F-commerce plagued by three-pronged crisis

Many Facebook-based platforms, which have sprouted in Bangladesh since the beginning of the coronavirus pandemic, are struggling to survive owing to the spike in raw material prices and decline in sales amid the global economic downturn.

The soaring dollar price is also a big headache for them as they have to pay more to buy the American greenback needed to make payments in a bid to boost their posts on their Facebook pages, reach more people and promote their products and services.

The devastating effect of the Russia-Ukraine war and global supply chain disruption has driven up raw material prices and lowered the profit margin.

"We are struggling to survive. Sustaining the business is now the main challenge," said Khadija Tul Kubra, the owner of Warisha Fashion.

The Dhaka-based F-commerce platform has been selling muslin sari and handloom products since 2019. It posted higher sales during most of the pandemic.

The decline came three months earlier as the impacts of the war-induced global slowdown set in.

"Sales have dropped drastically," Kubra said.

She said the price of yarn and fabric and dyeing materials has increased, making it impossible to make a profit.

"Besides, customers are getting more reluctant to buy products day by day."

According to industry people, F-commerce sales have dropped 20 per cent year-on-year in the last three months, as people are tightening their purse strings amid the rising cost of living fuelled by higher food and energy prices.

Inflation in Bangladesh sat on 9.1 per cent in September, squeezing household budgets.

However, despite the economic owes, the number of new f-commerce sellers is on the rise.

"Earlier, people used to open a page on Facebook and then start a business. But now many physical stores are opening Facebook pages to expand their reach," said Rahath Ahmed, co-founder and chief marketing officer of Paperfly, an online courier service provider.

The entrepreneur said the current slump in businesses has slowed the growth of F-commerce.

He also blamed the dollar price hike for making it costlier for the businesses to boost their page.

The American greenback has gained by more than 20 per cent against the taka in the past one year, owing to the falling foreign currency reserves.

In Bangladesh, F-commerce has been thriving for the last few years thanks to the huge size of the Facebook population. Their number has surged to 44 million, placing the country among the top 10 nations in terms of people using the social networking site.

By boosting a post on Facebook, a business's content related to its products or services can reach more people than it would have organically.

Biplob Hossain, manager of the F-commerce platform Tajaoffers, which sells gadgets, said the rising cost of boosting is now the main concern for them.

A few months earlier, the cost for a $1-boosting was around Tk 105 to Tk 110 after paying a 15 per cent value-added tax (VAT). It has now soared to Tk 120-Tk 125.

If the F-commerce platform does not have a business identification number from the commerce ministry, it has to pay an additional 15 per cent VAT since the payment is made through a third-party agency.

"In that case, the price goes up Tk 135 to Tk 140," said Hossain, adding that many F-commerce platforms have no such business identification numbers.

AKM Fahim Mashroor, chief executive officer of Delivery Tiger, a digital SME parcel aggregator, said luxury products sellers are particularly facing difficult times due to the higher cash margins required for opening letters of credit (LCs).

In June, the Bangladesh Bank set the LC opening margin at 100 per cent and 75 per cent for the import of luxury and non-essential products, respectively, in a bid to discourage their purchase and save foreign currencies.

Nasima Akter Nisha, president of the Women and e-Commerce Trust, a Facebook-based community marketplace for women entrepreneurs, said although the price of the products is rising, the income of people is not, which is affecting the sales of F-commerce platforms.

"The hike in the raw material prices has raised the production cost and customers are asking why the price is rising. These issues are negatively impacting the women entrepreneurs."

Another reason for the falling e-commerce sales is that courier, delivery and logistics service providers have increased their rates recently in response to the hike in fuel prices, according to the industry people. 

The country's top courier and logistics service providers have increased their charges by around 20 per cent since August after the government raised the prices of diesel and kerosene by 42.5 per cent. The price of petrol and octane has gone up by 51.1 per cent and 51.7 per cent.

Since the hike in fuel bills will surely be passed on to end-consumers, an item that previously cost about Tk 500 will now be priced at about Tk 600, said one entrepreneur.

Nisha urged women-run businesses to keep patience and hold on to the entrepreneurial spirit to surmount these setbacks.

Women owned 70 per cent of Facebook-based businesses opened since the pandemic and there has been an increase of more than 65 per cent in Instagram businesses owned by women, said Meta, the owning company of Facebook, in March.