Sushmita Saha Assistant Manager, Credit Risk Management and Bonnishikha Chowdhury Executive Officer, Credit Risk Management

Delivery services has always been a blessing for both consumers and the country’s economy. All thanks to technological development, rapid smart phone and internet penetration which made the delivery services just one click away. With time, verticals of delivery services are also widening. From parcel to food, from groceries to medicine, delivery services are broadening their horizons in order to cater the growing needs of the consumers. Moreover, the rapid growth of e-commerce in Bangladesh also played a vital role here. According to the Financial Express, as of January 2020, e-commerce was growing at 72% per month, indicating a sharply rising demand for deliveries.
However, when the government declared country wide general holidays in order to control Covid-19 contamination, the operations of logistic service providers faced significant obstacles, such as unprecedented demand surge for essentials, shortage of qualified workforce and safe packaging and delivery infrastructure etc. To comply with safety measures everyone preferred to stay at home as much as possible which made us rely more on the delivery services. Moreover, the pandemic also caused a wide change in the consumption pattern. The consumption of luxury items drastically fell and people started to focus more on daily essentials. Thus, the local logistic service providers had to bring a significant change in their model within a very short span of time in order to cater the growing demand. Moreover, a significant number of conventional brick and mortar based businesses also have adopted home delivery services to comply with the new normal and the number of such adoption is still growing.

The Before Pandemic Scenario:

Even a few years ago delivering products at the doorsteps was a hidden market and now, as per The Daily Star –January 2020 data, the logistics companies are altogether earning about BDT 5 million a day and hiring about 10,000 to deliver products. Moreover, the sector was booming at an annual growth of 100% this sector has just doubled its turnover compared to last year.

E-commerce and F-Commerce has always been the biggest sector for the local logistics service providers of the country. Thus, the boom in e-commerce and f-commerce helped the delivery service providers to grow and vice versa. Before pandemic, the number of deliveries per day was around 60,000 in this sector which was twice that of traditional couriers. There are 300 delivery companies in Dhaka only. However, key market players like Pathao, Biddyut, Paperfly, eCourier hold 90% of the market share. Comparing to the tech based services providers, the traditional courier services could not capture much of the market shares of E-Commerce & F-commerce segment but giants like SA Paribahan Courier Service and Sundarban Courier are still widely relied on for inter district deliveries. Moreover, The Post Office too has started carrying products of online business orders and handling more than thousand orders a day. BPO has provided services to 750,000 customers while conducted BDT 1,200 crore transactions in the month of April while countrywide holidays were going on. Before pandemic groceries was not a very popular segment for deliveries. The market leader, Chaldal has their own delivery service arrangements thus, they did not have to rely much on the local services. 

Food:

After e-commerce and f-commerce food delivery shares the second biggest chunk of the pie. In the big cities there used to be around 30,000 deliveries in a day as per The Daily Star January, 2020 data. However, during the lockdown, for a certain period of time all the restaurants were closed down which resulted a sharp decline in sales. The key market players of this sectors are Hungry Naki, Pathao, Foodpanda and Shohoz. Uber Eats also used to be very popular amonge city dwellers. However, it left the Bangladesh market in June of this year. All the food delivery companies are backed by foreign investments states The Daily Star. However, top restaurants like KFC, Pizzahut, PizzaInn etc have their own delivery arrangement. On the other hand, homemade food suppliers like CookUp, Foosto etc have also been getting popularity and for delivery they often rely on their own delivery arrangements.

Self-Delivery:

As mentioned before some top restaurants have their own delivery system which will fall under selfdelivery category. Other than that, a lot of f commerce businesses have self-delivery services. As per January data the number of daily self-deliveries were 10,000. However, apart from f-commerce a lot of brick and mortar businesses also used to deliver their products with own arrangements.

Coping with Covid-19

Restriction on movement is indeed a new situation for the country people which made us largely dependent on delivery services. Thus, especially during the general holidays logistic service providers were the unsung superheroes as they were saving the community from contamination. However, it is obvious that the demand of delivery services was sky rocket but it was not same for all the verticals. Necessity was given more priority than luxury which resulted the demand of grocery delivery breaking demand of all the time. On the other hand, restaurants remained closed for a certain amount of time which caused a sharp fall in food delivery services. Moreover, e-commerce and f-commerce based businesses were also not in service during the holidays causing a fall in parcel delivery services. However, after the holidays the logistic service providers did not take much time in coming up with contingency plans and introduced new verticals in no time to cater the sky rocket demand.

Food Delivery:

Food delivery platforms suffered the most since late march as all the restaurants were closed down. As per Light Castel Partners April, 2020 data, orders dropped by almost 80% during that time. However, The Daily Star stated in September, 2020 that till date, those platforms have not been able to recover more than 50% of the losses incurred. There was also a huge shortage of delivery man since a lot of them left for village after general holidays was declared.
Fortunately, the food delivery platforms responded swiftly to this situation. Platforms like Food panda, whose core business was delivering food, by mid-April they introduced Panda Mart to deliver groceries and medicine. On the other hand, Pathao re launched Pathao Tong to deliver groceries and also extended their verticals with Pharma, shop, Bongo, Games etc. in order to adjust the shift in market dynamics.
Platforms like CookUp, Foosto etc. who use their own delivery services also faced a sharp a decline since people were not ordering much due to safety concerns. On the other hand, when the Government allowed restaurants to start their operation in a limited scale, along with the the big restaurants with self-delivery services, other restaurants also started providing delivery services by their own. Moreover, restaurants started to collaborate with more food delivery platforms to cover up the losses incurred during the shutdown period. Till now the restaurants and food delivery platforms are maintaining the safety and hygiene protocols like contactless delivery, using MFS or other payment gateways to avoid cash transaction, ensuring masks and gloves for the delivery personnel etc. Overall, this particular vertical of delivery services is recovering at a slow but steady pace. 

