buyers of their product. Since there are many
buyers and sellers and there is no control over the market price, there is total freedom of
entry and exit in this market structure. While there is no true perfect competition, it gives us
a point opposite of a monopoly in which to work from. Perfect competition is summed up
with six basic assumptions: 1) large number of sellers/producers; 2) larger number of buyers;
3) homogeneous product; 4) free entry into and free exit out of the market; 5) perfect
knowledge; and 6) there is easily moving in and out of the industry for buyers and sellers
(Bernheim and Whinston, 2008). These six assumptions make these products or services
perfect substitutes and the demand curve is perfectly elastic. Bottled water could be
described as close to perfect competition. Bottled water is produced by many companies and
they have no control over the price of their product. There are many buyers of their product
but if they try to control the price of their product, there are many alternative brands that
provide bottled water.

The next market structure is monopolistic competition which can be described as a form of
imperfect competition. In this market structure, each firm can make decisions about price and
output as the products, while similar to other products, has uniqueness about it. That
uniqueness may be a specific brand, quality within the product, marketing of the product, etc.
This differentiation of the product allows each firm to set their own pricing (Eriksson, 2010).
There is total freedom to enter or exit this market structure. Restaurants can be classified as
monopolistic competition. While restaurants provide the service of preparing food for their
customers, each restaurant has their own recipes, name, and atmosphere that can be used
to differentiate their brand from another.

Monopoly is the next market structure. A monopoly is a market structure in which there is
only one producer/seller for a product. Monopolies are characterized by a lack of economic
competition to produce the goods or service and a lack of viable substitute goods. Another
attribute of a monopoly is the difficulty to enter the market due to high costs, governmental
regulations, or other impediments. Some monopolies that exist are utility companies and
drug companies. Utility companies are regulated by the government and drug companies
have patents on certain drugs they develop. During the period in which a drug company’s
patent is in force, they are the only one that can produce that drug.

Oligopoly is the last market structure. It is described as the market structure in which a few
firms compete imperfectly. Since there are only a few firms that produce a product, they can
have influence over the price charged for the product. Entry into this market is difficult which
adds to the ability for companies in this market structure to dictate prices.

If a business is making a profit, others may want to enter into that market structure. A
monopoly has a high entry barrier to deter others from entering into that market structure.
If someone was to enter into it, it would no longer be a monopoly. Since a monopoly has the
power over market price, the price can be set to make a profit in the short run but it does not
guarantee a profit in the long-run. A good example of this is the US Postal Service. The federal
government gives the USPS the right to deliver mail. Even with continual price increases in
postal rates, the USPS still runs with a deficit. In the Oligopoly market structure, the entry
barrier is high, giving businesses the right to dictate prices, however, with a few companies in
this structure, there is competition for business. An example of a business in this structure is
the airlines. The airlines can be competitive with their prices, but if they raise their prices too
much, business will go down. To offset this, airlines compete against other airlines in trying
to get you to fly with them. They have different plans to draw you into their airline and charge
separately for some services. This allows passengers to select and pay for only the services
they want. This keeps the basic price of an airline ticket down.
3.2 Current market structure of e-commerce business setting

E-commerce accounts for hundreds of billions of dollars in sales annually globally, and that
figure is growing rapidly. The price effects of internet shopping, and e-commerce in general,
have received a lot of research attention. But the diffusion of e-commerce through an
industry is likely to affect more than just prices. Market structure likely changes as well, as
reduced consumer search costs lead to a wave of creative destruction. The tools of e-
commerce make it easier for consumers to find lower-price sellers, meaning lower-cost firms
(or those able to deliver higher quality at the same cost) will grab larger shares of business
away from their higher-cost competitors. Even if the more competitive landscape created by
lower search costs reduces prices and margins, this market structure response could be large
enough that low-cost firms actually become more profitable as e-commerce spreads. High-
cost firms, on the other hand, are doubly winner (Goldmanis et al., 2009). Not only does their
pricing power fall, but their market share falls too, as customers who were once captive –
either because of ignorance or lack of alternatives – move on to better options elsewhere.
Some of these firms will be forced out of business altogether.

