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How online shopping became a hunting ground for a quick turnover

  • Published at 03:05 pm October 6th, 2021
Supporters of e-commerce platform Evaly stand with posters demanding release of its CEO Mohammad Rassel Mahmud Hossain Opu/Dhaka Tribune

A deeper look into how Bangladeshi online shops turned into unregulated depositories for money paid in advance by customers

E-commerce initially took off in Bangladesh with a simple business model; instead of buying retail products from brick-and-mortar stores, people just ordered what they needed online.

But as these online shops had lower overhead costs, they began offering better deals. And these deals slowly morphed into extravagant discounts, turning the shops into new marketplaces for sourcing cheaper goods. 

Although these deals seemed too good to be true, Ponzi schemes began to get away with people’s money banking on the fact that resellers would be seduced by these offers. 

Fast-forward to the present, the scam-ridden industry seems to have witnessed a major change in consumer behaviour as people no longer just buy what they need.

Many are lured by deep discounts with the sole intention of reselling products at the market price to turn a profit, thus referring to these acts as “investments”. 

Also Read - E-commerce sector rife with complaints despite new policy

“The problem is that such an unprecedented large volume of orders from a single source has enabled the platforms to become like banks, holding onto thousands of crores of taka,” explained a top official of the e-Commerce Association of Bangladesh (e-CAB).

One such e-commerce investor, who preferred to go by the pseudonym Sadman to protect his identity, is an undergraduate student who dreamt of making a quick buck from the discount frenzy.

Lured in by the big discounts on motorbikes offered by e-commerce outlet eorange, he planned on buying them at watered-down prices and reselling them at the market price — a seemingly hassle-free investment, he had thought.

The only catch was that to avail of the discounts, Sadman had to pay 100% in advance.

He ended up investing Tk3 lakh of his family's savings on this business venture.

Chaldal CEO Waseem Alim said this investment ideology has been promoted by the fraudulent e-commerce sites to collect more money.

“E-commerce is primarily retail. Even offline, you buy things wholesale and sell them as retail products. If you want to invest in trading rice, you buy a truckload of rice from the rice mill. You do not buy 5kg of rice from Shanti Nagar Bazar and try to sell it for profit. Also, 30% return on investment in three months is unheard of. These are usually indicative of scams,” he added.

The discounts, which often hovered around 30-40%, were popularized by other controversial online stores including Dhamaka Shopping, Sirajganj Shop, Aladiner Prodip, and of course, Evaly.

However, if something seems too good to be true, it probably is.

On August 17, Sadman, along with scores of other victims, stood outside eorange's office in Gulshan, demanding refunds.

Sadman had not received any of the products he had spent his family’s savings on.

Like him, many have lost their entire savings and or bank balances after being duped by the e-commerce platforms.

Several scammed consumers recently filed a writ petition with copies of vouchers and purchase orders worth Tk16 crore to the High Court to retrieve their money, which they claimed to have “invested” in eorange.

Among the petitioners, Abdul Barek of Dinajpur's Birampur is said to have invested Tk70 lakh, Wahedul Alam of Dhaka's Gulshan to have invested Tk47 lakh, while Aminul Islam of Pabna's Chatmohar claims to have invested Tk40 lakh into the platform.

Also Read - e-CAB suspends rogue e-commerce platforms

Investor or end-user?

At a time when the line separating a general end-user from a reselling “investor” has been blurred, how does one differentiate between the two?

Omer Sharif, head of Operation and Growth at Chaldal, told Dhaka Tribune of a way to figure this out: e-commerce is for B2C, i.e., retail. 

So, for example when one is buying a product or service from e-commerce platforms such as Chaldal, Daraz, or Pathao, the buyer is entitled to a certain volume of consumption that identifies and validates their consumption as retail.

“We, along with several other platforms, have a policy that dictates the difference in consumption quantity between a consumer, and a reseller, which is based on official data on average family consumption,” he said.

“Suppose if there is an order of 5kg sugar, we identify them as customers. If there is a 20kg order, they are identified as bulk buyers or resellers upon a verification process that lets us know if the buyer has a retail shop or any such venture,” he explained.

Sharif also said that e-commerce platforms are mostly for end-users, and if the business model has to be business-to-business, then it would be through a completely separate and different process.