Grocery Delivery:

Online grocery delivery pushed to breaking point during the pandemic. As per the Business Standard, before the Covid-19 outbreak in the country, Chaldal, a leading online shopping platform for household goods, used to have 2,500 orders every day. The volume of the daily orders multiplied to around 16,000 in April and May due to the nationwide shutdown put in place from March 26 to curb the spread of the deadly virus which resulted Chaldal to limit their per day number of orders since it was causing delay in delivery. In an effort to meet the excessive number of orders made each day, Chaldal had to make some technological and strategic changes to its organization, including replacing old servers and automating the refund process. The company hired 300 employees after the COVID-19 pressure mounted. In the current new normal situation, Chaldal on average receives around 6,000 orders per day, which is 140% higher than that of six months back.
Not just Chaldal, all online-based platforms that mainly retail everyday essentials have experienced a remarkable business growth during the pandemic. Conventional chain stores such as Meena Bazaar, Agora, Shwapno and Unimart have shifted their services to online also. Apart from their own delivery services, Shwapno collaborated with Pathao and Food Panda.
Moreover, some e-commerce and f-commerce who did not used to deliver groceries also swiftly changed their vertical to capture the market demand. For example, AirBringr who used to be solely P2P shopping platform started FreshBringr as their grocery supply wing. Market giants like Daraz, Bikroy.com, Sheba.xyz have also been delivering fresh groceries now.

Parcel Delivery

While a number of e-commerce platforms that mainly retail essential goods are overwhelmed by an unprecedented number of orders, those that sell lifestyle and luxury items saw the demand for their products plummet to rock bottom causing fall in the parcel delivery services. As per the business standard, of all the e-commerce companies, around 80-85% sell fashion wear and gadgets, which have been impacted badly by the novel coronavirus outbreak. Before the pandemic, around 90% of the daily online orders were for luxury products. But the number of orders has now dropped to 30% only. However, the good news is, since May 2020 the e-commerce and f-commerce sectors are pulling over. For example, Daraz lost around 5,000 of its importdependent merchants soon after travel bans were issued around the world in order to curb the spread of coronavirus (The Daily Star). In May, the company added more than 10,000 local retailers to its platform. To provide customers with a better shopping experience amid the coronavirus crisis, Daraz has completely revamped its logistics technology. Paperfly, another logistics company based e-commerce, witnessed a 10% decline in daily deliveries in May. In August the number of shipments made each day surged to 13,000, a 44% increase from its value during the pre-pandemic period, which it was just over 9,000, according to The Daily Star. At the beginning of the outbreak because of weak logistics infrastructure and travel restrictions, e-commerce consumers suffered a lot. However, with new innovations and technology integration, business for the logistics services providers has extended. 

Medicine Delivery

As the government instructed law enforcement agencies to help the country’s e-commerce providers in delivering medicines and daily essentials, like online groceries, virtual medicine platforms have also been getting huge response in recent times. They are receiving six to seven times higher orders than the normal times as people are maintaining social distancing and avoiding large gatherings because of the pandemic. Apart from e-commerce based businesses, large drugstores like Lazz Pharma, Tamanna Pharmacy also started delivery. Lazz pharma has their own delivery arrangement but Tamanna pharmacy collaborated with Pathao in order to provide home delivery of medical products. A lot of other local pharmacies also collaborated with Food Panda for medicine delivery services.

Pandemic brings about innovation

The disruption in the market has made a lot of brick and mortar based businesses to go online and adopt delivery services. Besides, many brick and mortar stores and fast-moving consumer goods brands are partnering with e-commerce platforms to make their products easily available to consumers. For instance, global skincare brand Nivea has recently partnered with multiple e-commerce platforms to keep its supply chains moving to get closer to its consumers even if they are confined to their homes. E-courier has spotted the vacuum in online grocery and introduced the first BOT-based messenger shopping in the city. A BOT is a software application that runs automated tasks over the internet. If someone clicks on the link, a messenger window will open and the BOT will help do the shopping, and people with no experience in online shopping can do it smoothly. They also added another new product named “missed call shopping”, where if customers give a missed call, they will receive a return call to share their lists and address. The service is limited in the capital currently. Thus, it can be stated that the disruption in the market has created new windows for innovation.

While the crisis has sparked a skyrocket of demand for certain verticals of this sector, the industry as a whole is suffering along with most other industries. Moreover, risk is a fundamental element of any business. A global event as prominent as the COVID-19 outbreak is likely to have an impact on any business. The booming sectors must capitalize on this opening at once and focus on practices like consumer retention, that will make this growth more sustainable. On the other hand, as we are moving on with this new normal arrangements, a post COVID-19 boom for the verticals which are lagging behind, seems to be on the cards. A vast infrastructural and technological development along with new innovations can help the logistic service providers to be more flexible and cater the rapid shifts in market demand in no time.