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They Don’t Come Back: Dhaka's E-commerce Has A Retention Problem

“During a special occasion or campaign the number of orders goes up by at least 100%,” says Founder of a Dhaka-based Ecommerce company in an interview with FS. Ecommerce players like Daraz, Ajkerdeal and many other experience occasional spike in orders with exclusive offers and discounts. For many ecommerce players, the number of orders doubles when there is a meaningful discount. But the growth seldom survives past discount or crazy offers. Growing orders is a priority for any company. For ecommerce companies in Dhaka, it is more so. “We have seen the growing awareness about ecommerce over the past few years. But it has not materialized in terms of numbers,” one founder tells FS. Ecommerce companies combinedly serve about 45,000 orders per day in Dhaka, according to several industry sources. The problem is that the number of orders has not changed much in the past year. It has seen incremental growth but the dramatic growth that shape internet business is missing from the graph.

As noted above, it is not that there is a lack of awareness about ecommerce in Dhaka. Ecommerce is quite an old thing for consumers in Dhaka. It started back in 2005. Yes, there is a need for further consumer education but lack of consumer education is far from a strong growth barrier for ecommerce companies. In fact, the numbers that ecommerce companies draw during special occasion and campaign suggest that the market is quite ready and that the total number of people shop online is quite significant. The problem is that a very tiny percentage of these people return daily to shop online. That’s what hurts the growth of ecommerce in Dhaka. In short, Dhaka’s ecommerce has a retention problem. Customers come for offers and discounts but don’t stick around. This is a phenomenon that has puzzled many ecommerce entrepreneurs in the country.

The expectation gap

You could look at the problem from different perspectives. Online shopping demands a certain level of behavioral change from consumers which is not an easy thing to do because you are asking users to change their shopping behavior that has formed over many years. And then some online shoppers are simply bounty hunters who would only shop when there is an offer or a hefty discount. These points do offer an explanation to the stagnation but they don’t offer a useful explanation that could help address the challenge.

A helpful approach would be listening to customers. Ecommerce companies suffer from an overall of lack of trust among customers. This lack of trust is not a linear phenomenon. It is a culmination of a host of reasons including subpar service, price and quality discrepancy, logistics problem, frictions caused by payment and logistics and much more. While this scenario has improved over the years, thanks to great service from companies like Pickaboo, but this has hurt the ecommerce growth in Dhaka caused by subpar service from many ecommerce and f-commerce players.

Take, for instance, shopping is an instantaneous thing. When people order something they expect that they would get it on time. A good quality product at a great price. This is more so for ecommerce because of the medium. On the one end, ecommerce companies do promise great quality and best price and excellent service and then when you fail to deliver on that promise it creates a long term perception problem in the market. Particularly, on the quality and price issues, there are rampant complaints against many of the leading ecommerce platforms in the country that hurt the growth.

Why it matters

In order to grow exponentially, ecommerce companies have to become an alternative for daily shopping for people. It has a lot to do with retaining customers who come for offers and campaigns and turning them into regular shoppers. Unless this happens, meaningful growth will remain a challenge.

There are several ways that ecommerce companies can start with. One strategy that has worked for many successful retail companies, both online and offline, across the world, which Jeff Bezos called ‘focus on the things that do not change”, which is a combination of price and collection. Ensuring best price for shopping online and the largest collection of best quality products. This is the strategy, at the core, that helped Walmart to become the world’s most successful retail company and Amazon the largest ecommerce company on earth. Contrary to that, ecommerce companies in Dhaka seldom offer the best price in regular time. When there are offers and campaigns, that’s a different case, but in regular time few ecommerce companies offer price advantage to customers. In fact, ecommerce is expensive than regular shops in many instances. At the same time, very few ecommerce companies have solved the quality issue in ecommerce. It is true that there are a lot of frictions including lack of payment and logistics that help facilitate digital commerce. Similarly, quality responsibility partly falls on the suppliers end as well when you are a marketplace. But these are the challenges that customers will seldom understand and most importantly, customers should not bother about what are the challenges there. That’s the reality of any business.

The world runs on incentives. Price and quality are two of the most important incentives for any shoppers. It does not matter how bad traffic is in Dhaka, people would never shop online for convenience alone if there is no price incentive and quality guarantee. Ultimately, for achieving meaningful growth, ecommerce companies have to bet on things that don't change.

Thank you Ayrin Saleha and Sadia Tasmia for reading the draft of this article.

Photo courtesy: Photo by Brett Jordan on Unsplash

Mohammad Ruhul Kader is a Dhaka-based entrepreneur and writer. He founded Future Startup, a digital publication covering the startup and technology scene in Dhaka with an ambition to transform Bangladesh through entrepreneurship and innovation. He writes about internet business, strategy, technology, and society. He is the author of Rethinking Failure. His writings have been published in almost all major national dailies in Bangladesh including DT, FE, etc. Prior to FS, he worked for a local conglomerate where he helped start a social enterprise. Ruhul is a 2022 winner of Emergent Ventures, a fellowship and grant program from the Mercatus Center at George Mason University. He can be reached at ruhul@futurestartup.com

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