Supershop Industry in Bangladesh : A Sector with Huge Potential

Supershop Industry in BD

The super shop industry of Bangladesh was first introduced, almost 20 years ago while Agora was established in 2001. According to TBS News, the super shop holds only 1.6% of the local retail market industry of Bangladesh. Although the Supershop sector contributes a very insignificant share of the local retail market, the potential and customer base of it is increasing slowly.

Supershop Industry Overview

A supermarket is a self-service shop offering a wide variety of food, beverages, and household products, organized into sections. The supershop industry is one of the growing sectors in BD. The growth of supershop increased due to the socio-economic development, urbanization, and purchasing power of the middle and upper-middle class of the country. Following the western concept, Rahimafrooz Superstores Ltd. introduced ‘Agora’ as Bangladesh’s first supershop in 2001. This superstore was founded by Rahimafrooz Superstores Ltd. The next year the ‘Gemcon group’ launched ‘Meena Bazar’. In 2006, “Shwapno” started its journey in Bangladesh as a sister concern of ACI Limited. In terms of the number of outlets, “Swapno” is currently the top supershop chain in Bangladesh, serving more than 40,000 customers every day with more than 185 outlets. However, among all the Shwapno’s outlets, 61 outlets are owned by ‘Shwapno’ and the rest are managed through franchises. In addition, the Gemcon Group’s ‘Meena Bazar’ has 18 locations in Dhaka, Chittagong, and Sylhet, while Rahimafrooz’s Agora has 18 locations around the country. According to a report of the Daily star published in 2020, Gemcon Group and Rahimafrooz were in discussions to take over all ‘Agora’ locations. United Group’s ‘Unimart’ also has three outlets at Gulshan, Dhanmondi, and Wari in Dhaka, as well as two express outlets at United Hospital and United International University. On the other hand, Daily Shopping, run by Pran-RFL Group, has 51 outlets across Dhaka. Apart from this, there are some other small supershops chains inside Dhaka including 4 outlets of ‘Almas’ and 2 outlets of ‘Prince Bazar’. Most of the super shop retail outlets are located in cities and urban areas like Dhaka, Chittagong, Narayanganj, Rajshahi, and Sylhet.

According to TBS, Bangladesh’s retail market was worth $16 billion in 2020. The superstore industry accounted for only 1.6% of this total, or around $256 million. However, this figure is substantially higher in neighboring nations. Supershop account for 43% of the overall retail market in Sri Lanka. In India, the proportion is 8-9%, while Myanmar and the Philippines have more than 50% share of the retail sector in 2020. Although the supershop landscape is very small in Bangladesh, the sector will continue to grow in our country. According to a report of the Daily star published in January 2020, the super shop industry will be growing at a rate of 24% each year on average and according to TBS news, within the next seven years, supershop will account for at least 10% of retail sales in Bangladesh.

Business Model

Supermarkets’ business models and income generation are profoundly reliant on product sales across the world. In that case, Supermarkets often acquire products from both primary and secondary sources. Supermarkets can purchase items at low prices if they obtain them directly from the source, without the involvement of any middleman. On the other hand, the cost of purchasing the same amount of product rises due to intermediaries. However, super shops have more purchasing power than supermarkets and they are capable of buying things in bulk for all of their stores. As a result, despite the presence of several intermediaries, superstores may obtain items at a cheaper wholesale price than small retail shops or grocery stores. As a result, supermarkets may generate more revenue at larger margins than small retail or food stores.

Supermarkets sell items with both high and low profit margins. According to one market analysis, certain local items can create less than 5% profit, and some imported products can generate up to 50% profit. Super shops can typically make a profit of 15%-16% of total sales. To generate income, superstores frequently use a ‘bundle pricing’ approach. Super shops can use this method to clear out stock of slow-moving items by offering a ‘bundle’ consisting of both slow and fast moving products at a discount price. In addition, for some items, supermarkets offer “buy one, get one free.” In this approach, Super shops are able to boost sales volume while also generating huge profit margins. 

Furthermore, FMCG giants such as ACI and Pran-RFL operate super shop networks such as ‘Shwapno‘ and ‘Daily Shopping’. As a consequence, both companies offer FMCG products to consumers through their own retail chains. It has also enabled them to maintain strong profit margins for chain stores and FMCG corporations.

In addition to profit generation from product sales, manufacturers provide shelving fees or slotting allowances to super shops. It helps the manufacturers to display their items in prominent places or shelves of the super shops. Manufacturers use this method to introduce new products to the market or to promote less-known brands. Furthermore, several manufacturers provide a variety of appliances, such as freezers and automated shelves, for a fee in exchange for the use of their products. In this approach, the super shops promote the brands and generate revenue as well.

However, the whole business model of super shops is based on selling more and more products to customers. That’s why every super shop offers a membership program for its consumers, with a reward point system for every purchase. Customers keep coming back to the super shops because they receive additional benefits through the use of reward points.

Current Trends

In Bangladesh, the majority of buyers choose to purchase everyday commodities straight from the traditional market and grocery stores. However, as the purchasing power of Bangladesh’s middle and affluent classes rises, the number of individuals shopping at super shops tends to grow. As a result, super shops in Dhaka have increased their operations in various regions in recent years. However, the Covid-19 Pandemic has resulted in a significant increase in Bangladesh’s number of super shops. It provides a secure shopping experience while preserving a hygienic atmosphere throughout the pandemic. According to Mr. Sabbir Hasan Nasir, Executive Director of ACI Logistics, Shwapno’s gross sales in March 2020 were BDT 131 crore, which is 50% more than the average sales. Unimart’s sales have grown at a rate of 40% every month until March 2020, according to Mr. Murtaza Zaman, the company’s CEO. 

