According to industry experts, Bangladesh’s logistics and freight industries have been expanding for years, in tandem with the steady growth of exports and imports. Initially, there were no guidelines or policies in place for the industry, and hence the relevant stakeholders had to face multiple operational challenges. Bangladesh has been ranked last among four emerging South Asian economies in the Agility Emerging Markets Logistics Index 2021, indicating that the country’s ability to provide domestic and international logistics possibilities has not improved.
But with time, startups focusing on this industry started to emerge; thus revolutionizing the industry with the help of technology and venture capital funds. In this article, we take into account the challenges as well as the potential of this industry in Bangladesh.
Businesses focusing mostly on e-commerce, ride sharing, meal delivery, and home services have done well in Bangladesh due to increased consumer demand, but this has so far been concentrated primarily in the top metro cities, especially Dhaka. The blue ocean of consumers dwelling outside of Dhaka is what e-commerce enterprises envision in the future, and there’s one important component that will surely decide the success of their growth strategy – logistics; and this is where Bangladesh’s next big potential lies.
According to a study by LightCastle Partners, the e-commerce business would almost quadruple in size by 2023, with a CAGR of roughly 37%. Bangladesh’s e-commerce adventure began in 2008, and by 2012-13, e-commerce and f-commerce (Facebook commerce) companies had sprouted across the country’s major cities. E-Commerce Association of Bangladesh (E-CAB) currently has 500 e-commerce and 2000 f-commerce enterprises registered, with a year-on-year growth of 72 percent in 2016-17. And the road seems to be filled with bigger milestones down the line. Bangladesh’s e-commerce market was worth $2 billion in 2020, according to Statista, and is expected to grow to $3 billion by 2023. There are currently 2,000 e-commerce sites and 50,000 Facebook-based stores.
The fact that only a few e-commerce-focused logistics companies with limited capacity are now functioning in Bangladesh is concerning, given the vast consumer base. Paperfly, Biddyut, E-Courier, RedX and Pathao are a few prominent businesses that account for about 90% of the nationwide e-commerce delivery market and all operate on a b2b or b2c model. Some e-commerce enterprises have their own captive logistics arm and work with logistics service providers in a joint venture.
The potential of tech-led logistics systems in Bangladesh can be further understood if we closely analyze the rise of logistics startups in the neighboring countries of the South Asia belt; catalyzed mainly by the rise of ecommerce. According to an industry survey roughly 20 to 30% of Southeast Asian Internet users bought anything online, which is similar to the UK and US rates. In Indonesia, 58% of residents polled by McKinsey said they had increased their use of online grocery delivery services since the epidemic, with 18% saying it was their first time. Rapid urbanization, infrastructure expansion, and international trade have all contributed to the growth of logistics. People will want more efficient delivery and transportation networks as cities become more modernized to meet their expanding needs. Because of its openness to foreign trade and investment, Southeast Asia has become a hotspot for many global brands and a desirable location for doing business.
Despite all the potential, there are certainly multiple challenges within the industry. Regardless of the fact that the sector has enjoyed rapid growth in recent years, it is still in its infancy. Several issues are interfering with its development. Because third-party service providers dominate Southeast Asia, the region has a large, decentralized environment that isn’t entirely paved for logistics jobs. In countries with many outlying islands, 3PLs (third-party logistics providers) struggle to create efficient delivery systems that can reach clients in locations with insufficient signs or roadways.
The solutions have also been chalked out by the industry experts. To maintain its maturity, the logistics industry must create solutions for improving visibility and transit control, addressing the shortage of warehousing and ports on smaller islands, and navigating the region’s challenging terrain for faster and less expensive deliveries. Although the current cost is significant, the industry is primed for innovation. To succeed, they must improve their processes and management systems while lowering costs through the use of technology. The sector may avoid obstacles in fuel costs, delivery speed, last-mile fulfillment, and other management issues with the use of route optimization, predictive warnings, smart shipping, and AI-based reverse and forward logistics.
While the traditional logistics industry in Bangladesh is barred with regulatory and operational problems, there are countless lessons that Bangladeshi startups can learn from the regional peers and implement. Thus, this seems like the perfect time to cater to this market and create industry-wide disruptions.
Written By Farhat Chowdhury Zishan
