The bet on Evaly
Sniffing the potential of e-commerce in Bangladesh, a country with 170 million population, Jamuna has made an inroad into the galloping e-commerce growth
Entrepreneurship and risk go together. However, the entrepreneurs do not just jump into the unforeseen, they take calculated risks.
With a fair reputation for its products, Bangladesh's one of leading business conglomerates comprising some 24 large scale enterprises, Jamuna Group's decision to buy scandal-dogged e-commerce firm Evaly is an interesting development in the country's corporate sector to follow.
Jamuna Group, which has business interests in many sectors, starting from electrical, engineering, chemical, leather, garments and textiles to real estate, cosmetics, beverages and news media, has perhaps made the riskiest decision of its lifetime to invest in a company facing criminal charges -- some of them are as grave as money laundering.
Keep updated, follow The Business Standard's Google news channel
While mergers and acquisitions among Bangladeshi firms are not so common, Jamuna's decision to make forays into fast-growing e-commerce business is seen as a bold bet.
Sniffing the potential of e-commerce in Bangladesh with 170 million population, Jamuna has made an inroad into the galloping e-commerce growth, which according to industry people saw a 166% surge in 2020 and is expected to hit $3 billion market by 2023.
Ostensibly, Jamuna wants to have its pie on the online marketplace alongside one of its off-line marketplaces - Jamuna Future Park.
One of Jamuna Group's owners told the media that the company's main goal is to reinforce the e-commerce business in Bangladesh. "After an analysis, we have found that the Evaly platform is very big. If a big group like us joins Evaly, it will become stronger," the owner said to the media, adding Jamuna Future Park is the 'largest offline marketplace' in Bangladesh, while Evaly will remain as the 'largest online marketplace' with Jamuna Group.
With Jamuna Group announcing up to Tk 1,000 crore in the beleaguered e-commerce platform Evaly, the first priority of the conglomerate will be to go for 'mission damage control'.
Founded only two and a half years ago in December 2018 with only Tk50,000 paid-up capital and Tk500,000 authorised capital, Evaly shot to prominence through its otherwise shrewd cyclone and earthquake campaigns, offering as high as 50 percent discounts on consumer goods such as refrigerators and motorbikes, however, only in exchange for advance payment but most of products remain undelivered.
Evaly also offered cashback of even 100 percent of total spending to lure customers. However, 60 percent of the cashback was added to the customers' Evaly balance. While placing the next order, a customer has to put in 40 percent money afresh to buy products and it rotates in cyclic order, ultimately ensuring Evaly's profit.
The investment disclosure by Jamuna and Evaly yet coincided with moves by regulatory agencies, including the Anti-Corruption Commission, to probe the alleged embezzlement or transfer of whopping Tk338.62 crore by Evaly.
The central bank's probe says the liabilities of Evaly to its customers stemming from undelivered goods stood at Tk213.94 crore and Tk189.85 crore to merchants, who sold their products via the e-commerce platform as of March 2021.
The Bangladesh Bank investigation also says the digital commerce platform had a total asset of Tk91.69 crore while its current asset was Tk65.17 crore as of March 14.
The central bank investigation prompted the commerce ministry to call for further investigation by the Anti-Corruption Commission, home ministry, the Directorate of National Consumer Rights Protection and Bangladesh Competition Commission.
From the point of view of business, devoid of ethics though, Evaly has been able to rake in some 40 lakh plus registered customers, handle around 10 lakh orders involving Tk 300 crore business a month from some 25,000 sellers, who supply about 4,000 categories of merchandise.
Evaly's customer number and transaction size speak volumes. Jamuna Group has grabbed the opportunity to buy into the cash-strapped Evaly, a move on a local company by a local company, which is not so common in Bangladesh. Details of the business deal however have not been disclosed yet.
Earlier in May 2018, leading multinational e-commerce marketplace Daraz, which has operations in Myanmar, Nepal, Pakistan and Sri Lanka besides Bangladesh, was taken over by global giant China-based Alibaba from German venture capital company Rocket Internet to create a stir in the e-commerce ecosystem.
Daraz Bangladesh, meanwhile, in its bid to capture the food delivery market has bought HungryNaki, a homegrown company that launched its operation little before multinational Berlin-based Foodpanda's entry into Bangladesh' market in 2013.
Industry insiders say by 2025, Bangladesh's daily online food orders will reach over one crore from 40,000 to 60,000 orders right now in a big push to the country's gig economy.
Coming back to the fresh investment into Evaly, challenges are aplenty for Jamuna Group apart from rebuilding the brand that has been labelled as digital multi-level marketing agency, which frustrates customers to no end. The brand has been depreciated by the distrust of its customers against the backdrop that many customers have failed to get refunds for undelivered goods.
With new regulations coming in view of current business nature of Evaly and the likes to safeguard customers, the marketplace's monthly business volume will surely come down drastically when it has to introduce cash on delivery, deliver products within stipulated 10 days, refund in seven days in the event of failure to deliver and keep money in escrow account in case of 100% advance payment.
When cyclones are silenced, earthquakes are subdued, Evaly has to go innovative to compete with other enterprises in a level playing field to regain the hearts of its customers.
Yet, Jamuna Group holds the added prospect of selling its own manufactured consumer goods at competitive prices via the portal 'owned by itself'.
Finally, entrepreneurs take 'founder risk', one of the threats to making a business investment, into consideration, diligently. Jamuna Group must have evaluated the founder: what was the ultimate motive to take the total liabilities of over Tk400 crore in such a short span of time? If the products worth Tk 213.94 crore are not delivered to customers as promised; if the sellers are not paid Tk 189.85 crore for their merchandise; where did the money go? Will the founder be able to deliver?
At the end of the day, it is the bet on the jockey, not the horse.
Shamim A. Zahedy is a journalist. He can be reached at shamim@zahedy.net