The type of market structure effects arises naturally from a model where firms with varying
production costs sell to a set of consumers who differ in their search costs. Consumers engage
in costly search when deciding from which firm to buy, and firms set prices given consumers’
optimal search behavior as well as their own and their rivals’ production costs. Firms have to
cover fixed costs to operate and enter the industry. Lower consumer search costs (that is, a
leftward shift in the distribution) caused by the introduction of e-commerce reduces both the
equilibrium average price level and price dispersion. Lower search costs lead the industry’s
low-cost firms to grow and the industry’s high-cost firms to shrink and sometimes even exit
(Emre, Hortacsu and Syverson, 2005).

In addition to these aggregate movements in all e-commerce businesses, the same e-

commerce-driven shifts occurred on a market-by-market basis. That is, cities where
consumers’ internet use grew faster in a particular year saw bigger drops in the number of
physical stores over the same year. Thus, despite all the talk about the absence of geography
in the e-commerce landscape, internet shopping’s effects appear for most of the products
and services.
E-commerce is playing an increasingly important role in many markets. The new technologies
it brings affect not just prices but also other components of market structure, with differing
effects across businesses. Those that are able to operate at low cost (and pass some of this
cost advantage on to their customers) can gain market share and profitability, while higher-
cost firms will be hurt, perhaps fatally.

3.3 Infrastructure of the E-Commerce Market

Infrastructure of electronic commerce is network communication and computing via

Internet. In this network, users can access and process information that is stored in remote
places. In addition, they can communicate with other users from their personal
computers. Information technology (IT) applied in electronic commerce helps reduce the
buyer’s costs associated with transaction such as searching for products, suppliers, and
comparison across offers. It effectively helps matching consumer’s preference with
seller’s offer. As such electronic commerce makes the business transaction more efficient
as it maximizes the utility of consumers (individual consumers as well as firm-buyers)
and thus reduces market friction. It has been noted that if the cost of searching is expensive,
consumer tends to pay a relatively high price for the first available product or service
(reservation price). However, IT in electronic commerce provides timely and comprehensive
information to the consumer in order to reduce the uncertainty in making choices across
products and suppliers. In addition, IT also provides information about the substitute and also
the possibility to customize the product to the consumer’s specific need and therefore incurs
a lower cost and higher utility. The efficient, free, and complete flow of information in the
electronic commerce provides consumers as well as suppliers the value of the product as it is
perceived from the other party. This helps the market mechanism become more efficient as
it reduces the opportunistic behavior in conducting transactions.

3.4 Products
Traditional physical goods generally have a physical, tangible presence, e.g., a printed
newspaper. Traditional service products involve the performance of a task for a
customer, e.g., a movie session in theater. In electronic commerce, the distinction
between products and services is not always easy to define, e.g., online newspaper
offered on the Internet. The key issue in electronic commerce is not to classify a product
as a good or service, but to define the attribute of the good or service that can be offered
on the Internet and the corresponding benefits that it provides to the consumer.

The main difference to traditional transaction is that products and services offered in the
electronic commerce market could be digitized and delivered via the electronic channels.
These digital products require minimum or even no inventories and warehouse. Selling
these products and services do not require physical front-stores. Consequently, most of
the costs are fixed and the variable cost is very small.

With physical products, the cost curves are parabolic with an optimal production quantity as
defined in classical microeconomics. As the quantity increases, the average cost will decline
up to a point due to the growth of variable costs on administration and marketing. In contrast,
digital products have hyperbolic cost curves. Variable costs of digital products are very low or
almost fixed. As the quantity increases, average cost will decline due to the distribution of
fixed cost over larger number of units. In addition, the marginal cost of digital products is
minimal. Consequently, as the sales increases, profit will increase rapidly.

Digital products lack normal wear and tear. The life cycle of a digital product is relatively short
as it is subject to the fast-paced development of IT. Therefore, it may shape a new behavior
to its consumers.

