Potential, Prospects, and Challenges of Cross-Border E-commerce in Bangladesh

Author: Niloy Sarkar

Cross-border e-commerce is a form of international commerce that sells goods and services across borders with the help of advanced technology and the Internet (Ding et al., 2017). In this form of commerce, businesses sell directly to consumers (B2C) through websites or online marketplaces, unlike the traditional business forms where there are business-to-business (B2B) bulk transactions.

The demand for cross-border commerce as a business model has significantly increased due to its ability to reduce transaction costs and swift delivery of goods to distant parts of the world (Wang et al., 2017). Some examples of successful cross-border e-commerce platforms are Amazon, e-Bay and Alibaba. According to reports by Statistica, the worldwide B2C cross-border e-commerce business will be worth 7.9 trillion dollars by 2030 (Karim Rezaul, 2022).

According to new research reports from the Dubai Chamber of Commerce, the value of the UAE e-commerce market is forecast to reach US$9.2 billion in 2026 (Khoder Nashar, 2022). Thanks to its large population and heavy use of digital technology in international business, China is currently the world’s largest e-commerce market. Estimations suggest that the country will generate about $3 trillion by the end of this year, which is more than double that of the United States.

Bangladesh and Cross Border E-commerce Prospects

According to a report from the e-Commerce Association of Bangladesh (e-Cab), there are more than 2,500 e-commerce platforms, out of which more than 95% are SMEs. These  firms have great potential to boost their business if they can sell their products internationally using online platforms and payment systems (Hasan, 2017).

Though the e-commerce scenario of Bangladesh has seen a great rise since the pandemic, the opportunity for these firms to operate internationally has been barred mainly due to the absence of a fixed policy to regulate their global expansion, besides other factors.

Bangladesh currently lacks access to advanced cross-border payment systems similar to platforms like PayPal.  Furthermore, there is a huge gap in logistical facilities necessary for cross-border e-commerce, like air freight, ships, or ground deliveries. There is also a lack of the skills to use advanced technologies needed to operate online-based e-commerce among local manufacturers and business owners.

However, the good news is that a draft of the cross-border trade regulations has been prepared, and the insights gleaned from the report are encouraging, holding great potential for fostering the growth of cross-border e-commerce within Bangladesh (Kashem Abul, 2023).

If the policy for e-commerce is ratified, it will allow local traders and e-com firms to import and export goods via the internet platforms. In addition, international digital business giants such as Amazon, Alibaba, e-Bay and others can buy and sell directly to Bangladeshi businesses and consumers.

The provisions of the CBEC policy will create a conducive export environment for the stakeholders  so that goods and services can be very easily bought and sold in the global market.This would  be ensured by linking local and international shipping and delivery.

For the ease of product delivery and transportation a Central Logistic Trucking Platform is to be established with which payment platforms shall be affiliated. In addition, the export and import of smaller parcels will be made easy while ecommerce products shall enjoy the same trade benefits as other goods and services.The policy is also expected allow exporters of digital business special tax benefits and VAT rebates.

One of the most crucial developments that is believed to be in the policy provisions includes building warehouses by the government and private organizations outside the country in areas where the e-commerce products would deliver their products. Furthermore, the cross-border regulation provisions are expected to create Digital Trade Export Zones in port regions of the country to facilitate the export of goods sold through e-commerce platforms.

The policy will also have rules and restrictions for foreign firms to follow to engage in e-commerce with Bangladesh. These include infrastructural development, after-sale services and advertising provisions.

Despite the CBE’s rapid expansion, limitations still exist in communication in various languages, payment methods, currencies, legal and tax frameworks, as well as product delivery(Anshari et al., 2021). Some of them are discussed here –

Competitive and Marketing Challenge

Prior to entering a foreign market, it is imperative for companies to possess a comprehensive comprehension of that market. However, because of varied cultures, consumers today have various consuming behaviors depending on where they live. Businesses claim that their success in cross-border e-commerce is significantly impacted by their inability to get adequate information about other markets(Gizem Sydaam & Emre Civelek, 2022).

One of the additional hurdles for businesses is now competing with brands that have already entered the market and attained a certain market share.

Standard Payment Mechanism: The payment mechanisms utilized in cross-border e-commerce and conventional techniques differ greatly. Customers who are interested in making international purchases often hesitate to proceed on websites lacking a designated or preferred payment method. This absence diminishes their confidence in the website’s legitimacy, leading them to reconsider and ultimately opt against making a purchase. International payment methods must be used by businesses that want to conduct cross-border transactions. However, the country’s prohibition on using a widely accepted payment method like PayPal has a big impact on how fiercely companies compete there. There is hope that the provision of CBEC regulation will cater to this need(Gizem Sydaam & Emre Civelek, 2022).

