Economic development spurs retail business

Bangladesh’s remarkable economic growth helped improve the people’s purchase power and living standards, which stimulated and spurred demand for retail goods and opened a new employment window, particularly for the youth.

Bangladesh has been ranked 41st among the world’s largest economies and the second-biggest in South Asia in 2019. The HSBC has forecast that Bangladesh will be the 26th largest economy by 2030.

Local manufacturers have been venturing into the retail market and cashing in on the situation, acknowledging the potential demand.  

Consequently, several retail industries, especially clothing and footwear, supermarkets, hypermarkets, groceries and convenience stores, electrical and electronics, food products (sweet, confectionary, bakery), mobile phone and accessories, furniture and furnishing, have experienced robust growth over the last few years.

According to a survey by BRAC, as the economy has grown, so has citizens’ purchasing power and attitude. Local entrepreneurs have utilised that opportunity to drive into the retail market, thus contributing to its growth.

Though the retail business is expanding rapidly in urban settings, it is gradually spreading its wings in remote areas. 

A study of the United Nations Capital Development Fund (UNCDF) titled “Landscape of Assessment of Retail Micro-Merchants in Bangladesh” described that retail had contributed an average of 13 per cent each year to Bangladesh’s GDP since 2012/13. This is comparable to the fast-growing readymade garments industry, which grew an average of 12.84 per cent annually from 2007 to 2016. 

While individually their businesses are small, together they transact more than $18.42 million annually and interact with millions of customers every day, said the study report. 

Besides, according to the research report of Kearney, a leading global management consulting firm, Bangladesh ranked fifth in Global Retail Development Index-2021.

Gemcon Food and Agricultural Products Ltd CEO Shaheen Khan said that the retail business is expanding as the dwellers are too busy to spend time in the market. They want many goods in one place to save time. Besides, the dense population, economic development, living standard, and buying power improvement also add fuel to the business.

Sabbir Hasan Nasir, Executive Director of ACI Logistics Limited, said that there is a huge possibility in the retail sector, which has a $200 million market in Bangladesh. The retail market is expanding gradually in the country due to changes in consumers’ behaviour. 

Employment potential for youth 

The retail business has opened a new door of employment, especially for the young generation. Besides, women and physically challenged people can find their livelihood in the sector.

At a recent BRAC roundtable on the occasion of publishing a research report -- Progressing the Retail Sector by Improving Decent Employment (PRIDE) -- Apex Footwear Ltd Managing Director Syed Nasim Manzur said the retail sector employed 6 million people directly and claimed the employment will double if the indirect people are counted. The BRAC research found that 66 per cent of the retailers have between one and four employees in a single outlet. 

On the other hand, the UNCDF study said that the micro-merchant segment of the retail sector offers entrepreneurship and employment opportunities, creates demand for finance and accounts for millions of transactions with customers daily. Almost 50,000 people enter the industry each year.

Online retailing not curbing out expectedly

E-commerce and F-commerce have helped businesses expand. But businesspeople say the expansion has been under par as the general people are not tech-savvy. Besides, consumers are opting for purchasing goods in person rather than online after recent waves of e-commerce fraud. 

Sabbir Hasan Nasir said that e-commerce is not expanding properly in the country as the mass people are not accustomed to using technology and many don’t know about online shopping. The outlets who are offering big discounts are performing well.

“We used to sell 21 per cent of products online during the Covid-19 pandemic. Now we are selling only 11 per cent of goods online,” he added. 

Shaheen Khan said that consumers like to purchase home and fashion products online. But they prefer to buy fish, meat and vegetables in person. 

Lagging behind in organised retail 

Though the unorganised local grocery shops are still greater contributors to consumers’ goods turnover, shoppers are gradually shifting their focus to organised retail where they enjoy a clean, air-conditioned and healthy atmosphere.

Sabbir Hasan Nasir said that 98 per cent of retail business in Bangladesh is unorganised while 2 per cent is organised. In contrast, India’s retail business is 9 per cent organised and Sri Lanka’s 43. He said that the retail business must be operated in an organised way. We must ensure tax for all which is now being paid by some retails.

Barriers remain

Ensuring decent employment is considered the main challenge in the retail sector. As per the Brac research, only 6 per cent retailers have at least one female employee, while 69 are unwilling to hire women because of safety and security issues. Besides, 2 per cent hired people with disabilities and 78.3 per cent were unwilling to recruit transgender people, fearing that customers would be uncomfortable.

Shaheen Khan said that people tend to avoid organised retail businesses where they have to pay 5 per cent vat on purchase. Besides, the business people have to pay 65 per cent tax in importing necessary machinery for retail. And they have to pay high rent as they are allowed to rent outlets in commercial places. 

“The business was expanding 25 per cent in 2012 but now we have to suffer due to high VAT and tax,” he said. “We demand scrapping the 5 per cent VAT to help expand the sector.”