3.5 Linking market competition of e-commerce to traditional theory

In some ways, e-commerce facilitates the belief of classical assumptions on perfect

competitive market. The competition in e-commerce market has the subsequent
characteristics. In e-commerce, the dimensions of the companies might not be a major
competitive advantage. The benefit of entry to a profitable business and therefore the
effective communication on the web permit new but small entrants to contend with efficiency
with larger companies for market share, build up company brand and image. Additionally, the
geographical barriers, even language barriers, are eliminated in business to business similarly
as in business to consumer transactions. The delivery price of digitized product is reduced
considerably (Lábaj et al., 2017).
Online ordering has expedited the routing of order to remote production sites. There's no
need for a physical location wherever consumers and sellers have face-to-face meeting for
dealings. Then the products don't need a physical delivery from a store to the customer’s
home. It reduces the prices of storage, packaging of conventional distribution channels. The
e-commerce additionally offers customers with the convenience of searching response.
Customers don't have only some megabrands however several substitute merchandise to
form their alternative. E-commerce provides lower info search price for consumers and timely
comparison among merchandise and sellers. A larger quantity of data is accessed on the web.
Due to the event of subtle search engines, customers will simply compare costs of the many
merchandise offered. In most cases, customers will calculate the value of their orders. Online
auction may be a standard methodology for marketing on web (Goldmanis et al., 2009).

With the increasing use of web for value comparison, the ultimate dealings value is going to
be under while not online dealings. Those businesses that charge a premium to their
customers currently have the challenge of providing their e-commerce purchasers with
premium services and product as e-commerce creates new distribution channels through
direct contact, information based, and bifacial communication with customers. Internet
promotes many-to-many dialogues concerning attributes of products and services rather than
the unidirectional dialog from marketer and customers. during this communication,
information is not any additional being filtered by sellers. Product promotion are going to be
conducted through target, matched interactive promoting and advert, in distinction to
ancient in-store show.

Client services play a very important role in competition in electronic commerce. client
services embody customization, personal differentiation, besides the normal after-sales
services. Enhancing client service is that the prime concern to companies since customers will
notice connected info on product and services from web, and specify their want for support
on-line. Consequently, to achieve success, the strategy of the companies ought to be mass
customization, rather than production. This customization provides a competitive advantage
similarly as a rise in overall demand of products and services (Fell and Haynie, 2012).

With the above characteristics, electronic commerce could support economical market and
will end in the classical perfect competition. In such perfect competitive market, an item is
created once the consumer’s disposition to pay equals the price of manufacturing the item
and neither individual sellers nor consumers will influence market offer or demand.
Competitive behavior in electronic commerce setting forces the firm to alter from a
noncompetitive competition to an oligopolistic one. As new entrants offer customers with
substitute merchandise and services, the competition can increasingly become more perfect.
Ultimately, this may build the market become economical by matching offer and demand at
grade that maximizes the supplier’s similarly as consumer’s surplus.

4.0 E-commerce market: A Bangladesh perspective

E-commerce sector carries huge prospects to the business sector as it is possible to take order
for products and continue transaction anytime. It makes the economic activities more
dynamic and flexible. Statistics says that, total sales of e-commerce business have already
been reached $22.049 trillion US dollar in 2016 (Orendorff, 2017). In addition, it is estimated
that currently e-commerce is more than 300 crore taka industry in Bangladesh and it is
growing very fast. We can categorize e-commerce business in 6 types: B2B (Business to
Business); B2C (Business to Consumer); C2C (Consumer to Consumer); C2B (Consumer to
Business); B2A (Business to Administration); C2A (Consumer to Administration); and C2C
(Consumer to Consumer). In recent years, exponential growth prospects have been acquired
by many Business-to-Business and Business-to Consumer type of e-commerce businesses. For
example, bikroy.com where anyone can post advertise to sell anything to anyone.

As per BASIS (Bangladesh Association of Software and Information Services) more than two
thousand online business has started in Bangladesh. It has been expressed by business
experts that web systems administration and cell phone scope influence them to meet buyers
on the web and convey a smooth and straightforward shopping knowledge. The market has
yearly exchanges around Tk 10 billion including e-ticket deals and deals on
Facebook. What's more, it ascends at a radiant pace with a month to month development of
20-25 percent according to information from BASIS uncovered to Financial Express (BASIS,
2017).