Too many regulations governing payment methods have been passed by many nations. Too many regulatory variations for payment systems present a challenge for enterprises. It will be important for the policy formulators and concerned authorities to work on this issue in Bangladesh as well.

Logistical challenges: Due to the nature of cross-border shipments, the logistical procedures involved in cross-border e-commerce may result in extended timeframes for cargo processing.  In addition, because the products must travel great distances, logistics expenses might be very costly. Today, plane delivery times across borders might be less than 24 hours. Customers who use e-export services anticipate, among other things, that their orders will arrive promptly, completely, and unharmed (Wanganoo et al., 2021).

In the case of Bangladesh, the logistics management would pose greater challenges when foreign products are shipped in. However, from a producer point of view, if the local companies can build and manage logistical support in the global locations for safely and timely delivery of their goods, the profit margins and brand value would rise significantly.

Promising possibilities for Bangladesh in the Global e-commerce Market

Firstly cross border e-commerce will allow Bangladeshi producers to enter the vast international internet market through which Bangladesh-produced products will be accessible to global consumers. This initiative holds the potential to not only amplify profits but also elevate the caliber and excellence of local products to align seamlessly with the demands of the global market. Though this may seem like a very difficult task to achieve for local manufacturers, the enormous population and labour force available in the country can tackle the challenges if supported well by research, policy and training.

Findings show that SMEs in Bangladesh have adopted e-commerce in a moderate state. A little over half of the SMEs in the nation use at least a website for their fundamental company operations. They partially rely on their websites for customer service, marketing, and advertising(Islam et al., 2021). Therefore, we can hope with proper guidelines and support, the huge potential of Bangladeshi SMEs can be tapped through cross-border e-commerce.

Many Bangladeshi businesses provide e-commerce services such as web design, domain name acquisition, secure hosting, digital marketing and advertising, app development, in-home services, and payment gateways.  A number of these businesses serve clientele from other countries, particularly those in North America. According to a 2017 survey by the Oxford Internet Institute (OII), Bangladesh was the second-largest supply of online labor after India, with almost 500,000 active freelancers (Bangladesh – ECommerce, 2020).

These service-providing firms and individuals must be used in developing an efficient cross-border e-commerce system in the country so that foreign companies feel welcome to conduct smooth business operations in Bangladesh. Local businesses can also employ these agents to make their international Internet transactions flawless and efficient.

Similarly, products from the foreign market will enter Bangladesh and the consumers of the country will be able to purchase goods from other countries easily and quickly at competitive prices (Gabriella & Agus, 2020). The international traders will try to keep the prices within the purchasing range of local consumers making it possible for locals to enjoy authentic global shopping directly from the foreign markets.

Along with these benefits, there will be a multitude of challenges, especially in payment security and timely product delivery. Essential services like product or price refund and warranty services may be very time-consuming initially for both the producers and the consumers (Thaseen et al., 2021).

Nevertheless, the introduction of e-commerce across borders will increase the sales volume and profit margins of local sellers which will directly contribute to the national economy (Kabir et al., 2020). It will also be a learning experience for local brands when they compete or collaborate directly with global brands.

Conclusion

The complete formulation of the cross-border e-commerce policy in Bangladesh is still pending, delaying the comprehensive assessment and estimation of the actual impact of such activities. As Bangladesh approaches the remarkable milestone of transitioning into a middle-income developing nation within a mere half-century of gaining its independence, we find ourselves standing on the threshold of immense potential.

With our aspirations soaring high, it is imperative that we embark on a journey of comprehensive readiness – positioning ourselves not only as discerning consumers but also as adept producers, poised to embrace the boundless opportunities presented by unrestricted access to the global digital marketplace.

In this regard, the role of the policy makers, indsutry personels, research bodies and cyber space specialist along with other stakeholders are absolutely crucial. Though we have already entered the phase of Digital Bangladesh along with various e-commerce platforms there is a significant delay already regarding our access to the cross border e-commerce global market place. Further bootlenecks and stagnation in this regard will cause the severe competetive disadvantages for our local enterprises. That is why, it is urgent that all stakeholders work together to make cross border a e-commerce a reality sooner than later.

Reference

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