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The global e-commerce market is set to continue showing strong growth due to the convenience factor. With widespread internet penetration and a growing trend toward reliance on online options, consumers are increasingly in the habit of carrying out a growing number of activities online, from social networking to shopping. The growing consumer base for mobile devices means that people are more and more accustomed to accessing the internet from anywhere and at any time, be it to purchase goods and services or to use online content. Making consumers aware of the safety of mobile payment will be an important factor for e-commerce market growth moving forward.
Key Market Segments
The e-commerce and online auction arena grew 10.4% from 2007 to 2012, with 8.8% more growth expected annually through 2017, according to industry research firm IBISWorld. Employment in the online shopping arena is also expected to creep upward, from 177,642 jobs last year to 183,396 by the end of 2012, and nearly 206,000 in 2017. The number of enterprises in this industry is expected to increase from 52,969 to more than 61,000 over the next five years. As such, entrepreneurs building new ventures would do well to focus on localization and customization, which are two big selling points with customers. So opportunity of online business and e commerce has not been ignored at all. The online grocery market continues to expand as consumers subscribing to home-shopping extend their online activity to a growing number of areas, including the convenience of grocery shopping on the internet. The trend toward online grocery shopping is particularly strong in developed nations like the US and the UK. According to research from private firm Key Note, the UK internet grocery market will record high yearly growth until 2013, and the overall market will at least double by then as compared to 2008.
Online grocery shopping is one of the fastest-growing segments within the grocery market, allowing shoppers to access a huge array of products online, compare product prices and schedule home delivery. Online outfits are rolling out this segment of their business by developing their websites, boosting stock availability and elaborating their distribution networks. Within the context of the economic downturn, online grocers are forced to compete on price as consumers can compare prices with the click of a button.
Global E-commerce Industry
Thanks to convenience and increasing internet penetration, consumers are readily turning to online shopping, which has been fuelling the retail market in developed countries. The world B2C e-commerce industry generated between $400 billion and $600 billion in 2010, according to yStats.com, which estimates the market will generate somewhere from $700 billion and $950 billion in 2015.
There were over 2 billion internet users worldwide in 2011, and it is forecast this number will exceed 3 billion by 2015. Profit from B2C e-commerce represents less than 10% of overall retail revenue in established markets like the UK and France, which are expected to rise above the 10% mark in coming years. This figure falls to under 3% in less well-established B2C e-commerce markets. Social media continues to fuel the B2B e-commerce market, which aims to boost electronic business process efficiency, reports T Systems. E-commerce is being considered as a separate, profitable field of business, and intermediary actors are updating their B2B business models, while embracing aspects of social media.
Regional Market Share
The US online retail market generated almost $153 billion in revenue in 2010, reports MarketLine. The market is expected to record yearly growth of close to 11% between 2010 and 2015, when it is expected to reach almost $252 billion. Electronics is the leading market segment, generating almost $36 billion in 2010, which represents more than 23% of the overall market in terms of value.
The EU online retail market generated close to $163 billion 2010, reports MarketLine. Market growth is expected to slow to a yearly rate of just over 14% between 2010 and 2015 to exceed $316 billion by the end of that five-year period. Electronics is the leading market segment, generating just over $41 billion in 2010, which represents more than 25% of the overall market in terms of value. The online retail market in the Asia-Pacific region generated almost $81 billion in 2010, reports Market Line. Market growth is expected to slow to a yearly rate of over 15% between 2010 and 2015, when it should exceed $170 billion. Electronics is the leading market segment, generating almost $17 billion in 2010, or close to 21% of the overall market in terms of value.
Bangladesh ecommerce market could grow up to the mark in the next 3-5 years
Competitive advantages determine whether a company can move forward. E-commerce is the right tool for gaining competitive advantage nowadays in Bangladesh. Business now goes online. Some restrict the definition of e-commerce only to internet enabled transactions while some others defined broadly saying not only internet rather telecommunication and telecommunication based tools are also involved in ecommerce activities. In Bangladesh perspective, the broader definition is accepted to all. Like traditional commerce, e-commerce does not involved only in buying and selling of goods and services rather includes inter-company and intra-company functions like negotiations and transactions, manufacturing and marketing etc. using email, Electronic Data Interchange (EDI), fax, file transfer, video conferencing etc. Depending on the involvement with electronic means, a company can be either a complete or partial e-commerce user.