Though e-commerce has many opportunities in Bangladesh, there are many challenges that
ecommerce businesses are experiencing. One of the major challenges experienced by e-
commerce is technology and the flow of information within the same business and from
business to consumers. In addition, security issues and challenged need to be emphasized
before starting the business because thousands of hackers are waiting to steal your
information especially credit card information. On the other hand, customer satisfaction
needs to be the highly prioritized as there are countless competitors are out there. In order
to satisfy the demands of consumers, e-commerce business essentially be able to respond to
consumer needs and perform activities accordingly in a quick, reliable and secure manner. In
addition, e-commerce business must follow security standards and disciplines to achieve and
hold the consumer trust and confidence in order to sustain in the market. Adequate
guidelines for security systems and networks for e-commerce system are available for
developers to develop e-commerce system. However, numerous numbers of virus programs
are already running and new viruses are being spread by hackers to get access most of the
authentication and authorization of e-commerce system. In this paper, different security
threats and challenges of e-commerce business has been discussed with available solutions.
Security and trust are basics for making an environment favorable to e-commerce business.
Unless ensuring consumer protection, consumer’s data protection and countering cybercrime
e-commerce sector is not fulfilling and cannot attract potential consumers (E-Commerce
Policy Framework for Bangladesh, 2017). On the other hand, growth of e-commerce is reliant
on the existence of secure, user-friendly and cost-effective payment methods (E-Commerce
Policy Framework for Bangladesh, 2017). Secured monetary transaction technologies are so
much important to create faith among the purchasers (E-Commerce Policy Framework for
Bangladesh, 2017). Presently, the e-commerce market volume is Tk 300 crore taka per year
(E-Commerce Policy Framework for Bangladesh, 2017). However, currently in Bangladesh,
cash-on-delivery is the widely used payment method among customers. Around 90% of online
purchasing orders are done by cash on delivery method (E-Commerce Policy Framework for
Bangladesh, 2017). This sector will be accelerated more if we can introduce something like
PayPal payment method (E-Commerce Policy Framework for Bangladesh, 2017).

5.0 Emergence of E-Commerce in Bangladesh

With the increasing diffusion of ICTs, more specifically the internet, the global business
community is rapidly moving towards Business-to-Business (B2B) e-commerce. The buyers or
importers gain a clear advantage when the Internet gives them access to the global market,
by which they can compare prices across regions, find out whether prices vary by order
fragmentation, get awareness about alternative products. Consequently, the sellers or
exporters make sure that they are well portrayed in the cyber world through websites and
portals. Like buyers, sellers also benefit from increased and more efficient access to the global
market through the internet. Bangladesh is pursuing an economic policy of export-led growth.
With the rising forces of globalization, it is becoming increasingly important that the private
sector, particularly the export sectors are well prepared to meet the requirements and
expectations of the importers and also stand out in the competition again exporters in other
countries. In such a scenario, two issues are becoming particularly important for Bangladeshi
export sectors- one, whether businesses are automating their internal processes with these
of ICTs to become increasingly efficient and competitive in a global context and two, whether
businesses have effective presence and participation in the cyber world. International
organizations such as UNCTAD (United Nations Center for Trade and Development) and WTO
(World Trade Organization) have emphasized on the importance of e-commerce for
developing countries over the last several years. UNCTAD has special programs to facilitate
developing countries to transition into e-commerce. The WTO has also developed rules and
guidelines for global e-commerce transactions.

6.0 E-Commerce in Different Sector in Bangladesh

Though being a under developed country, selected segments of the Bangladeshi business
community has embraced technology with reasonable success. Personal computers and the
Internet are also emerging as day-to-day business tools. These positive indicators are favoring
the prospects of e-commerce in Bangladesh. Some sectors are Ready Made Garments (RMG),
Banking Sectors (Online Banking), Online Shopping, Web Hosting Domain, Online Cards, Gifts,
Online Transportation System, Hotel Management and Tourism etc.
7.0 Kind of e-commerce business in Bangladesh

As of now, three kinds of E-Commerce are prominent in Bangladesh. They are:

Business-to-Business (B2B)

Business-to-Business (B2B) e-commerce includes every electronic exchange of products or

services between business organizations. Makers and conventional business wholesalers
regularly work with this sort of electronic trade. For example, sindabad.com which is a first
B2B ecommerce business in Bangladesh.

