Ecommerce is a fascinating market in Bangladesh for various reasons. The market has seen excellent growth over the past several years. All predictions suggest the market is going to grow significantly in the next couple of years.
At the same time, it is also a market that has so far defied conventional predictions. The conventional growth expectations remain elusive with a unique pattern of development.
To begin with, the market is fragmented with a lot of small and medium players that primarily operate through social media pages. There are mainstream large ecommerce players such as Daraz in all-purpose horizontal space, Chaldal in grocery, Rokimari in books, Pickaboo in mobile and gadgets, Khaas Food in safe food, Shajgoj in beauty, and several others.
While many of these players are dominant in their vertical, it is a stretch to call any of these players dominant if you consider the overall retail scene. This picture gets clearer when you put them in comparison with the rest of the retail market in the country or similar players in other markets. The point being ecommerce remains an insignificant percentage of retail until now.
Second, horizontal and all-purpose ecommerce marketplaces have so far struggled to build market dominance. Instead, we have witnessed a gradual rise of vertical ecommerce players, about which I have written before. Most of the horizontal ecommerce players seemed to have suffered from a lack of growth or a slower pace of growth.
This has pushed even previously ambitious players to take a vertical approach. From the rise of vertical ecommerce: “If you look at the trend over the last several years, companies are increasingly going vertical and investors are showing more interest in backing vertical companies. This is a reversal of what happened just a few years ago when every company was trying to build either a super app or serve every customer and sell all kinds of products. Those days are gone. The majority of horizontal ecommerce players in Dhaka have gone out of business. [...]
There are many reasons why horizontal players failed in the past. I listed a few of the assumptions in that article. One such assumption is that the market is not that big to sustain multiple large horizontal players.
“The regular encouraging narrative of excellent internet penetration aside, the real story of internet penetration in Bangladesh is much more complex. To be clear, this phenomenon is not unique to Bangladesh. It is probably the same in many other emerging markets such as India. Not only the total number of internet users is smaller in Bangladesh. Only a small segment of the total internet users regularly shop online.
To be clear, there is a growing online shopper group. If you are reading this, you are likely in this category. You buy many things —from groceries to food to fashion — online. You may even have a Netflix or HoiChoi subscription. You have the spending power and are comfortable buying that lipstick from Shajgoj or Mango from that direct-to-consumer startup in Rangpur. This is the customer everyone desperately wants. However, the number of these customers is smaller than you would otherwise think.
Let’s try to work out a rough overall number of potential ecommerce customers in Bangladesh.
Daraz said more than 450,000 customers shopped on their platform on the first day of their last 11.11. Daraz 11.11 is like an extreme shopping day when people who never go online also try to go and see the offers. In 2022, the number of credit card holders in Bangladesh was around 3.7 million. In 2022, total MFS users surpassed 180 million but according to research, only 40% of total MFS users are capable of using the service. More importantly, unlike credit card users, MFS users are rarely the online shoppers that we are talking about. Several estimates put Netflix as having some 2.5 lakh subscribers in Bangladesh. Another streaming platform Hoichoi is said to have some 5 lakh subscribers in Bangladesh. Chaldal reportedly delivers over 300,000 orders a month.
If you triangulate all these numbers, you get a number that is closer to home. And that’s the number every single Bangladeshi consumer internet company is fighting for.
If you look into markets like India and China, these numbers are similarly representative. There is no surprise in the numbers.”
The point is, the market has not grown as fast as many people predicted. It has mostly been incremental growth with sporadic bursts of rapid movements such as during the coronavirus pandemic.
This paradox of growth has perplexed almost all the ecommerce players in Bangladesh. It has also affected the investors’ interest in the sector.
Contrary to that, physical retail remains one of the strongest and largest sectors in Bangladesh. Ecommerce in all estimates is only about 5% of the overall retail in Bangladesh, which is estimated to be a BDT 1372 billion market.
Unlike many markets, retail in Bangladesh also maintains a unique nature. Bangladesh is one of the most densely populated countries on earth. This has resulted in a very different retail market. Small mom-and-pop shops dominate the sector. Retail shops are everywhere. The hyperdensity of these retail stores has partly played a role in the slow development of ecommerce in the country. The utilities of ecommerce, the prime of which is the convenience of shopping sitting at your home, don’t ring true for many people who can easily find a shop on their way home from work to buy everything they need.
