F-Commerce: A double-edged sword

F-commerce is one of the newest forms of online business (e-commerce) that got popular among young entrepreneurs because shopping on Facebook pages is more convenient and popular among the younger generations. 

The prospect of f-commerce in Bangladesh is even better as it is among the top 10 nations in terms of the number of facebook users. According to Statista, Facebook's user base in Bangladesh was 39 million in 2020. Additionally, the f-commerce market size in Bangladesh was approximately worth Tk312 crore, according to the IDLC business review from 2019. 

Moreover, it said that more than 3,000,00 Bangladeshi stores are operating through Facebook. Of these stores, women own 50%. The social media platform boasts 50,000 business pages in the country. 

According to the data collected by the Bangladesh E-Commerce Association (e-CAB), in the past year, business transactions worth Tk7,000 crore took place over traditional e-commerce mediums while transactions worth another Tk1,000 crore was attributed to the f-commerce sector. 

The General Secretary of e-CAB, Mohammad Abdul Wahed Tamal, said that during the Covid-19 pandemic, both e and f-commerce were revolutionised. In comparison to earlier periods, the growth of online sales increased by 70% to 80%. 

F-commerce became a saviour during the pandemic as many people turned to it for their livelihood. Even large companies turned to e and f-commerce to save their business. 

This social media platform may seem flawless but just like every light has its shadow, f-commerce has its drawbacks. Perhaps the biggest negative impact that f-commerce has on the economy is that it reduces the amount of sales tax and other local taxes. Not every Facebook retailer charges the appropriate sales tax or other local taxes for the items that customers buy from their online stores and pages. As a result, people may not pay sales taxes on online purchases that they would have paid if they had made the same purchase in a brick and mortar store. 

Businesses can evade tax as well. Out of the 3,000,00 Facebook-based stores, only 100 are associated with the E-Commerce Association of Bangladesh. The page owners can earn between Tk10,000 to Tk1,000,00 on average per month. Since these businesses do not have any physical structures they can evade tax easily. 

Facebook business can also remove money from the local economy. For example, if a customer purchases a gift from a Facebook page instead of a local business, that money goes to the online retailer instead of the buyer's community. This loss of income can restrict the local economy. If less money flows to local businesses, they will subsequently hire fewer people to run the businesses. This can result in fewer job opportunities and consequently less spending that creates a vicious cycle that prevents communities from growing.  

There are also instances of people getting conned out of their money through Facebook stores and pages. Cheaters often set up fake pages with attractive items or offers to lure customers. They take the money upfront but never deliver the product. And luckily for them, there is no way to trace them either. Sometimes the retailers deliver fake products too. Customer security is non-existent in this sector.

With no surveillance on the f-commerce sites and no existing legal framework, the sector is disorganised and faces many challenges like uncompetitive pricing, customer harassment, quality issues, etc. Authorities such as the Metropolitan Chamber of Commerce and Industry and the Ministry of Commerce should formulate and enforce regulatory actions.

F-commerce indeed is a sector with huge potential for a developing country like Bangladesh. Even though it adds more value to our e-commerce industry, it needs proper economic definition with guidelines for both entrepreneurs and consumers. However, regulation should not hamper the spontaneous growth of the start-ups.

The author is a student at Jahangirnagar University and can be reached at [email protected]