Business-to-Consumer (B2C)

Basically, exchanges of goods or service electronically between business and consumers

refers to B2C e-commerce business. It compares to the retail area of internet business, where
conventional retail exchange ordinarily works. For example, Rokomari.com, Kiksha.com is
following B2C business model.

Consumer-to-Consumer (C2C)

When exchange of good or services occurs electronically between one consume to other
consumer, it is called C2C business. In this case, communication platform is online website
where both interested parties get connected and exchange goods and service. For example,
Bikroy.com is a C2C e-commerce business.

8.0 Growth of E-Commerce in Bangladesh

In Bangladesh E-commerce sector growth has exceeded all expectations and has had a leading
impact on changing the economy in terms of aggregate investment. In Bangladesh e-
commerce started in the late 1990s. During the period 2000-2008, the e-commerce sector
observed slow growth. Annual rate of growth in the ecommerce sector for the past three
years is trending above 200% year on year. According to Bangladesh bank, payments and
transactions by credit cards were nearly Tk 11 billion in June 2008. 6 Massive changes
occurred in the mentioned sector when Bangladesh Bank allowed online payment in the
country, thus, officially opening up the e-commerce sector. In the year 2013 Bangladesh
Association of Software and Information Services (BASIS) and Bangladesh Bank jointly
observed “E-Commerce Week” for the first time in the country. B2C is the most popular form
of e-commerce. It observed growth rate above 300% for the last three years. Market share
for ecommerce for B2B and B2C are 10% and 90% respectively. Currently 18-23% of mobile
phone users are using a smartphone with an annual growth rate of 30%. There are 50,000
people actively engaged in e-commerce with projections of 1,000,000 people being employed
in the sector over the next 10 years. Transaction sizes for ecommerce purchases are still
relatively small. Average spending per online shopper is BDT 9000-10000. About 70.5% of e-
commerce users spend less than BDT 5,000 a month. About 29.3% buyers using a website
directly as compared to 43.5% using Facebook Page for purchasing products online.
Contribution of e-commerce as a percentage of GDP is less than 1%, if we take industries
connected with e-commerce under consideration it nears 2.5%. (BASIS, 2017) At present per
day, approximately 20 thousand & per month 5-6 lakh parcel was delivered all over the
country. All commerce will become an e-commerce within the next few years and this process
will help the sector mature. Currently, there are 1,000 e-commerce entrepreneurs in the
country, who are running their business through websites. There are approximately 8,200
Facebook pages also running this business.
9.0 Global E-commerce: current trends and further growth

Global Ecommerce anticipates a 246.15% increase in worldwide ecommerce sales, from $1.3
trillion in 2014 to $4.5 trillion in 2021 (Orendorff, 2017). That’s a nearly threefold lift in online
revenue.

Total Global e-commerce sales (in trillions of

US dollars)

4.5
3.9
3.3
2.8
2.3
1.9
1.5
1.3

TOTAL GLOBAL E-COMMERCE SALES (IN TRILLIONS OF US DOLLARS)

2014 2015 2016 2017 2018 2019 2020 2021

F IGURE 1: T OTAL E - COMMERCE SALES WORLDWIDE (SOURCE : ORENDORFF , 2017 AT T HE ENTERPRISE GUIDE TO GLOBAL
E COMMERCE )