There are several other cultural reasons for the dominance of physical retail. When it comes to high-end products such as mobile phones, the tendency to go to offline retail is higher. In many instances, people in Bangladesh enjoy going shopping. Major cities such as Dhaka have few opportunities for entertainment other than eating out or going to shopping malls. People think it is alright to go shopping both to shop and entertain themselves.
On the hand, ecommerce still suffers from trust deficiency and many people prefer physical retail to online for high-value products.
These market realities have limited the potential of ecommerce companies that have been looking to build lasting companies in the digital commerce space until now.
It has pushed several ecommerce companies to pivot to B2B ecommerce and several others to seek opportunities at the intersection of ecommerce and physical retail.
One of the companies that have gone on to execute an extensive omnichannel strategy is Pickaboo.
The company claims that omnichannel has not only helped it to overcome the growth stalemate of ecommerce, it has also helped it to expand its ecommerce business, expand its overall opportunity, and take its business to a different level.
The company asserts that the future of true ecommerce expansion in Bangladesh might as well be at the intersection of ecommerce and physical retail.
In today’s article, we look into Pickaboo’s omnichannel strategy and how the company is charting a new model at the intersection of physical retail and ecommerce.
Pickaboo, the Dhaka-based leading mobile, and electronics products-focused e-commerce startup, has built an ambitious omnichannel operation over the last three years.
The move has helped the company overcome the ecommerce growth stalemate and expand its market and opportunity. The company says it is now expanding on the strategy. The company proposes that given the unique nature of the market in Bangladesh, omnichannel is going to be one of the meaningful strategies to scale for ambitious digital commerce companies.
It is early to say how Pickaboo’s omnichannel strategy will eventually fan out. However, for now, the success of Pickaboo’s omnichannel strategy can offer food for thought for other ecommerce players across verticals regarding building true scale and expanding beyond strictly ecommerce audiences. There has been some movement for the omnichannel strategy for a while. Several other ecommerce-first companies have slowly been looking to expand their physical retail such as safe food startup Khaas Food and beauty startup Shajgoj.
Pickaboo was founded in 2016 as a mobile phones and electronics gadget-focused ecommerce marketplace. Founders of Pickaboo include veteran entrepreneur and Founder of Bangladesh’s highly successful mobile phone brand Symphony Aminur Rashid, Morin Talukder, CEO of Pickaboo, and Arun Gupta, Founder of Momagic India, who also worked with MediaTek as Country Director. The company suggests the founders come with years of significant experience in the mobile and electronic products industry. The founders have been exclusively focused on mobile and electronics verticals, which gives the company an added advantage.
The company quickly became one of the leading e-commerce players in Dhaka using a combination of excellent customer service, authentic products, and effective marketing. However, the rise was cut short by strategic missteps and various reasons. It suffered a series of setbacks between 2018 and 2019. But setbacks can make you stronger if you can use them mindfully. As they say, “what does not kill you makes you stronger.”
Pickaboo came out of the challenges more resilient and has since bounced back to growth. It has evolved and refined its strategy, focusing more on sustainable growth. It has entered physical retail turning itself into an omnichannel player, expanded its dominance over mobile and gadgets, and broadened product offerings to the electronics products category.
Today, the company says it has solidified its new model at the intersection of e-commerce and physical retail and plans to expand the model to accelerate its overall growth.
The omnichannel strategy makes sense. As we noted earlier, ecommerce growth remains below expectations in Bangladesh owing to various challenges and the fundamental nature of the market.
Contrarily, physical retail is a huge market. For Pickaboo, the strategy has greater resonance given the vertical it operates in. The mobile handset market, combined with gadgets and accessories, is said to be a BDT 16,000 crore market in Bangladesh. The category is also one of the most popular categories in ecommerce because of the convenience of buying these products online. Despite that, 99% of the mobile handset market remains offline. The majority of consumers remain comfortable trusting offline retail shops over online sellers. Whereas the mobile and electronics retail market remains fragmented in Bangladesh, true to the broader nature of retail in the country. There are not many multi-brand retail outlets that offer distinct services. Few have a strong brand image. And none that has an online operation at scale. Moreover, the offline retail world remains largely unorganized.
