The e-commerce sector in Bangladesh had been going from strength to strength over the last decade, particularly during the coronavirus pandemic, as online purchases skyrocketed.
Now, the industry is rapidly losing the trust of customers, the cornerstone of its success, after allegations of embezzlement and fraud surfaced against a few firms in recent months.
The digital commerce sector is now battling to undo the damage done by the ‘unscrupulous business practices of about a dozen platforms, according to industry insiders.
These companies swindled unsuspecting customers out of billions of takas on the pretext of providing lucrative discounts and offers, which ultimately landed some of their owners and officials in jail, reports bdnews24.com.
Despite the upheaval surrounding the industry, some entrepreneurs, who have been running their businesses in compliance with the rules, see a silver lining in the current crisis. They believe e-commerce will be able to ride out the storm and get back on track.
Monir Hossain Talukdar, CEO of online shopping platform Pickaboo, lamented the fact that businesses that are above board were having to pay the price for the misdeeds of a few.
“The new e-commerce guidelines have provided an opportunity to eliminate unfair competition, but the latest incidents of fraudulence created a lack of trust among the customers,” he said.
Pickaboo, which sells smartphones and other devices, saw a 30 per cent slump in sales after July, according to Monir.
"No new customer is interested in shopping online now. People have got a bad impression of e-commerce. I believe we are facing a temporary challenge but it comes from both customers and suppliers. Customers are panicking about making payments online, while suppliers are reluctant to give us the product."
He hoped the digital market would regain the trust of customers soon.
In the wake of the recent scandals surrounding platforms like Evaly and Eorange, even the companies that steered clear of over-the-top offers or discounts are suffering, according to Kamrul Hasan, CEO of Sindabad.com Ltd.
“Though there wasn't any complaint lodged against us, we are affected by the overall situation. The traders these days ask our staff if they would commit fraud and embezzlement in future.”
He believes it will take time to win back their trust.
“We were experiencing a stable growth before the guideline was issued in July. Once the guideline was issued, it didn’t affect the e-commerce companies like Ajkerdeal.com, which mostly sell inexpensive products. But the sale of products priced beyond Tk 50,000 has ground to a halt,” said AKM Fahim Mashrur, founder of Ajkerdeal.com.
“But those who never resorted to any dubious practices didn’t face any trouble.”
AN INDUSTRY MARRED BY FRAUD
A spate of incidents involving e-commerce customers being ensnared by fraudulent schemes came to the fore over the past month.
Disgruntled customers, who were cheated by different platforms, including Eorange, Dhamaka, Evaly, Qcoom and Aleshamart, took to the streets in protest. RingID is the latest addition to the list.
Law enforcers have been detaining e-commerce entrepreneurs on embezzlement charges every now and then.
The head honchos of at least three of those companies have fled abroad with the embezzled funds, while the others went into hiding within the country, according to media reports.
Under these circumstances, customer trust has hit rock bottom, especially when it comes to buying expensive products from online shops. On the other hand, sellers are frustrated by the stigma currently attached to online traders despite providing quality products.
Although new guidelines have now come into effect, customers and sellers are still no closer to recovering the billions of takas they paid to digital commerce firms such as Evaly and Eorange.
On Monday, Prime Minister Sheikh Hasina promised that stern action would be taken against those involved in embezzling funds in the name of digital commerce and said the government will take steps to recover the money lost to scams.
"Some people tried to defraud people by taking advantage of their bad times. They [fraudsters] will surely be punished. We haven’t sat idle. They were arrested instantly,” she said.
“And as they have been arrested, we will also find out where they’ve kept the money and what assets they have made,” she added.
EVALY PAVED THE PATH FOR SCAMMERS
In Bangladesh, digital commerce took its first steps in 2011. A year later, Bangladesh Bank introduced the National Payment Switch Bangladesh (NSPB), allowing online transactions through banks. This set the stage for the fledgling industry to take flight as local start-ups gradually entered the fray along with a few foreign companies.
Over time, some of them went out of business while others pursued mergers.
To regulate the digital market, the government introduced the National Digital Commerce Policy in 2018. The e-commerce sector, however, remained beyond the purview of the law.
The commerce ministry later drafted the e-commerce guidelines on Jul 4 to promote good practices in the sector.
The new guidelines were mainly prompted by the shady dealings of Evaly, launched in December 2018. The platform managed to build a large customer base by luring shoppers with eye-popping discounts and cashback offers. Many of them fell prey to Evaly's business model. But as the number of customers soared, so did the number of complaints. Despite making advance payments, many customers never received the products.
Evaly's business model was soon followed by other platforms, to the detriment of customers.
Followers of Evaly founder Mohammad Rassel opened up new companies like Qcoom, Sirajganjshop, Dhamaka, Eorange among others, and began to ensnare customers with tantalising offers.
They promised to sell expensive products at half their price and took advance payment from the customers, only to grab the money for themselves. The customers felt cheated as they did not receive the products even after waiting for months.
Left with little recourse, some of the aggrieved customers began filing cases of fraudulence and embezzlement from August onwards, while others protested in the streets.
IMPACT OF NEW GUIDELINES
The new e-commerce guidelines have not had any negative impact on the business of Pickaboo, as the company was already delivering products within three days in Dhaka and five days elsewhere, according to its CEO Monir Hossain Talukdar.
Also, 80 per cent of the orders placed on Pickaboo are under the ‘cash on delivery’ system and 20 per cent on a pre-payment basis. Thus, the news guidelines had no adverse effect on their business, he said.
Instead of hampering the business, the guidelines have given the company an opportunity to conduct its business smoothly in the absence of unfair competition, according to Monir.
The guidelines stipulate a five-day deadline for delivery if the customer is based in the same city as the e-commerce company. Otherwise, the delivery period is 10 days.
It also bars e-commerce firms from charging more than 10 per cent of a product's price in advance. If a product cannot be delivered within 48 hours, the advance payment cannot be charged. The companies will have to use Bangladesh Bank’s escrow service for advance payments.
An escrow is an arrangement where the buyer and seller of big-ticket items, such as properties, large amounts of cash, shares, and other physical assets place them in the care of a neutral third party until the transaction is completed.
Most of the online traders hailed the new guidelines, saying it smoothened the payment process.
“Earlier, the pre-payment used to be less than 20 per cent of the total sale. There’s no trouble with pre-payment after the escrow service was introduced,” said Fahim Mashrur of Ajkerdeal.
“The payment gateways are scrutinising those who deliver the products after five days or later. We deliver our products before five days and that’s why our payment is never delayed.”
Jachai, an online shop selling the essentials, including kitchen products, has been relying on the ‘cash on delivery’ system for its business. “That’s why we weren’t affected much by the current problem of mistrust among the customers,” said Abdul Aziz, founder of Jachai.
“The trust issues would never have transpired if the guidelines were issued earlier,” he said.
Shayantani Twisha, head of public relations at Daraz Bangladesh, said the current situation has not affected the company’s sales or growth of the business. “The e-commerce sector is much more matured now.”
Mohammad Nazimuddaula, head of product at Chaldal, another popular e-commerce platform, also said the travails of the embattled firms has not affected their business. Chaldal has established a presence in big cities like Dhaka, with 25 centres.
“We are totally different from the category of sellers and customers who are facing problems. We are fully a grocery delivery business and we deliver products within an hour, mostly in the cash-on-delivery method.”