However, B2B business is dominating in e-commerce market than that of B2C platform. In
2017, B2C ecommerce sales hit $2.3 trillion worldwide. B2B ecommerce, on the other hand,
reach $7.7 trillion. Those two data points represent a 234.78% difference in market size. The
dominance of B2B ecommerce means at least two things. First, self-service is on the rise. Data
from CEB Now Gartner found that “customers are 57 percent of the way through a typical
purchase process prior to proactively reaching out to a supplier’s sales rep.” This doesn’t
eliminate the need for a sales staff, but it does give ecommerce a distinct advantage. Second,
wholesale customers — namely, independent retailers, small-to-medium franchises, and B2C
outlets — largely prefer a simplified ordering experience. This eliminates the need to invest
in wholesale portal with all the bells and whistles of B2C ecommerce.
 Global B2B Ecommerce Sales Dominate B2C

23%

B2C e-commerce sales (in trillion

USD)
B2B e-commerce sales (in trillion
77%
USD)

F IGURE 2: B2B AND B2C E - COMMERCE SALES (SOURCE : S TATISTA , 2017)

China’s e-Commerce market is the largest in the world and growing fast. It accounts for more
than 40 per cent of total global e-Commerce spending and is projected to reach US$1.6-trillion
within the next two years. Perhaps not surprisingly, 40% of the world’s e-commerce sales are
made in China, so retailers need to look for new ways to expand into these fast-growing e-
commerce markets, to avoid losing market share to competitors.

F IGURE 3: W ORLD ’S LARGEST E -COMMERCE MARKET IN BILLION USD (SOURCE : E DQUID , 2007 AT BUSINESS . COM )
India (27%), Philippines (51%), Colombia (45%) the UAE (33%) and China (27%) are some of
the fastest growing e-commerce markets in terms of percentage growth. Indonesia, the
world’s fourth most-populous country, has now emerged as the fastest growing e-commerce
market. In the space of a year, Indonesia’s e-commerce growth rose from 45% to a staggering
78%, and is now worth $7.2 billion. What’s more, there is potential for this to grow further,
as online sales still only account for 2.4% of all retail sales, despite an Internet penetration
rate of 40%. Following in Indonesia’s footsteps, Mexico is the second fastest growing e-
commerce market, while the Philippines entered the top ten list in third place, with its e-
commerce market growing 51%. In the member states of the European Union, e-commerce
is growing by 16% a year on average. While Brexit continues to cast a shadow of uncertain
trading relationships between the EU and British businesses, the latest findings from PPRO
demonstrates a clear opportunity for British retailers to explore other alternative global
markets. For some British and European retailers, the scale of e-commerce and the pace of
growth in the world’s emerging markets is often surprising, but undoubtedly these markets
present opportunities. Significant e-commerce growth in countries that weren’t previously a
priority offers British businesses the chance to extend their global reach, as long as they can
meet local payment preferences.

E-commerce Growth rate: where Bangladesh

stands

78%
59%
51%
45%
33% 32% 32% 31% 30% 27% 27% 26% 26% 25%

E-COMMERCE GROWTH RATE

Indonesia Mexico Philippines Colombia

United Arab Emirates Vietnam Saudi Arabia Israel
Bangladesh China India Singapore
Malaysia Argentina

F IGURE 4: W ORLDWIDE E- COMMERCE MARKET GROWTH RATE (S OURCE : PPRO EMERGING MARKETS REPORT , 2018)
10.0 A comparative study

10.1 E-Commerce Market Status of India

E-commerce in India has improved and is improving quite rapidly. Due to improved internet
speed and availability, huge customer segment has joined this market.

T ABLE 1: E- COMMERCE MARKET IN INDIA (S OURCE : U NITED NATIONS I NDUSTRIAL DEVELOPMENT O RGANIZATION , 2017)

E-commerce market size in India (during 2010 to 2016) (INR in crore)

Years 2010 2011 2012 2013 2014 2015 2016

Sales 26, 63 35,142 47,349 53,301 81,525 125,732 168,891
Simple growth rate % (over 33.8 34.7 12.5 53.5 54.2 34.3
the
preceding year)
CAGR% 36.30%

The above table reveals that the size of e-commerce market has enlarged from INR 26,263
Crores to INR 168.891 Crores with the Compounded Annual Growth Rate (CAGR) of 36.3%. A
close observation of simple growth rates computed on the basis of the preceding year reveals
that the growth rate percentages vary from 12.5% to 54.2%, representing a significant growth
in e-business in all the years, barring the year 2013. The growth is higher in 2014 and 2015,
because of the fact that India’s e-commerce market announced its arrival in 2014 and there
was Flipkart’s ‘Big Billion Day Sale’ followed by Google’s ‘three-day online shopping festival’.

