Despite a slow start, the success of the e-commerce industry in South Asia is inevitable. Has the ongoing pandemic given the final push this sector required to flourish in the region?
In a discussion titled “RESTART ASIAN ECONOMIES: Ideas and Actions for The e-Commerce Industry,” hosted by the Friedrich Naumann Foundation for Freedom (FNF South Asia), the panellists discussed the impacts the pandemic has had on the regional e-commerce industry. Despite the increase in popularity, the sector faced a lot of challenges at the height of the crisis. It also facilitated new avenues for ideas, innovations and integration of traditional models of business with the available and latest technology within the “New Normal”. The programme also discussed how the e-Commerce Industry overcame challenges, and how it is gearing up for a larger role in the future growth of economies around the world. Moderated by Dr Najmul Hossain, Country Representative of FNF Bangladesh, the panellists were Dulith Herath, Founder and Chairman of Kapruka and Sonam Chophel, Founder of Druksell.
E-commerce in Numbers
In the pre-pandemic world, the estimated global annual growth of traditional trade during (2015-2020) was around 2%. In contrast, during the same period, the annual growth of the e-commerce sector was expected to be 50%. Consequently, the projected worth of e-Commerce in the aggregate global trade is around 3.5 trillion USD which is 13-14% of the total.
South Asian Perspective
E-commerce in South Asia lags noticeably behind the rest of the world. The industry has failed to capture a significant percentage of sales in their respective markets, and the numbers paint a standardized picture across the region. Despite phenomenal growth, under two per cent of total sales in India is done through e-commerce. The number is even lower in Bangladesh, making up less than one per cent of the total sales. Srilanka’s domestic e-commerce industry was projected at around 40 million US dollars in 2020. On the other hand, e-commerce has been a game-changer for Bhutan, especially during the pandemic. Bhutan is one of the first countries to impose nationwide lockdowns, and e-commerce facilitated access of essential products to its citizens.
THE IMPACTS OF COVID-19 ON E-COMMERCE:
Sonam Chophel explained the impacts of the pandemic in Bhutan’s e-commerce sector. He restated the fact that the country has been slow in adapting to the sector. A significant portion of the population is still unable to grasp the full implications of e-commerce fully. Conversely, the pandemic has forced people to look for alternative means for accessing essential products. People have increasingly been leaning towards e-commerce for essential products as opposed to non-essential ones in the pre-pandemic times. Concurrently, social commerce has picked widely, businesses across the country have started using Facebook and Instagram to promote their products, and there has been a spike in the domestic markets for buying goods.
Secondly, the shift in consumer behaviour has become very noticeable, besides shifting to essential items, they are looking for products online. Logistically, health safety has been the main priority of consumers. Therefore, e-commerce started to gain attention from the general population in the post-pandemic world, and startups have started to invest money in the sector. There are significant challenges for e-commerce in Bhutan like a small domestic market and challenging geographical terrain for delivery. The impact of the pandemic on the e-commerce sector in Bhutan has been through the significant change in consumer behaviour.
Dulith Herath divulges the impacts of the pandemic on Srilankan e-commerce sector by equating the implications on his own business, Kapruka. When the first lockdown was announced, Kapruka’s orders went from 5000-7000 to 80,000 a day. It was challenging for the company to get a grasp on the number of orders that were pouring in. The biggest mistake of the company was to continue taking orders despite the limitations. It resulted in a considerable backlog, which resulted in an unusual delay in delivery time. Instead of providing next day delivery, Kapruka’s delivery time often stretched to a week. Also, they had to refund for nearly seventy per cent of the orders placed. After assessing the sustainability of the surge, Kaprika decided to double its capacity. Concurrently, a large percentage of the surge consisted of first-time customers, a portion of which will continue to use the platform for procuring essential items. Herath also explained that the surge was artificial, and the expansion of the company has been based on logical forecasts. In the end, the most crucial aspect of e-commerce is logistics. It is not about the number of vehicles available, preferably the number of people working in the warehouse and delivery who are expecting better pay and insurance facilities.
FUTURE OF E-COMMERCE AND NECESSARY GOVERNMENT SUPPORT
E-commerce in Bhutan is in its primary stages and Druksell being one of the first e-commerce companies in the country is still trying to innovate to overcome the existing challenges. For example, Bhutan’s banking sector is not prepared for large online purchases and has minimal foreign transactions happening under strict regulation. Imports of goods in Bhutan is strictly regulated and expensive. It is one of the main challenges of e-commerce business in Bhutan. The government needs to assess the import barriers and allow the e-commerce companies to bring foreign products and sell them to customers. Concurrently, companies face logistical issues daily, the last mile deliveries in Bhutan is very difficult because some of the people live at 1000-2000 metres above sea level. The government needs to work with the stakeholders and find a sustainable logistical and infrastructural solution to the existing issues.
Dulith Herath is certain that e-commerce is here to stay and will be an integral part of shopping for the next generation. However, there are four main things that the governments of developing countries need to do to ensure the robust growth of the sector. Firstly, the telco companies in the respective countries should be made more competitive. The government has to facilitate the competitiveness that will drive the data costs down, which is essential for the growth of the e-commerce sector. Secondly, banks must understand the e-commerce business model to ensure proper funding. It can be done by including a board member who is an expert on the issue. Also, privacy laws must be brought at the early stages of development to protect customer data.
Most importantly, the post office of the respective countries must be given a facelift. Logistics is essential in e-commerce; we should utilise the existing post office infrastructure for logistical support. The networking capacity of the post office is immense and can result in win-win partnerships for all the respective stakeholders.
The Friedrich Naumann Foundation for Freedom is a foundation in the Federal Republic of Germany devoted to the promotion of liberal principles and political education. The goal of the foundation is to advance the principles of freedom and dignity for all people in all areas of society, both in Germany and abroad.
FNF Bangladesh works to increase civic awareness in promoting liberal values on the market economy, the Right to Information Act and the chances and challenges of digital transformation. The foundation pursues these issues in partnership with policy-makers, business bodies, think-tanks, journalists, citizens and other members of the civil society. FNF Bangladesh is registered under the Bangladesh NGO Affairs Bureau and has been working in the country since 2012.