Mom-and-Pop shops, commonly known as Mudir Dokan in Bangladesh, have dominated the retail space for ages. Although super markets were predicted to put these shops out of business, that has not been the case in reality. Due to the inability of supermarkets to penetrate the middle class market, Shwapno was the first to set up smaller shops with their brand name in less affluent areas. This strategy helped Shwapno to compete more directly with these Mom-and-Pop shops and establish some credibility in the retail space to the middle class consumer.
Mini Markets or Mudir Dokan: Which will sustain?
Mini markets have brought standardization to the middle and lower-middle class shopping experience. They are able to leverage their brand names to create trust in consumers and attract more customers in the process. As these mini markets are more relatable to the age old Mudir Dokans, they come off as more relatable to the consumer base. Moreover, the increasing income of the middle class has created potential for more growth in the retail market.
Despite the unending potential, according to Bangladesh Superstore Owners’ Association (BSOA), the organized retail segment only captured 1% of the total retail space in 2019. This points to the lack of acceptance and reach of organized retail in the current market. So, although Mini Markets have a great potential for growth, Mudir Dokans are still leading the market. But in terms of sustainability, mini markets stand at a far better position and have the potential to do much more in the future.
The COVID-19 pandemic has been a game changer for the retail space as it has forced shops to close down and people to stay inside. The larger supermarkets have taken this opportunity to leave their marks in the online grocery segment by opening digital grocery services. Although these services have just gained popularity, they have been around for quite some time. Their failures to get on the radar can be attributed to quite a few internal and external factors.
Digital Grocery Services in Bangladesh
- Existing Players: Chaldal and Khaas Food had been 2 of the more renowned online grocery outlets from before the pandemic. They have recently increased their offerings in response to the surge of online purchases.
- E-Commerce Players: Daraz, DeliveryHobe, AjkerDeal, Sheba.xyz, etc., and other existing e-commerce platforms have come forward by integrating grocery delivery in their offerings to grab a greater share in the market as the pandemic has progressed. Companies that have not yet introduced grocery items have all experienced a significant drop in their orders. For example, The country’s leading delivery company Paperfly reported a 90% decrease in orders.
- Pathao: Pathao swiftly relaunched their ‘Pathao Tong’ service to deliver groceries and other essentials to the consumers in response to the pandemic. They have also been a prominent player in the market due to their presence in the delivery and ride-sharing space
- Supermarkets: Shwapno partnered with Foodpanda and Pathao and is currently offering free delivery through their website. Meena Bazar is relying on their online platform Meena Click that collaborates with Shohoz. K-bazar also emerged as a player after being launched by a lifestyle brand, Kotha.
Although the pandemic has forced people to shop online, it is worth understanding why the digital grocery space failed to flourish earlier. This will help understand the future challenges for this ecosystem as most consumers can be expected to go back to traditional shopping methods after the pandemic ends.
Why has the digital grocery sector not grown?
The pandemic has boosted the growth of the digital grocery space, which was dormant for the past few years. The reasons can be attributed to a lot of different factors:
- Lack of Technological Integration: Very few supermarkets have their own platform and operate out of Facebook or Instagram pages. Even if the platforms are available, they lack important things such as real time tracking, proper inventory counts, etc. So as a result, the businesses have been unable to draw in more consumers.
- Quality Concern: As the consumers are used to buying products by directly inspecting their freshness, digital grocery lagged behind. Thus, the retail space has been dominated by the physical outlets.
- Payment Issues: Customers have a hard time clearing their payment due to the existing barriers in digital payment. Although the rise of MFS has created more opportunities for easy payment, the cash limits still bars larger purchases.
- Delivery Problems: The inefficiency of delivery services are often the cause of annoyance of consumers. Delivery men sometimes cause problems like mixing up orders, calling at awkward times, inability to find the correct address etc. Although, these annoyances are mostly caused by the inefficiency of third parties, it still reflects negatively on the companies themselves
Future Prospects in the Digital Grocery Space
The per capita income of Bangladesh has displayed a growing trend over the years resulting in increased buying capacity of all socio-economic groups. This increased capacity comes with a boost in the payment through mobile financial services (MFS) like Bkash, rocket etc. The month of May 2020 saw an average daily transaction of BDT 1535.53 crore on MFS platforms. This was a 58.7% growth from the previous month. Growing connectivity and better integration of payment platforms have made the industry more profitable and lucrative. But to make the perfect use of these positive externalities, the businesses have to do a better job of getting more consumers on board. This is a big challenge as it goes against the age-old norm of getting groceries after inspection from markets. In the post-pandemic world, more consumer trust has to be developed, and only then the full benefit of our growing income and internet penetration of Bangladesh can be enjoyed by the online grocery platforms. For this to happen some changes like the following can be brought on:
- Supermarkets can work with tech companies to create a more integrated platform for their outlets so that people don’t fear getting bad products through online purchases
- The supermarket chains can have capacity building for delivery men as they are the face of the company to most of the consumers. This can include things like general courtesy and map navigation training, etc.
- The chains also have to focus on image building as consumer trust is the number one issue in most purchase decisions. So fresh produce has to be kept as a priority in image building if online grocery is to ever succeed in Bangladesh.
Eqra Mohammad Resalat Ohee, Content Writer and Farah Hamud Khan, Senior Business Consultant & Project Manager, at LightCastle Partners, have prepared the write-up. For further clarifications, contact here: [email protected]
- 1. Retail Industry in Bangladesh: A Different Shape up Story – LightCastle Partners
- 2. Online grocers fail to seize the day during biggest opening yet – The Daily Star
- 3. Bangladesh’s per capita income rises to $2,064 – The Dhaka Tribune
- 4. Mobile Financial Services (MFS) comparative summary statement – Bangladesh Bank