In all, there has a dramatic rise in number of unique visitors and merchants and rapid growth
in product categories on offer including holiday packages, motorcycles and even homes. The
year 2014 noticed valuation of some of the larger players touched a billion-dollar mark.

Further, according to Indian Market Research Bureau (IMRB) the e-commerce sales are
projected to reach around INR 220,330 crore by December 2017. Thus, it may be inferred that
the India’s digital commerce industry is growing at a swift pace year by year.

10.2 Impact of Global Player in Indian Market

This July saw a mega face-off between Amazon and Flipkart on their Prime Day and Big
Shopping Day sales — mega product launches, curated offers and deep discounts. Flipkart
generated four times its daily revenue and sold 2.5 times more than its daily run rate while
Prime members became the highest streamers in India ever. Amazon had 40% mindshare
during its 36-hour extravaganza; 35% new customers from tier II-III cities leading to more than
three times of overall sales growth in daily essentials. This would be impossible for many of
the more than 1,000 ecommerce startups without a dollar tap and access to clever tech.

10.3 Impact of Global Player in Bangladesh E-Commerce Market

In compared to Indian market, Bangladesh market has the same trend. Due to huge increase
in the number of internet user, people are getting connected to the online shopping methods.
The size of e-commerce market crossed the Tk 17.0 billion-mark in 2017 from Tk 4.0 billion in
2016, according to the data available with e-Commerce Association of Bangladesh (e-CAB).
According to the report published in The Financial Express, the market size is expected to
reach Tk 70 billion (Tk 7,000 crore) by 2021.

As of 2016, a total of $50 million was invested in the sector. Of the total, $10 million came as
FDI. But the amount would be much higher as Chinese e-commerce giant Alibaba had recently
acquired leading online marketplace Daraz. Ten leading companies-both foreign and local --
are present in the online market. They are Daraz, Pickaboo, Kiksha, Ajker Deal, Bagdoom,
Priyoshop, Shadmart, and Backpackbang. Of them, the market share of Daraz is estimated to
be 40 per cent.

11.0 Challenges of E-Commerce in Bangladesh

Bangladesh is a late entrant in e-commerce. Although this is a new sector in Bangladesh but
it observed tremendous growth within a short time. Bangladesh has a great opportunity for
e-commerce, but it is not at all satisfactory condition. Challenging factors of E-commerce
includes technological factors, socio-economic factors, political factors, etc.
11.1 Challenging factors of e-commerce
T ABLE 2: C HALLENGES FACING THE E - COMMERCE IN BANGLADESH

Technological factors Socio-economic factors Political factors

 Network accessibility  Low per capita  Frequent change in
for rural and income; government
backward  Costly and limited policies regarding
communities in internet ICT and ecommerce;
getting connection;  Protectionist trade
an internet  Poorly developed policy;
connection; socio-economic  Tariff and non-tariff
 Inadequate Skilled IT and physical barriers;
professional; infrastructure;  Strike due to
 Lack of  Consumer political chaos;
Trustworthiness on dissatisfaction due to  Government’s
IT inability to delivering exchange rate
infrastructure; correct policy;
 Low bandwidth and product on time;  Cross boundary
unreliable  Unconsciousness regulation by
connection; about online government;
 Lack of sufficient based services;  Insufficient legal law
electronic payment  Lack of commitment against deception
services; on buyer and arising from online
 Cyber-attack and seller side; transactions.
hacking.  Inherent tendency
toward
traditional
transaction systems.

11.2 Major legal issues

E-commerce website development, online transaction, product advertise and copyrights

involve many legal issues.

Followings are some major legal issues of e-commerce business which need to be considered
step by step:

 Electronic contracting
 Electronic signature/Digital signature
 Electronic Payment and security thereof
 Dispute resolution
  Consume protection
 Cybercrime
 Intellectual property rights.

