Consumer rights

Bangladesh e-commerce faced its own pandemic in 2021

Plagued by fraud and unsustainable business models, recent policy directions and new funding could prove to be the double boost needed to strengthen the sector in 2022

Despite the setbacks, which were plentiful in 2021, the e-commerce industry has consistently seen growth, supported by continued improvements in online banking and fintechs and the rise of a tech-savvy population with power. high purchase.

Covid-19 accelerated this growth as people started to embrace digital shopping due to lockdown restrictions and soon e-commerce platforms started to flourish everywhere.

According to the Bangladesh Electronic Commerce Association (e-CAB), official reports and industry insiders, online sales increased by around 70% in 2020 compared to the previous year, and the size The industry’s market share stood at nearly $ 2 billion last August. year.

E-CAB Vice Chairman Mohammad Sahab Uddin estimates that the sector’s valuation in 2021 may have exceeded Tk 20,000 crore, or around $ 2.32 billion.

By 2023, the market is expected to reach $ 3 billion.

But the journey has not been easy for the industry, and those difficulties, in part, were prompted by the investigation into Evaly’s irregularities.

One of the reasons Evaly got away with its business model for so long was the lack of a regulator and policy framework for the industry.

There were no specific operational guidelines until the middle of this year, although a digital trade policy was adopted in 2018.

Sahab Uddin says these setbacks actually helped them identify important issues in the industry, “which are being addressed on an ongoing basis” and which will help the industry accelerate even further in 2022.

“We didn’t have a policy or guideline for a long time, but that’s not the case anymore. The framework will evolve further as the market develops further, ”added the head of e-CAB.

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Crime and Punishment

Complaints of undelivered goods, refusal to reimburse and the cult of personality surrounding Evaly Rassel’s boss dominated the first half of the year.

But as these complaints began to pile up, several banks and mobile financial services (MFS) cut ties with the suspicious platforms.

When the patience ran out, several people started to file a lawsuit against Evaly, Dhamaka Shopping, eorange, Sirajganj shop and Qcoom.

Later, Evaly CEO Mohammad Rassel and his wife Shamima Nasrin were arrested on allegations of embezzlement and fraud.

Law enforcement officials also arrested Ring-ID director Saiful Islam for embezzling Tk 200 crore in just three months by luring people to his investment program promising online income.

Sonia Mehzabin, owner of e-commerce platform, her husband Masukur Rahman and COO Aman Ullah are also currently behind bars for embezzling Tk 1,100 crore from consumers.

Investigations by several authorities have also revealed embezzlement and irregularities against various other electronic commerce sites hitherto gone unnoticed.

The Department of Criminal Investigations (CID) has also prepared a list of e-commerce companies that allegedly defrauded large sums of money from customers in the name of selling products, investing online, and lending electronically on their platforms and social networks.

In July 2021, the guidelines on digital commerce operations entered into force.

The directive provided proper instructions for deliveries, pricing and product presentation, which resulted in the shutdown of several platforms as they could no longer take advantage of the advance-first model – a model eliminated by the introduction of escrow system.

But it quickly gave birth to a new problem.

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Stuck in Escrow

In accordance with the guidelines, the central bank began to act as a third party by withholding payments and transferring them to sellers only after the product was delivered.

However, the system was not automated. The requirement for manual entry to verify transaction receipts resulted in huge delays in disbursing funds.

As of October 14, customers have paid more than Tk 512 crore to payment gateways, of which Tk 298 crore had already been paid to platforms by financial service providers.

The remaining Tk214 crore got stuck in various financial services organizations such as SSL, shurjoMukhi, Foster, bKash, Nagad and Southeast Bank.

Of the funds blocked in payment gateways, more than Tk 165 crore belonged to Qcoom’s online purchases, paid by its customers with Foster Payments, while Tk49 crore was blocked in other payment gateways, according to the central bank.

“It has also taught us that capacity building and the integration of technology are essential to create an ecosystem capable of protecting both businesses and customers,” Sahab Uddin said.

“The association has claimed the automation of the escrow system from the very beginning. We have already seen how even a solution can cause further disruption if it is not executed correctly, ”added the head of e-CAB.

Experts believe that cooperation between different agencies such as Ministry of Commerce, Bangladesh Bank, e-CAB and law enforcement agencies is essential for the implementation of guidelines and rules as well as for the integration of advanced tools to automate the escrow system.

In September, the Commerce Department also formed a 16-member committee to recommend action to discipline the e-commerce industry that initially proposed forming a new regulatory body as well as new laws to regulate the industry.

Still, business insiders and industry stakeholders felt that excessive regulation could hurt the growing sector, leading the committee to conclude that a new regulator would not be necessary and that amending existing laws and scaling up regulatory bodies should suffice.

The committee, however, recommended that all companies in the sector, including those based on F-commerce (Facebook-based companies), be enrolled in the registration process, which is due to be launched in January 2022.

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More investment needed

According to e-CAB, entrepreneurs in the sector still face various limitations.

“Banks or financial institutions are reluctant to invest in this sector. Providing services at the marginal level has been difficult and such a huge blow during crucial development hours slowed the momentum of the sector, ”an industry insider said.

“Entrepreneurs have overcome various issues and limitations in this sector since its inception, and with the much needed government intervention to regulate the sector, we have been able to return to our original trajectory of continued growth,” an e- said responsible for the CAB.

According to the association, companies that want to properly serve buyers have not retreated and have also seen demand for their services increase, with the potential for further growth.

“Many small entrepreneurs in the e-commerce sector are women, and the political support for the expansion that followed following the scams has certainly been positive,” said Nasima Akhter Nisha, additional secretary of e-CAB.

“However, much remains to be done to increase investment and develop infrastructure. Small businesses will strive to maintain the trust they have built through their service. But consumers can also help by using services and buying responsibly, ”she added.

Mohammad Abdul Wahed Tamal, secretary general of e-CAB, said the sector has yet to make a profit.

But it creates jobs, contributing to the country’s overall economy, he added.

E-CAB estimates that 100,000 new jobs were created in the e-commerce sector during the closures, and there will be 500,000 jobs in this sector over the next three to four years.

“We are working with government and platforms to respond to the growth of the sector, which is already visible,” Tamal added.

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To do things well

While scams have garnered the most attention this year, a few platforms have done it right by building trust and understanding what is most important to a consumer: good customer service, a long-term plan. and learn from mistakes.

A report published by the National Directorate for the Protection of Consumer Rights (DNCRP) shows that several platforms have been able to resolve customer complaints as effectively as possible.

These are Pathao, Chaldal, locals, alongside Uber and Foodpanda, some of whom had invested heavily in ensuring consumer satisfaction through technology, as well as developing human resources, rather than discounts or discounts. subsidized products.

Pathao tops the list with a grievance redress rate of 99.25%.

Chaldal, which achieved an 88.95% grievance resolution rate, has invested in technology to support the business through customer satisfaction rather than subsidizing products, especially in the difficult perishable segment. .

CEO Waseem Alim said, “Rather than subsidizing products, we have continuously invested more in technology as well as building a strong team to improve our services in the region, and this year has been a precedent for them. sustainable businesses.

“Guaranteeing the quality of our service to customers takes a lot of effort. We have had to invest heavily in the supply chain alone to ensure the satisfaction of our customers. Complaints are closely watched, as we are in the perishable goods business, which means products can deteriorate very quickly, ”added the boss of Chaldal.

Industry insiders believe the year 2021 has revealed the need for sustainable business models following the investment ideology promoted by scam ecommerce sites to raise more money.