How e-commerce companies are building strategies to spin-off grocery items: Lesson learned from e-commerce market leaders in Dhaka
ecomSeries — 1.0
Bangladesh e-commerce market has seen multiple waves of growth both in the demand and supply side in the last 5 years. Companies that face challenges geared up and continuously building strategies to deliver varieties of products to the customers. Grocery items are quite new for Bangladeshi e-shoppers, so the market it still at its nascent stage. A shift into e-commerce for grocery shopping can quickly disrupt the business landscape. Recent trends are indicating that the sector is set to explode soon and every FMCG brands need to be ready for the mix of challenges. Technology and innovative business models can scale-up the business and take it to the next level.
Growing internet penetration, coupled with increasing disposable incomes, is changing the way we do shopping. Bangladesh e-commerce market has seen rapid growth in a short period. The market grew with a CAGR ~30% (2016–19) where the market sized at $250 million as of January 2019. Almost 50,000+ orders are being placed daily with more than 2,50,000 products delivered at the customer’s door. The market is highly dominated by Gadget, Fashion and Electronic Appliance as of now, but a niche market of grocery items is slowly gaining popularity among urban customers. In a recent study conducted by Inspira Advisory and Consulting Ltd estimated the grocery market around $12–15 million as of January 2019 however, it is still concentrated in Dhaka city since a large portion of middle and affluent class population belongs to the capital. They are the early adopter of such products and willing to buy online. Besides, a large base of young consumers has started buying grocery online to save time from their busy lives, but their average purchase frequency and volume are barely sizeable.
What’s happening in Bangladesh’ e-commerce market and why grocery?
Alibaba owned daraz is dominating the market since 2014, and the competition was merely a thing in e-commerce until the rise of competition like evaly, chaldaal and deligram. Recently Deligram and Evaly secured investment and continuously scaling up their operation. Daraz claimed that they have the largest product (5+ million) and merchants (20k+) in their platform.
Daraz has listed grocery items from 2017, currently, they have adopted two core operational model to ensure smooth product delivery. That being said, they have seen a growth opportunity in grocery items but put the focus on FMCG products unlike listing perishable items like vegetable meat and fish. In a short interview with the author, Mr. Shihab, senior executive of grocery shared the advantage and disadvantages of the models. First, the retail model (Daraz mall), where they have on-boarded the top local FMCG companies and store their products in Daraz-owned warehouse. The model has drastically improved the product delivery lead time and quality check. It allows to deliver a product within 1.6 days (average), which ensures excellent consumer convenience. However, it’s growing slow since large FMCG companies yet to consider e-commerce consumer base as their sales growth. On the other hand, the merchant model brings a large variety of products at a much cheaper price for the consumers. After an order being placed a merchant packed the products and drop in the hub then Daraz ship the product to its destination. Quality check and timely delivery is a big issue here since Daraz has to rely on the merchants and often consumers get uncomfortable if they received a low-quality product and delayed delivery. Technology integrated warehouse is the ultimate solution to improve the overall experience, but it requires more investments to introduce new technology. In short-term Daraz focuses in market expansion, exciting deals, offers, discounts.
To be continued……