Bangladesh has increased a surge in digitization in every sphere. The increased connectivity has made access to smartphones and the internet more affordable and easier than ever. This has paved the path for different social media engagements like Facebook. The connected nature combined with a robust user base has given rise to the F-commerce ecosystem. So, where does Bangladesh stack up in the F-commerce scenario? What are the problems and prospects? We take a deeper look at this article.

What is F-commerce?

F-commerce is the short form of Facebook commerce. Globally there are 2.85 billion active Facebook users. That accounts for around one-third of the total population of the world. Almost a billion of them are regular users who log in at least twice every week. The increased user base has prompted the use of the platform as a business space which soon transitioned into small to medium scale businesses.

There are about 46 million active Facebook users in Bangladesh. The high user base has promptly encouraged small businesses to take up the platform as a marketplace. There are about 2000 dedicated eCommerce platforms in Bangladesh whereas there are over 300000 F-commerce pages doing business.

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Due to lack of regulation, a large portion of the business goes unaccounted for. However, out of a total of 7000 crores BDT worth of eCommerce sales, F-commerce accounted for over 1000 crore BDT in sales. This is a testament that Bangladesh is slowly making the transition to the F-commerce revolution.

Problems facing F-commerce in Bangladesh

A high tariff on import

Most of the F-commerce platforms in Bangladesh are import-based resellers. Most of the products are sold on a pre-order basis or niche customer base. As a retail importer, they face high import tariffs which are driving the cost up at the customer level. This price is not regulated at all and different vendors sell the same product at a different price which is a detriment for the customer.

Logistics

Another prime problem facing F-commerce is the lack of logistical support. Unlike the large eCommerce platforms of Bangladesh, the F-commerce businesses don’t have a dedicated shipping mechanism. As a result, they are forced to rely on local couriers and delivery partners. The third-party shipping method further drives up the cost in the customer end in the form of delivery charges.

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No legal framework

There is no legal framework to regulate the F-commerce sites. There are over 300000 Bangladeshi pages on Facebook alone doing business in various niches. The different regulations and permission required to set up a business don’t apply as there is no regulatory authority overseeing the entire process. As a result, there is no limitation to price competency, product regulation, and customer end experience.

Lost revenue

The government is losing a huge amount of revenue in the form of tax from the F-commerce platform. With the absence of regulatory bodies, there isn’t even an appropriate estimation of the number of operating F-commerce pages. These pages are doing business of over 300 crores. The pandemic caused a paradigm shift in business conduction as more and more people are getting inclined to online shopping. There has been a reported increment of over 70% to 80% increment in sales across the board. However, the government doesn’t receive any form of GST or sales tax from these pages.

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Lack of proper business model

Most of the F-commerce business owners are first-time entrepreneurs. There is a lack of experience and proper knowledge regarding different business processes. As a result, unlike venture startups, the F-commerce business doesn't scaleable. The lack of a proper business model incurs loss for the business at a different level. It can be product sourcing or inventory management or cash flow account, there are a lot of aspects that need to be considered before starting a business. The knowledge gap reduces the sustainability of the business in the long run.

Customer fraud

Customer fraud is rampant with F-commerce. There are countless instances of businesses cheating the customer in multiple ways. Many customers report that they have not received their product after paying advance money. Some receive a different product than advertised, others receive faulty products. Since there isn’t a regulatory body to oversee the entire process, the fraud is growing at an alarming rate.

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Payment gateway

The majority of Bangladesh's F-commerce transactions happen through cash on the delivery mechanism. There are two reasons behind this. One is the general disinterest of the customer to use mobile banking platforms and cards. The other is the lack of payment options from the vendor's end. Regardless of the reasons, the cash on delivery makes it difficult to track the transactions. As a result, the F-commerce business stays away from being incorporated into the traditional tax system.

Prospects of the F-commerce sector

It's not all negative when it comes to F-commerce in Bangladesh. The impact of F-commerce is immense on single startups with virtually no investment. Reports sites that F-commerce has been a success story for many women who started business as a hobby and are now raking in thousands in profit.

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The story is similar across the board with many people sharing their story of turning their financial state through F-commerce. However, the lack of regulation hurts the business owners too. The lack of credibility means the F-commerce startups cannot get small-scale loans to scale up their business activity. They are almost exclusively forced to use profit or personal financing.

With regulations and overseeing measures, both the vendors and the customers can be benefitted. There is an untapped business opportunity of over 1000 crore BDT which can be furthered with government and policy incentives.

Bottom Line

Though there are some limitations, F-commerce in Bangladesh has a lot of prospects. The Covid-19 has shown that people are interested in online shopping and it has introduced a trend that will only flourish from here on. The government can take some regulatory steps to formalize F-commerce and it will help to add significant valuation to the economy.

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