With e-commerce accelerating in cities across India, it’s easy to miss how consumer behaviour is changing right across the South Asia region. In this Insight, we analyse how the adoption of e-commerce channels in Bangladesh and Sri Lanka is creating opportunities for Australian exporters – including in markets that were previously difficult to grow.
Sri Lanka’s modern retail trend
The last two decades have witnessed a steady growth of modern retail in Sri Lanka. Major companies such as Cargills, Keells Super, Arpico, Softlogic Glomark and government-owned Sathosa have all expanded their retail presence in Sri Lanka, driven in part by fast-rising incomes.
Before the pandemic, these retail organisations were rolling out new stores at a rapid pace, and gradually converting Sri Lankan consumers to modern retail practices.
Liberal urban planning policies have expedited retail growth. City and town planners have allowed competing supermarkets to own or lease real estate premises in proximity to each other, creating modern retail hubs.
Bangladesh: it’s all about internet connections
With a far larger population than Sri Lanka (162 million, to 22 million) – but just one-third the GDP per head – Bangladesh has followed a different path towards e-commence. Instead of modern retail, the critical enablers have been expanded internet connections and the gradual legalisation of online payments.
In Bangladesh, e-commerce first became prevalent around 2012. It began with non-food related products such as mobile gadgets, baby care items, cosmetics and fashion products. As e-commerce platforms developed, some companies started supplying food and household products, including fresh fruits and vegetables.
Over the last few years, internet connections have improved and e-commerce has flourished. In Bangladesh, retail e-commerce is now growing at 72% a month. In March 2020, Bangladesh reached a milestone when the telecommunications regulator announced that the number of internet connections had passed 100 million.
At present, more than 25,000 small and medium-sized enterprises (SMEs) participate in e-commerce. Pre-pandemic, it is estimated that the number of retail deliveries per day averaged 15,000 to 20,000.
Response to COVID-19
E-commerce has grown rapidly in both countries since the onset of the COVID-19 pandemic.
Sri Lanka imposed a phased lockdown commencing March 16 and Bangladesh followed 10 days later. In response, consumers in both countries have rapidly turned online.
In Bangladesh’s two main cities, Dhaka and Chattogram (also known as Chittagong), consumers were becoming cautious of physical retail spaces even before the lockdown. As an alternative, some consumers switched to using online platforms for ordering daily necessities, such as groceries and household products. Since early March, online retailers have experience a four- to five-fold increase in orders and deliveries.
Initially, online deliveries were hampered by a lack of clear official instructions on how supply chains were allowed to operate. The situation lasted only two days, however, before high customer demand induced the government to relent. This reflects government support for e-commerce in Bangladesh, and the fast-growing importance of e-commerce platforms to consumers.
Currently, food and grocery products are the main beneficiaries of this e-commerce boom. Some of the major online food and retail service providers report that they have been working 24 hours a day to keep their supply chains moving. Consumers appear to be rapidly adjusting to home deliveries.
Sir Lanka has also seen a groceries boom in e-commerce. During early April, demand probably overwhelmed the online platforms created by Keells Super and Softlogic Glomark. There is also a rapid convergence of stores with delivery partners: Kapruka with Cargills; and ride-hailing app Pick Me with Sathosa.
The Sri Lankan market recently saw new players Saraketha and Lassana Flora emerging to provide groceries and fresh produce direct to consumers.
Opportunities for Australian exporters
With lockdowns accelerating a trend that was already apparent, the time is right for Australian companies to investigate an e-commerce route to South Asian markets other than India.
Sri Lanka is possibly the easier of the two markets. Sri Lankan consumers have been early adopters of Australian brands in the South Asian region, including San Remo pasta, Kraft/Bega cheese, Berri fruit juices, SPC Ardmona canned fruit and Meadow Lea/Peerless spreads.
The specialist online retailer, Daraz, sees opportunities to push FMCG brands online. Fast-adapting consumer attitudes will allow new players to emerge in the virtual space with fewer constraints than in physical retail. Cost-effective delivery of imported Australian brands direct to Sri Lankan consumers via a powerful online platform would allow efficient profiling and targeting of local consumers.
Bangladesh offers similar opportunities. Online platforms will likely retain new customers, industry sources suggest. Dhaka has a population of approximately 20 million and severe traffic congestion. With the convenience of online purchasing now apparent, residents may be unwilling to scale back online grocery purchases when the lockdown is eased.
Again, this change of purchasing habit is an opportunity for Australian exporters. Australian packaged food products such as cereal, honey and pasta are already sold by two online Bangladeshi retailers, distributed through local importers. There are also opportunities for Australian health and nutrition products and cosmetics.
Australian companies could use local importers and distributors to connect with an e-commerce platform in Bangladesh since this is probably the most effective way to establish the network.
Austrade is keen to help Australian exporters develop e-commerce markets in South Asia. This includes partnering with delivery partners in Sri Lanka and Bangladesh to develop virtual Australian stores.