Though there is no specific law for e-commerce sector currently, in order to facilitate e-
commerce and inspire the evolution of IT, the Information and Communication Technology
(ICT) Act, 2006 was passed planning with an outrageous discipline of 10 years detainment or
fine up to 10 million BDT or both.

12.0 Recommendations

For confirming a bright future for the e-commerce platform business in Bangladesh the
government and private sector should come ahead and take proper initiatives. To eliminate
restrictions, policy makers and business stake holders should take some initiative. The
recommendations are:

 Usage of low cost, flexible and secure payment method.

 Improving product display in the website/application.
 Gaining consumer satisfaction by different policies (e.g. Product return policy).
 Creating awareness among consumer and gain their trust by ensuring them
purchasing online is secure.
 Reducing product delivery time by improved logistic team.
 Ensuring fast internet connection countrywide.

12.1 Policy requirements

E-commerce sector brings enormous opportunities to the business sector as it makes 24/7
business possible. It makes the economic activities more dynamic. E-commerce can play
important role in achieving expected economic growth and socio-economic development. E-
commerce has been successful in increasing GDP. In order to obtain sustainable economic
development as well as business growth Bangladesh government should flourish e-
commerce. With regard to e-commerce Bangladesh needs to maintain some effective steps.
The followings are some of the recommendations that will ensure the smooth functioning as
well as the widespread use of e-commerce in Bangladesh.
 Bangladeshi e-commerce sites should provide greater layers of security for their
payment procedures;
 Upper level business courses in different disciplines such as e.g. accounting,
marketing, finance, management; economics should be modified by integrating e-
commerce topics;
 The government should provide the necessary support to e-CAB (E-commerce
Association of Bangladesh) so more people can be trained in this sector;
 E-commerce businesses require high-speed internet, which is absent in the rural
areas. The government should take the internet as a fundamental element of
business, particularly e-commerce business. It must ensure low-cost, high-speed
internet for rural people to turn its vision of Digital Bangladesh into reality;
 Bangladesh e-commerce sites should focus more on timely deliveries;
 Bangladesh e-commerce sites should not only update and evolve, but also address the
growing concerns like managing increased visits and purchases during the holidays,
payment methods;
 Effective IT security system should maintain by adopting latest IT technology;
 Effective IT security system should maintain by adopting latest IT technology;
 Fashion and electronic products are currently dominating the e-marketplace; products
of e-marketplace should be diversified;
 To penetrate into the global market, the government has to reform its regulations
regarding online transactions and upgrade the entire system;
 The Bangladesh Bank should formulate policies to ease the loan process for e-
commerce entrepreneurs;
 The government should do something about providing trade license for e-commerce
businesses. Currently, trade license is not issued specifically for e-commerce
businesses, which makes running such businesses difficult;
 It is important for Bangladesh to update the ICT law relating to e-commerce. It should
be done focusing on international practices.
13.0 Conclusion

Bangladesh could be a potential user of e-commerce. Although a few numbers of people in

our country getting the benefits from e-commerce, development of e-commerce in our
country must have strongly reflects on livelihood. By flourishing this potential sector all
people of our country will be benefited. The potential size of Bangladeshi e-commerce market
and promising sign of development in its ecosystem has resulted in some impressive
valuations for some of the country’s burgeoning e-commerce. There has been much debate
about whether these valuations are part of an overly optimistic “bubble”, or if they are
relatively conservative. Despite being a poor country, selected segments of the Bangladeshi
business community have embraced technology with reasonable success. In the case of
marketing, simply having a website in the vast sea of the Internet is not sufficient. Uniformity
is an important factor in the commencing of contracts through the Internet. Therefore, to
take advantage of the newer opportunities that IT development presents, the Bangladeshi
companies have to attain internationally accepted certification on quality control,
competitive price and timely delivery. Creating awareness among the Bangladeshi exporters
regarding ecommerce is essential. They have to be knowledgeable to appropriate and to
utilize the benefits of IT. The exporters are not required to acquire operating knowledge on
IT. Their understanding on the cost-benefit aspects followed by adopting e-commerce would
be an achievement.
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