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Country Spotlight: Understanding Consumers and Cross-Border E-Commerce in Bangladesh

After the five *BRICS countries, economist Jim O’Neill identified a second group of eleven countries with a high potential of becoming among the world’s largest economies in the 21st century. One of these “Next Eleven” is Bangladesh, a South Asian country of 161 million people.

As the first and largest e-wallet provider to operate in the country, Payza has a close relationship with Bangladesh. We’ve invested heavily in the local e-commerce market and we are proud to say our investment has paid off for Payza and Bangladeshis alike. Today, the online retail market is growing more rapidly than ever and there couldn’t be a better time for international sellers to expand their business into this exciting country.

Unless otherwise noted, figures in this article are sourced from:

Bangladeshi Consumers

  • Internet penetration:5% penetration
  • Mobile penetration: 23%
  • Online shoppers: 5 million
  • E-commerce sales: USD 38.1 million
  • E-commerce annual growth rate: 200%+ (2013-2016)

Despite its relatively small size, Bangladesh is the eighth most populous country in the world, fifth in Asia, and third most populous Muslim-majority country. It’s also one of the world’s most densely populated countries with triple the density of neighboring India. The country’s primary language, Bengali, is the seventh most spoken language in the world.

If you visit Bangladesh today, you will not find the impoverished country it once was. Instead, you will step out of the airport to find a vibrant consumer culture, fresh from celebrating the 45th anniversary of Bangladeshi independence. Between 1990 and 2014, the country’s poverty rate went down by more than half, with the rate of extreme poverty dropping to 12.9% in 2016, a remarkable achievement in poverty reduction.

The new emergence of a consumer class in Bangladesh has led to a 72% growth in e-commerce transactions over the course of 2016, with business-to-consumer (B2C) accounting for 90% of all transactions. With over 60% of online shoppers between the ages of 25 and 34, the market is young and tech-savvy, though cash-on-delivery still remains the most common payment method.

Besides the usual success of online hotel and travel bookings, the most popular e-commerce categories for Bangladeshi consumers are electronics, books, clothing and, uniquely, food. Online food delivery platforms such as Foodpanda and HungryNaki have gained an impressive following in the last few years, while online grocery shopping platforms Chaldal and Direct Fresh are also experiencing strong growth.

Drivers and Barriers

Driver: Emerging Consumer Class

Today, only 7% of the country’s population is classified as middle or affluent class (MAC), but that number is rapidly rising. More importantly, consumer wealth is being dispersed regionally, with projections indicating that the number of cities with MAC populations over 100,000 will double within the next ten years.

Barrier: Debt Concerns

When markets shift out of poverty, there is always an increased level of consumer wariness. The new influx of disposable income in Bangladesh has made consumers optimistic – 60% expect their incomes to rise this year – but also wary of going into debt for fear of not being able to repay it.

Driver: Mobile

While most transactions are still in cash, two-thirds of MAC consumers in Bangladesh own Internet-enabled smartphones, allowing them to make the leap to mobile payments. Mobile banking is already quite popular, as is researching products prior to purchase, allowing the opportunity for retailers to reach Bangladeshi consumers via m-commerce.

Barrier: Loyalty

While brand loyalty is good for e-commerce as a whole because it brings in repeat customers and builds trust, it does make it more challenging for new market entrants. However, while Bangladeshi consumers cite brands as a top motivating factor for their purchases, they are also budget and quality conscious. Retailers new to Bangladesh can attract customers by undercutting the established competition or offering a better-made product.

Bangladeshi E-Commerce Facts

  • One of the fastest-growing markets worldwide.
  • Rapid upward mobility: over 30 million more Bangladeshis are expected to make the leap out of poverty by 2025.
  • Total e-commerce transactions grew by 72% in 2016.
  • Total m-commerce market value doubled in 2016.
  • Two-thirds of all e-commerce traffic comes from the two largest cities, Dhaka and Chittagong.
  • 49% of online shopping traffic comes from new customers.

What we are witnessing in Bangladesh is an example of the leapfrog effect. A young and newly affluent population is rapidly adopting e-commerce, primarily by leaping straight from cash payment to online shopping via their mobile devices. While internet and mobile penetration are still relatively low and poverty relatively high, both of those facts are changing rapidly and experts agree that the market potential of Bangladesh is one of the highest in the world. By investing in this growing market, retailers can get a leg up on the competition and start building brand loyalty.

Expanding into a new international market is a risky venture but a very rewarding one if done right. For the latest information about how you can build and maintain a strong e-commerce enterprise and keep it compatible with legislation and buying habits at home and abroad, subscribe to the Payza Blog and follow us on Facebook and Twitter for the latest industry news.

*BRICS countries: Brazil, Russia, India, China, South Africa.