Present situation in Bangladesh
Much debate surrounds the blooming ecommerce industry in Bangladesh, with different views on whether the proliferation and growth of ecommerce companies and the valuation that some of them have generated is merely a bubble or just the tip of the iceberg. This article discusses the projected size of the opportunity and the growth drivers, examines the realities behind commonly discussed challenges, and assesses the debate around recent valuations. In the year 1996, private Internet Service Providers (ISP) launched Internet in Bangladesh. Since then, the infrastructural development in the sector of telecommunication has helped spread the Internet network around the country. Right now more than 6.5 million people are using Internet in the country with the help of around 200 registered ISPs and dial-up services and the cost of using Internet is low. The increasing number of user of Internet creates more opportunity of e-commerce in the recent years. Around 100 million people use mobile services and 15 or 20 percent people take mobile banking services. According to data of Bangladesh Bank, about 1 million mobile users take the mobile banking services and roughly over 100 crore transaction is made through the mobile banking every month. We have more than 2500 ecommerce website and 1000000 digital buyer overall and 50% of them are form Asia Market.
India earn 1.6 billion $ per year from e commerce a year
In order to cope with the present world, almost all of the financial organisations and international businesses in Bangladesh enter in the information highway through hosting website. Banks and other financial organizations have started online transactions like fund transfer, payment etc. However, the ecosystem elements required to support the growth of the ecommerce industry are also falling into place.
• Internet access infrastructure: Bangladeshis’ Internet user base is expected to grow to between 8 million and 10 million in the next 3-5 years, driven by growing adoption of fixed broadband and the launch of 3G service.
• Payment infrastructure: Consumers in Bangladesh have adopted innovative approaches to payment, such as net banking, Mobile banking, and cash- or card-on-delivery. The National Payment Switch On Its Way to Installation soon.
• Logistics and delivery infrastructure: Leading logistics companies have recognised the growth in the ecommerce sector and are investing in their network to better address the opportunity. Some e-commerce companies are also building their own logistics. The average turnaround time for e-commerce deliveries has declined from 7-6 days to 1-3 days in the last year or two.
• Awareness : The local people need to know the business opportunity as a whole including the payment method so that the market can grow more.
Based on the macro-level opportunity and expected maturity in the ecosystem, we expect the ecommerce market in Bangladesh to grow in a level to contribute the national economy in a large scale in the next 3-5 years.
Ecommerce companies will need to address several margin-related challenges to achieve profitable growth
As they shift their focus from top-line growth to monetisation and profitability, ecommerce companies will need to address several challenges related to gross and net margins. Within the local e-commerce industry, product categories with a larger ticket size tend to offer a lower gross margin than less-expensive items. As a result, ecommerce companies that have significant depth within a given vertical are having to expanding horizontally in order to increase their margins.
There are two key cost components that ecommerce companies will need to manage in order to increase net margins and achieve profitable growth.
• Customer acquisition costs: The average gross merchandise value is not much higher than the cost of acquiring a new customer. As a result, repeat usage is critical to profitability. Customer acquisition costs will decline as the industry consolidates and financially weaker players lose out to larger players.
• Delivery costs: Bangladeshi ecommerce market is same as india in that e-commerce company must cover the cost of delivering goods to consumers. This will continue to put a strain on margins as well as capital requirements in the short-to-medium term as e-commerce look to build their own delivery arms. However, in the medium-to-long term, investment in logistics will bear fruit as it helps ecommerce companies to acquire new customers as well as retain established ones.
Recent e-commerce valuations have attracted much debate, but they seem reasonable
The potential size of Bangladeshi ecommerce market, and promising signs of development in its ecosystem, has resulted in some impressive valuations for some of the country’s burgeoning e-commerce. There has been much debate about whether these valuations are part of an overly optimistic ‘bubble’, or if they are relatively conservative.
The ecommerce market in Bangladesh is not for the faint-hearted or those looking for an ROI in a short timeframe. It is also not without its share of challenges.
However, for the top three or four companies (and their investors) that manage to ride out the next 3-4 years, there are fruits to be borne out of the potentially large and profitable oligopoly that could be established in the coming years.