Usually, for a B2B model, there are frameworks such as letters of credit (LCs) and other financial tools and frameworks to enable such kind of trade in contrast to a low volume of consumption by a lone consumer. Additionally, if someone is buying to sell, they are not end-users or consumers.

Several international platforms also use similar policies, as the businesses cater to end-users and not resellers, for which they have completely different wings, according to industry insiders.

Additional Commerce Secretary Hafizur Rahman says that consumers do not invest, they pay for goods in return.

“Although anyone can invest in any business, including those in the digital space, we need to understand there is a risk associated with being an investor, and there is a chance of getting no returns. You also have to take liability as an investor and have to own stakes in the organization to be considered as one,” he explained.

Mustafizur Rahman, a fellow at the Centre Policy for Dialogue (CPD) also agrees that there is a big difference between a consumer and investor.

“An investor has liability in terms of sharing profit and loss with the company it has invested in, in contrast to that of a consumer who pays for products. However, consumers paying advance is a normal thing, but the regulatory bodies have not been able to safeguard the consumers,” he said.

But these e-commerce investors seem unwilling to share these losses.

Recent social media clips have shown buyers of Evaly identifying themselves as investors, claiming to have bought bikes at heavily discounted prices and then having sold them at higher prices.

The social media accounts of many such people were seen celebrating the premature news of Jamuna’s investment into Evaly, and also leaving harsh comments under posts criticizing the e-commerce platform’s owners.

Also Read - How these e-comm platforms are doing it right

Take Rana from Gazipur, for example. He told Dhaka Tribune that unlike those of others, his orders of bikes had been delivered by Evaly during the initial days, which enabled him to make a quick buck.

When Evaly founder and CEO Mohammad Rassel was arrested along with his wife from their Mohammadpur residence on September 16, several customers gathered outside the building and protested against the arrest.

A guy named Sarker, who had invested Tk11 lakh into Evaly in the last seven months, was also present at the scene

“I do not know what to do now as the company chief has been arrested. I have no hope of getting the money back as the fate of all failed MLM companies like Evaly is the same,” he said.

Customers usually do not get their money back once the chief of such a controversial organization is arrested and their assets are frozen, protesters said.

Consumer awareness a must

Hafizur Rahman said customers cannot be blamed for these losses, as the e-commerce sector is still in its infancy.

“They just need to be more aware of the scams that come with the trend of buying cheap and selling for profit,” he added.

An e-CAB official said that although many have been found to be buying as consumers and then reselling products at market price, there are still real end-users in the sector.

“They have not invested in the platforms — you legally cannot since these are retail businesses. But this is where the regulatory bodies should have been vigilant in identifying the pattern of large transactions in the sector,” the official said.  

Regulatory bodies, especially Bangladesh Bank, failed to monitor such huge transactions and in the e-commerce sector, as there are laws against businesses using public money without receiving IPO permission.

“The problem with the sector was the subsidization of products by businesses through the use of public money by circumventing laws such as the IPO framework,” he added.

Awareness is also imperative and customers need to be made aware of the do's and don'ts of online shopping, Syed Almas Kabir, president of Bangladesh Association of Software and Information Services (BASIS), told Dhaka Tribune.

Also Read - ‘E-commerce does not need a new law’

“Both the industry, as well as the government, must take this responsibility. When a customer wants to buy online, they must verify the authenticity and reputation of the merchant by reading reviews and asking around,” he added.

“The terms and conditions must be carefully read and understood. If there is any offer that is too good to be true, then probably it is.”

“Consumers must be wary of such offers or schemes. It is always safer to use digital payment methods with escrow for records and future claims. The consumer rights protection hotline number must be published by the merchants and publicized by the government. Consumers should make use of it and lodge complaints if they believe they are being cheated. Without complaints, it becomes difficult for the authorities to take necessary action,” Kabir also said.

Recently, even Commerce Minister Tipu Munshi said that consumers needed to be wary of giving in to deals that seem too good to be true.

"Some e-commerce firms like Evaly, eorange, and others, offered motorbikes of Tk2.50 lakh at a surprisingly lower price of Tk1.50 lakh, which is quite impossible.”

He also said that any new sector has challenges to face and the government wants to ensure that the e-commerce sector can operate by overcoming those challenges.

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