Covid-19: Impact on E-Commerce Industry in Bangladesh

(The Research Article has been prepared by the e-CAB Research Center)

Source: E-CAB Survey
94.4% of the e-commerce companies are local companies with local investment. 5.3% companies have both local and foreign investments and only 0.4% companies have fully foreign investment. 69.7% of the companies cater the local market exclusively, 0.7% of the companies work exclusively for foreign market while 29.6% cater both domestic and export market.

Source: e-CAB Survey
11.5% companies pay salaries in the accounts of the employees directly, 62% pay salaries in cash while the rest 26.5% pay some part in accounts and some parts in cash. 81.3% of the companies operate form their rented office and another 4.2% continues their operations from rented home. Only 10.6% of the companies have their own office, while 3.9% of the company owners operate from their own home.

Source: E-CAB Survey

86.6% of e-commerce industry feels that they will be seriously impacted because of the Covid-19 situation, while 11.9% of the companies feel that they will be moderately impacted. Only 1.5% of the companies do not expect any impact on revenue and/or profits.

Source: E-CAB Survey

For many e-commerce business owners, this is the only source of income to support themselves and their family members. Although the operation came to almost a complete halt, the companies need to continue to pay their staffs and bear the cost of rent, utilities and other expenses. The types of impact that the e-commerce industries are facing include:

 

Area of Impact	Details
Operation and Sales	* Not receiving outstanding dues from clients * Not getting work order from countries that are affected severely from Covid-19. * The regular operation is halted, no turnover from  business. * Companies are forced to reduce expenses. * Unable to be able to pay to the workers and a lot of   workers might need to be laid off. * Delivery to the customers extremely difficult, a lot of delivery persons left to their home district and not easy to find replacements. * Physical training activities are completely stopped. * Demand for the products and services lower than normal time. * Employees are in home quarantine. * People are not paying insurance premium and new insurance products are not bought. * Arranging any kind of physical movement for the buyers is impossible, so sales is getting hampered. * People are not giving order to items that are not a necessity. * Goods remaining in warehouses and damaged. * Ride-sharing services. * Halt in research and development activities for company improvement. * Perishable products in stock will get spoiled. * For service based companies, providing service is impossible, so getting service charge will not be possible as well.
Sourcing and Marketing	* Sourcing of raw material became impossible from Covid-19 affected countries. * The local supply chain is also broken or severely hampered. * No new marketing activities, existing or potential clients has low interest.
Loss of opportunity	* Missing the key season in business that will be difficult to overcome even after situation improves. * Unable to deliver project work on time. * Unable to tap the Noboborsho and Eid market. * Difficult to manage logistics for data center that can hamper any recovery operation. * Because of the drop in RMG export, logistics companies will suffer. * Not possible to acquire any new business. * No tourism or aviation activity during Covid-19 period. * Decline in the demand for digital services. * Launch of new products/services getting delayed (and might not be successful because of the situation). * Project abandoned from client end. * Confirmed orders might be cancelled.
Finance	* No revenue during lockdown. * Fund stuck with supplier. * Unable to pay loan instalments from financial institutions or personal loans. * Loss of existing orders. * Not being able to pay office rent and utilities. * Not being able to pay the suppliers.

 

It is clear that many of the e-commerce industries will face the challenge of survival, if appropriate support is not provided by the Government. The industry owners will have no option but to lay off a large number of their staffs and will become loan defaulters. The inventory based companies has close to 400 million pieces of products in their stock, but most of it will remain unsold. The value of the existing stock is close to BDT 800 million (US$ 10 million). Close to 20% of these stocks will get wasted because of the existing lockdown and this wastage percentage is likely to increase if the lockdown situation continues. Over 40% of the monthly turnover is already impacted and the whole industry is facing a very grim future.

Given the picture, E-Commerce Association of Bangladesh humbly demands the following for the survival of its members from the Government of Bangladesh through special arrangements. This will help flourish an industry that is the future of the country.

Defer the payment of installments for at least 6 months from any financial institutions in Bangladesh for the e-CAB members by issuing instruction from Bangladesh Bank.

Provide additional loans with zero or very low interest. This will help the e-commerce companies to kick start their businesses, search for new clients and continue the regular sales and marketing efforts. The amount should be at least one month equivalent of the industry revenue, i.e. BDT 700 crore. E-CAB proposes the following terms for this loan:

The period of loan will be for 5 years with a 2% simple interest rate
The loan amount will have a one year grace period and the rest 4 years will be flat rate interest
e-CAB will collect all member details with their employee information and communicate with all members for getting update on their Covid-19 impact. e-CAB will also collect business history of all its members.
e-CAB can collaborate with some banks for easy disbursement of loans to its members. Without a No Objection Certificate from e-CAB, no member will get loan. e-CAB will collect necessary office documents and provide to the bank for facilitating payments/installments. All members will submit their respective PDCs.

Postponement of collection of company income tax (IT) and value added tax (VAT) for at least two years.
Provide Grant to facilitate payment of staff salaries, utilities and other operational expenses. The amount of the grant should be able to cover at least 6 month operational expense and that amount stands at 400 crore for salaries, 60 crore for rent and 20 crore for utilities totaling 480 crore.

e-CAB wishes to work together with the relevant government ministries to facilitate its members and overcome this grave situation together. We expect a considerate and positive response from the relevant government authorities.

 

Co-Author :

1. Sadruddin Imran,Chairman,e-CAB Research Center.
2. Raisul Awal Vice-Chairman,e-CAB Research Center.
3. Dr.Shah Alam Chowdhury,Member,e-CAB Research Center , Founder & CEO, Center for Research and Trainnig.
4. Dr. Ahmed Istiaque,Member,e-CAB Research Center.