Pickaboo saw an opportunity in these paradoxes and has taken advantage of these gaps in the market.
The company’s physical retail thesis is simple: multi-brand large outlets where customers can find products of different companies under one roof coupled with excellent service. Working with multiple brands and product categories reduces cost.
Finally, marrying Pickaboo’s online operation with its physical retail can create advantages and opportunities across operations for both ends of its business.
Pickaboo realized around 2020 that ecommerce in Bangladesh was not growing as fast as the other markets. The ecommerce market was leaning more towards a discount-driven approach. The company realized that it would take a couple of years to reach its full potential in Bangladesh. At the time, Pickaboo was already one of the biggest ecommerce players in the mobile and gadget space. The company was seeing double-digit growth. But it was not enough.
The overall ecommerce remained small and it was hard to go beyond that at the time. The company, similar to many other ecommerce players at the time, tried several strategies. Excellent customer service. Discounts. Loyalty programs and so on.
Around this time, Pickaboo also started to experiment with a small-scale physical retail operation and connect it with its digital commerce operation. The result came in relatively quickly. The company found out in a couple of months that its physical retail was doing excellent. It was also complementing its ecommerce operation and vice versa.
Pickaboo’s reputation in the online world as a customer service-focused ecommerce company coupled with advantages in data and technology has helped the company in building an offline operation within a relatively short time. Physical retail, on the other hand, helped Pickaboo’s ecommerce to gain further confidence from customers who are generally skeptical about online shops.
Similarly, the existing relationship with brand partners has helped fast-track its offline operation. The combined online-offline operation has strengthened Pickaboo’s overall demand aggregation, improves Pickaboo’s leverage with partners, and allows it to design better benefits for customers.
The initial success convinced the company that an omnichannel approach could be the secret to meaningful ecommerce growth in Bangladesh. The company put together a plan and set out to expand its physical retail operation while also working relentlessly on integrating both operations to turn it into an omnichannel player.
Today, Pickaboo has 23+ physical outlets. The move has helped the company accelerate its growth.
On the back of the success, early this year, Pickaboo raised $1.5 million in a pre-series A round from Startup Bangladesh Limited, the flagship venture capital company of the ICT Division of Bangladesh, and several other local and international investors.
The company claims it has figured out a secret about the country’s ecommerce growth and that it has to go beyond mere digital.
Pickaboo sees two opportunities. Building a multi-brand retail chain for mobile, gadgets, and electronic products. And building an integrated omnichannel operation that can offer significant growth opportunities as well as a competitive advantage to anyone who can build it.
Pickaboo opened its inaugural retail store on Feb 5, 2020, in Bashundhara Shopping Mall, Dhaka. In the first quarter of 2020, the company opened nine retail outlets in Dhaka. By the second quarter of the same year, Pickaboo had built a strong retail operation complementing its online operation.
Today, with 23 outlets in operation, Pickaboo is probably the only omnichannel ecommerce player of its size in the market. And the company aims to become the largest multi-brand omnichannel retail chain for mobile and electronics products in Bangladesh.
Pickaboo’s physical stores are full-fledged multi-brand physical retail stores for mobile phones and electronics products. The company works with retail entrepreneurs to set up these retail stores under a unique franchise model where both the entrepreneur and Pickaboo invest jointly.
Pickaboo maintains greater control over how these shops are designed and operated. In every outlet, Pickaboo puts a manager who manages the entire operation. Several other employees take care of the smooth running of the shop.
Pickaboo outlets maintain a uniform design and experience and put a lot of importance on customer experience. There are monitoring systems in place to review various interactions with customers. The sales representatives in the shop are trained to help customers with usage and other issues.
Retail is expensive. Management is complex and challenging. Using a semi-franchisee model to execute its retail strategy cuts both ways for Pickaboo. Instead of investing all the capital by itself, Pickaboo works with retail entrepreneurs who already have retail operations or are interested in a retail business to create the outlets. For small retail entrepreneurs, a partnership with Pickaboo helps them to compete effectively with other brand shops.
Pickaboo has been working hard to execute its omnichannel strategy. The company sees marrying online and offline operations can create strong competitive moats giving access to a larger market opportunity. Physical retail is a much larger market. With a foot in the gate, you have access to a much larger opportunity. It also helps you to take ecommerce to more people.