Aside from super shops, online grocery delivery services have grown in popularity in this pandemic. According to a statement from the Daily Star of 2020, the average grocery order basket value at the online grocery store ‘Chaldal’ was BDT 1,300 before the pandemic, but it climbed to BDT 3,750 during the period. At one stage, the local ridesharing platform ‘Pathao’, and the online food delivery platform ‘Foodpanda’ have also come up with offering daily commodities and grocery delivery services. This has had a significant impact on the rise of super shops. However, stores like Shwapno, Meena Bazaar, and Agora are focused on online sales and home delivery along with in-store sales. Serving clients in both physical locations and online has given the country’s super shops the opportunity to serve more people. However, now that the pandemic situation has stabilized, the majority of customers continue to shop at the traditional market and grocery shops. According to industry experts, Customers have returned to their prior buying behavior to avoid paying an additional value-added tax on packaged goods.


Investment Cost

According to a Financial Express report published in 2018, Building a single supershop in BD costs four times higher than neighboring nations. Opening a 4000 square feet supershop in BD can cost BDT 4.5 crore. On the other hand, in Sri Lanka and Indonesia, it costs only BDT 1.1 crore. When it comes to opening a superstore, location, size, and interior design strategies play a vital role. Since the majority of the super shop’s customers are from the middle and affluent classes, and most of them live in the city, superstores are established in densely populated areas of the major cities. Furthermore, a super shop requires significantly more space than a regular retail store. As a result, the expenses of establishing and managing a superstore rise substantially.

Sharing Profit Margin

Super Shops mainly practice 2 types of value chains: direct sourcing and indirect sourcing. When a supershop uses indirect sourcing, there are 8 intermediaries along with producers and end customers, which allows them to set a profit margin of 10-12%. On the other hand, when they use direct sourcing, it contains 5 intermediaries and sets 12-18% profit margin. So, direct sourcing is more profitable than indirect sourcing. However, supermarkets are not always able to perform direct sourcing due to issues such as transportation and a limited number of medium and large farmers.

Logistic Issue

In Bangladesh, supply chain logistics is one of the most serious issues in every industry. Supermarkets must cope with several challenges of selling fresh vegetables and fish due to Bangladesh’s limitations in transportation and cold storage management. However, many customers believe that the supermarket’s veggies, fish, and meat are not fresh. In addition to the emphasis on cleanliness and hygiene, a specific temperature is constantly maintained in the super shops. That’s why the vegetables, fish and meat sold in the super shops are fresher than the unclean atmosphere of the traditional market.

Customer Perception

The perception of customers is the most challenging task in the expansion of the super shop sector in Bangladesh. Bangladeshi consumers are extremely price conscious. Consumers do not have to pay any VAT while buying products from the country’s traditional retail outlets. However, VAT is charged on over 70-80% of the items sold in supermarkets. According to NBR guidelines, each superstore must pay 5% VAT. Because customers are price sensitive, one of their assumptions is that the price of a product is high in the supermarket. In addition to that, Consumers may also check the market price and bargain in traditional retail stores and raw markets. As a result, they prefer these stores over super shops. 

On the other hand, Consumers in Bangladesh have a tendency to buy on credit. But there is no way to buy on credit in super shops without using a credit card. In Bangladesh, however, credit cards are used by fewer than 1% of the population. As a result, supermarket shopping in Bangladesh is still restricted to the top and upper middle classes. Consumers in this group enjoy shopping at the supermarket because they may find a variety of brands in several product categories as well as a clean and healthy atmosphere.

Growth Depends on VAT Percentage

Bangladesh’s super shop revenue is derived by the percentage of VAT on the retail price of the product. From 2005 to 2018, the percentage of the VAT has changed a couple of times. Prior to 2012, when VAT was only 1.5%, this superstore grew at a pace of more than 100%. When a 4% VAT was implemented in 2012, the shop’s revenue growth slowed and went negative. Later, in 2014, the VAT rate was reduced to 2%, and revenue began to rise at a rate of 46%. However, the reintroduction of 4% VAT in 2015 resulted in a decrease in revenue growth. And, once again, the increase in the VAT rate to 5% in 2018 is causing a reduction in revenue growth.

Future Opportunity

In Bangladesh, People’s purchasing power is increasing day by day. This year, per capita income increased to USD 2227 from USD 2064, so we can say people’s disposable income is increasing as well as, middle and affluent class consumers want to purchase everything under one roof. So, demand for super shops is increasing all over the country. According to a business standard report, it is expected to meet the rising demand within 5-10 years, supershop will be built in all district headquarters and suburban areas of BD. According to another report of TBS news, Trading at traditional kitchen markets is expanding at a pace of 5-6%, whereas Shwapno’s growth is predicted to reach 20% every year, which indicates that customers are moving away from traditional retail markets to super shop. So, there is a huge growth opportunity for super shop.

Though the Bangladeshi super shop business is still in its early stages, it is well established in some developed countries. If this industry develops effectively in Bangladesh, it will be able to attract the world’s largest retail conglomerates. If these retail giants come to Bangladesh, they would expand the country’s super shop business as well as the total retail market size. While worldwide retail giants are gradually shifting to e-commerce, traditional stores are still surviving in the market. Although Amazon is an e-commerce company, the company is doing research in physical stores using various innovative technologies for in-house grocery item selling. Thus, they will be able to service more customers as they’ll be able to serve both physical and online platforms.

Although the number of super shop outlets in BD is insufficient, it has significant potential to grow since the customer’s demand pattern is changing, overhead incomes are rising, and super shop chains are rising as well. During the last 19 years super shops have changed the country’s shopping pattern, customer service as well. If the government agencies like regulators and tax authorities help the super shop industry by enforcing fair policies and equal opportunities it could have grown at a faster speed.

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