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    Market Insight: Supermarket Industry in Bangladesh – Part 1

    LightCastle Analytics Wing

    Since the inception of Agora’s journey in 2001, the Bangladeshi supermarket sector has taken a steady and assuring stride forward. After 12 years and with 107 stores, the domestic industry now stands at around BDT 1,500 crore. As Bangladesh shifts towards the middle income status, all the subsequent advantages, such as higher income per capita and urbanization will further expedite the industry’s profitability.

    A closer look

    According to the BSOA (Business Supermarkets Owners’ Association), currently there are 121 supermarkets in the country. However, the industry is largely dominated by three major players – Shwapno (59 Outlets), Agora (13 Outlets) and Meena Bazar (18 Outlets). Once a key competitor, Nandan, now holds just two stores.
    In terms of distribution network and competitive prices, Swapno has entrenched itself as the market leader, whereas, Agora and Meena Bazar are viewed as market leaders in terms of quality and services.
    Market Share
    With rapid urbanization, the industry is expected to grow by almost 15 times its current size by 2021. Positive economic externalities such as generation of employment via SMEs, higher food safety and security, price stability, and inclusive business development are expected to accompany this growth.
    Number of Supermarkets in BD

    Industry drivers

    The key cost and revenue drivers of the industry are listed below:
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    • Change in social structure: The steady rise of nuclear families, coupled with the influx of women in the workforce means less time for shopping. Thus, it is becoming increasingly important to have a huge variety of products under one roof.
    • Change in per Capita Income: Per capita income has increased to above USD 1,000 in 2013 and is expected to grow further, especially in urban areas. This change in socio-economic structure has given rise to a new breed of middle-class who are willing to spend their higher disposable income in supermarkets rather than wet markets in pursuit of convenience and social status.
    • Change in Taste and Fashion: Globalization through internet penetration, international trade, and myriad of international television channels have exposed consumers to new ideas. Shopping from supermarkets, long considered a Western concept, is slowly being accepted by mainstream consumers in Bangladesh.
    • Consumer Awareness: Due to widespread media coverage over usage of formalin and chemical contaminated consumable products; consumers are more aware of possible health repercussions of consuming these products. Moreover, since supermarkets promise unadulterated produce, many conscious customers are slowly turning away from the traditional wet markets.

    Industry analysis

    Porter’s Five Forces Model
    Porter's 5 Forces
    From the model it is conclusive that stiff competition exists among the major firms which are backed by the rich capital of their respective parent companies. Such superfluity acts as a barrier to entry for new firms. Recently, several e-commerce platforms have stepped up to offer essential commodities with zero cost home delivery facilities.  In the long run, as they gain traction, strong competitors might arise from them.
    The present scenario is such that a customer might visit the store at the month’s start, but the same person might prefer the wet markets to meet immediate needs, provided no supermarket exists in close proximity. Reasonable pricing, credit facility (from retailers), and convenience also drive customers to these wet markets. There are also general stores in almost every neighborhood where customers can purchase their basic daily needs. But even with this looming threat, buyers have little influence over price, since they only procure in small quantities. Suppliers have a similar minimal impact on the supermarkets’ profitability.
    Supermarket SWOT Analysis
    Below is a thorough analysis of the internal and external environment of the industry.
    SWOT Analysis
    [The final part of this blog on supermarket industry will focus on the sourcing methods, challenges and way forward ]

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    LightCastle Analytics Wing is the research division of LightCastle Partners. It is tasked with producing periodic reports on the different sectors of the economy, analyzing trends in markets and making methodical, thorough and intelligent analysis to improve strategy and drive business growth.