One noticeable change during this Covid-19 pandemic has been the shift of consumer behaviour. The contactless economy has become a necessity for survival, and though once we thought it is the younger generations who will effortlessly shift to e-commerce markets, now even our parents and grandparents have bKash wallets and are ordering through Facebook shops or from ChalDal.com. In fact, the e-commerce retail sector is a significant source of foreign investment, raising approximately USD 41 million and is now the third highest funded sector in Bangladesh, based on the Bangladesh Startup Ecosystem: Funding Landscape dashboard of LightCastle Partners. Though this shows a lot of promise for the future of the e-commerce sector, it also highlights the fact that businesses, platforms, and regulators need to understand the overarching negative issues and challenges with this sector and need to consider potential approaches to go about addressing them at present and in future.
To start with, let's look at the reason why this boom in e-commerce platforms occurred. Even before the pandemic, there was a demand for these platforms for a few reasons. One key reason is convenience—due a hectic schedules, coupled with traffic jams and long distances, sometimes it is much more convenient to just order a product online, especially if it's not an experience product and the brand has a constant reputation of safe and proper delivery. And this sector expanded thanks to the help of secure and easy online payments, with the help of banks and companies like Sslcommerz and now mobile wallets such as bKash. At the advent of the Covid-19 pandemic, online transactions peaked due to the nature of the disease and the fact that contactless economy was no more a luxury but a necessity for survival. And as the world slowly moves to the new normal after the pandemic, it is evident that the e-commerce sector will play a major role in the economy.
So, what are the pressing issues in this sector? One key issue is that of trust. Just as there has been an increase in online consumerism, there has been a significant increase in problems related to fake products, broken products, bad quality, unnatural delay, and severe lack of customer service, at times bordering on rudeness towards the customer. And these issues have increased proportionately during the pandemic. And these led to a significant drop in trust in many of the e-commerce portals and traders. The problems are mostly focused on either retailers who are small, Facebook shops, and at times with larger organisations as well. And though many small (sometimes large) organisations have opted to take advantage of the situation and the need for a contactless economy to offer sub-par services, they need to understand that the damage done will not only have a short-term repercussion, but will echo in the longer terms as well.
To ensure the growth of a healthy and reliable e-commerce sector, action is required from three different parties. The first and the most important role needs to be played by the online shops or merchants. Both the merchant and the platform need to build trust with the customer, and not just be happy with a completed sale of sub-par quality or customer service. And there are two reasons to do so. Common wisdom in the field of strategy is that for any policy/decision to be effective, you need a carrot and a stick approach. The carrot stands for incentive and the stick for punishment. The stick, if companies fail to build trust, is that there is an undeniable increase in online consumerism, and the barrier to entry for a new player is not very high. This sector does not need specialised resources or a specific location advantage. With decent funding, any organisation can enter the e-commerce sector. At the same time, for most of the products which are purchased online, the customers don't have very high switching costs. Brand loyal customers still prefer to buy from a physical store or the online shop of the brand. So for e-commerce platforms, the customers are mostly buying something that is not too brand specific. So, if a new player comes in to ensure customer service and establish trust, then the platform which is lagging will lose most of the customers at a breakneck speed.
To avoid this, the present E-commerce merchants and platforms need to build trust. In terms of the carrot—the incentive—these organisations should build trust because that is the preliminary step of building lasting brand value, and if we have seen the history of business in the last hundred years, brand value can be a considerably important factor (Apple can be a prime example of that).
For platforms, which connect buyers to sellers, such as Daraz, it is also important to have a "carrot and stick" approach towards their sellers. Bad service and bad quality will not harm only the merchant but will reduce faith in the platform. So, it is very important to improve the ecosystem of the platform. They can create an incentive mechanism through promoting and pushing the products of those merchants and sellers who had high ratings from verified purchasers (purchaser accounts which have been confirmed by the platform that has not been created by the seller to improve ratings). Similarly, seller accounts with complaints can be downranked and showed less when a consumer searches for a product. This simple mechanism can encourage sellers to be more professional, work on customer service, and reach out to larger markets. At the same time, just like the idea of Amazon Choice, these platforms can have their team of product evaluators recommend some of the sellers' products, or the sellers account, another incentive to come up with really good products and services.
Finally, a considerable role needs to be played by regulators and policymakers in our country. In a fast-changing entrepreneurship ecosystem, with many challenges, policy aid and enforcement can help a sector to flourish. One key issue can be to establish an online consumer protection act and create an infrastructure to enforce such an act. At present, many of the platforms are trying or develop their versions of consumer protection policies, but unless a regulatory policy level drive is taken to create a uniform set of laws protecting online consumer, scams and frauds will still flourish. This suggestion is further strengthened by the fact that there is a large portion of F-commerce (Facebook based shops) in our e-commerce sector.
These suggestions are neither a complete list of things that can be done, nor are they effective on their own. As mentioned, to ensure a flourishing e-commerce sector, steps need to be taken by multiple parties together. But if these steps succeed, the future of online consumerism and e-commerce is sure to contribute to a healthier economy.
Khan Muhammad Saqiful Alam, Commonwealth Scholar, National University of Singapore, is Analytics Adviser, Intelligent Machines Limited.