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The Digital-to-Physical Rush: Bangladesh's Online Businesses Embrace Brick-and-Mortar

In an interesting strategic twist, Bangladesh's burgeoning online businesses are increasingly setting foot in the physical world. 

From e-commerce giants to edtech innovators to agri-tech players to digital healthcare companies, a growing cohort of digital-native companies is opening offline experience centers and service delivery hubs. This trend, which began with pioneers like Khaas Food and Pickaboo a few years ago, has now become a notable strategic shift across various sectors. 

Some of the notable digital players that have entered the physical world in the recent past include: 

  1. Truck Lagbe: The digital trucking services platform launched service points across Bangladesh 
  2. Khaas Food: Started as an online safe food brand and has since expanded into offline outlets. The company’s number of offline stores is nearing 20.  
  3. Pickaboo: Started as an ecommerce company focused on mobile and gadgets and has since evolved into an omnichannel player with a growing number of offline stores. 
  4. iFarmer: Started as an access-to-finance solution for farmers, it has evolved into an end-to-end platform with a long list of solutions. The company has since launched offline centers. 
  5. GoZayaan: The prominent OTA in the country launched its first offline experience center last week. 
  6.  Shikho and 10 Minute School: Two of the prominent players in Dhaka’s edtech market have launched offline experience and learning centers. 
  7. Drutoloan: The SME-focused fintech player has launched a number of SME centers, partnering with the existing retail shops
  8. ISHO: The new-generation furniture brand has built a successful omnichannel operation. 

These are just a small number of a growing list of companies exploring what is now increasingly known as omnichannel operations. 

The Allure of the Tangible

At first glance, this movement appears counterintuitive. Why would digital upstarts, born in the frictionless realm of bits and bytes, voluntarily embrace the constraints of atoms? The answer lies in the unique characteristics of the Bangladeshi market and the evolving needs of its consumers.

Bangladesh, while rapidly digitizing, remains a country where trust is built through personal interactions. The tangibility of a physical presence serves as a powerful trust signal, especially crucial for businesses handling sensitive transactions or services. For fintech players like Drutoloan, which recently launched offline SME centers, a physical touchpoint can be the difference between a skeptical potential customer and a loyal client.

Similarly, offline presence combined with online can dramatically expand market opportunities for many of these players. While digital commerce across verticals has seen meaningful growth in the country, offline continues to dominate economic activities. For instance, for edtech companies, there is an apparent ceiling when it comes to online reach. 

Moreover, these offline centers serve as experiential marketing hubs. In a market where product awareness and digital literacy are still developing, hands-on demonstrations can be far more effective than digital ads.

The Strategic Calculus

This digital-to-physical move is not without its strategic considerations. On the upside, offline centers can significantly boost brand visibility and credibility. They serve as living, breathing advertisements, potentially reaching customers who might never have encountered the brand online.

For edtech players like Shikho and 10 Minute School, offline centers can complement their digital offerings with in-person tutoring and study spaces. This hybrid model could prove particularly appealing in a culture that still places high value on face-to-face learning.

However, the move is not without risks. 

Establishing and maintaining physical locations introduces substantial fixed costs, potentially eroding the lean operational model that gave these digital startups their initial advantage. 

There's also the danger of brand dilution if the offline experience fails to match the quality of the digital offering.

Many online native companies are expanding offline with the expectation that it will expand their market and bring new growth. However, premature expansion into a complex operation like running a physical operation can create new operational challenges. It can also dilute focus and cause misallocation of resources. At the same time, the mover also opens these companies to new competitive realities. 

Moreover, startups are usually resource-constraint organizations, and dividing up the limited resources can cause suboptimal returns on investment. 

Trying too many things all at once is rarely a good strategy. 

That being said, expanding to the physical world is a pragmatic strategic move for many of these companies given the market reality in Bangladesh, some of which we discussed above. Risk is inherent to every strategic decision. Companies that can manage these risks well and execute will certainly benefit from the move.  

The Broader Implications

This trend reflects a broader realization in the tech world: the future is not purely digital, but rather an intricate dance between online and offline realms. It's a tacit acknowledgment that while digital platforms offer unparalleled reach and efficiency, there remains an innate human desire for tangible experiences and face-to-face interactions.

For Bangladesh's digital economy, this hybrid approach could accelerate technology adoption. By providing physical touchpoints, these companies are essentially creating digital onboarding centers, easing the transition for customers who might be hesitant about purely online services.

The move also signals a maturing of Bangladesh's startup ecosystem. As these companies grow beyond their initial niche, they're adopting more complex, multi-channel strategies to capture market share and build sustainable businesses. 

Looking Ahead

As this trend continues to unfold, we can expect to see more nuanced implementations of the online-offline hybrid model. Companies will use data analytics to optimize the location and offerings of their physical centers, creating a seamless omnichannel experience that leverages the strengths of both digital and physical worlds.

We might also see interesting partnerships emerge. For instance, edtech startups could collaborate with traditional educational institutions to create innovative learning spaces that blend digital curricula with physical infrastructure.

The success of this strategy will ultimately depend on execution. Companies that can maintain their online advantages while effectively managing physical operations will be well-positioned to dominate their respective markets.

The offline move of Bangladesh's online businesses is more than just a trend—it's a strategic evolution that reflects the unique characteristics of the market and the enduring importance of physical experiences in the digital age. 

As these companies navigate this new terrain, they're not just expanding their footprint; they're reshaping the very landscape of Bangladesh's digital economy.

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