Strategically, an ecommerce company can use offline outlets as delivery hubs for online deliveries — a hyper-local ecommerce model — reducing friction and improving resource utilization and cost. For instance, Pickaboo already allows customers to collect their online orders from their nearby Pickaboo outlet.
The convergence of offline and online commerce is happening across markets. The model has strategic relevance for Bangladesh given the strength of offline retail in the country and the overall state of ecommerce.
Online lacks relative trust, reliability, and reach. The ecommerce market is much smaller. The offline lacks data infrastructure, reach, and tech infrastructure to scale.
A seamless omnichannel operation can potentially offer a large market opportunity and a lasting competitive advantage to any company that can pull it off.
A synergetic online-offline operation can benefit both parts of the operations of a business.
For an ecommerce company such as Pickaboo, getting into physical retail comes with added advantages. For instance, being an online retailer, Pickaboo has one of the most important advantages when it comes to retail – data. Adding offline to that model further expands its data advantage. Being an omnichannel player Pickaboo has access to data from both the online and offline world which allows it to make better decisions. It is a unique advantage that is hard to access for many other online-only e-commerce players.
Moreover, due to its offline retail operation, Pickaboo enjoys several structural advantages because of its online-offline play. One, Pickaboo drives big volumes for its brand partners through its online and offline operations. This means it gets priority when it comes to getting the latest products from brands. This means Pickaboo always has the latest collection in its shop ahead of everyone else giving it a competitive advantage that is not accessible to other retail outlets.
As noted earlier, an integrated offline-online operation expands the potential addressable market size and growth opportunities. It allows Pickaboo to create a hyperlocal ecommerce delivery model. Improves trust and brand image with customers and leverage with partners and helps build stronger competitive moats. Seamless integration between offline and online commerce can result in a superior strategic advantage for Pickaboo.
Pickaboo has a great start with its physical retail. Along with a much bigger market opportunity, physical retail should allow an online retailer to attract new offline customers online, build trust with skeptical customers, and help improve operational efficiency when it comes to delivery and logistics. A seamless marriage between offline and online operations could potentially prove to be the secret sauce of success for companies like Pickaboo in Bangladesh.
In my opinion, Pickaboo should eventually come out of its mere ecommerce identity and instead should position itself as an omnichannel retail player. Some of the biggest companies in the world take an omnichannel strategy with a strong physical retail presence. Companies such as Lululemon in athletic clothing, and Warby Parkar in eyewear have built category-dominating companies at the intersection of the physical and digital world. While many of these companies originally started in the physical retail world, their transformation shows that you have to heed the call of the market.
Given Bangladesh’s socio-economic reality, it makes even more sense to take advantage of both worlds given the opportunity.
Pickaboo has so far shown that it is possible to build a successful omnichannel business that can expand the market opportunities for an ecommerce company. The company now planning to expand its physical retail operation. It also plans to open large-scale retail shops and include other electronic product categories along with mobile and gadgets. The new model can further improve offline margins for the company and accelerate its growth.
If Pickaboo can pull off a synergetic online-offline play in retail, it can become a formidable player in the entire digital commerce space in Bangladesh and can also be a model for a new ecommerce growth strategy.
This is an interesting time for Pickaboo, armed with a business model innovation, backing from prominent investors, strategic category expansion, and growing ambition to solidify its market position in the mobile phones and electronics space, Pickaboo is looking ahead to an eventful future.
Having said that, while offline offers excellent opportunities in conjunction with online retail, it is not devoid of challenges. There are many challenges when it comes to running an offline retail operation. More so when you are doing omnichannel.
The offline operation has management issues that are different from online. While you can easily ensure customer service online because it is managed centrally, it can be a challenge if you aim to do the same offline. This is more so for Pickaboo since the company claims customer service as one of the key differentiators. At the same time, retail is an investment-heavy operation. The current economic condition can also cause additional challenges.
To that end, if Pickaboo wants to succeed in its omnichannel strategy, the company has its work cut out for it.
This story was developed under the Future Startup partner program, where here we highlight interesting, high-impact organizations and their work that might not attract comprehensive analysis otherwise.