Nusrat Jisha stumbled into online commerce while helping her sister sell custom-designed saris. In doing so, she discovered that Facebook allowed her to tap into a much larger pool of potential demand. The proof came when she designed a T-shirt protesting harassment of women on public transport. The shirt went viral in her corner of social media and created an impetus for her bustling online commerce business in Bangladesh. In four years, her income from online commerce has nearly matched her household's previous total income. Nusrat is not alone. There are legions of women across Asia who are doing the same.
As discussed in an earlier blog post, entrepreneurs in the informal economy — where many women are concentrated — face barriers to selling their goods on e-commerce platforms. These barriers can be multifaceted: cumbersome business registration processes, mobility difficulties in sourcing inputs from markets, among others. However, this is not preventing them from engaging in online commerce. Over the past two years, CGAP and our partners in Asia have observed women turning to whatever social platform they use to connect with peers and repurposing these connections for commerce, whether to buy or sell goods. This is a vast, informal type of e-commerce that hides in plain sight (or “site").
In 2019, we studied this informal e-commerce phenomenon in Bangladesh, Myanmar and Pakistan to gain a better understanding of what it is, how it works and who engages in it. Below are some of the key insights from the CGAP – pi STRATEGY research in Bangladesh and the implications for financial inclusion.
Why informal e-commerce, and how it is different from e-commerce?
Informal e-commerce is a variant of e-commerce in which goods are bought and sold via social platforms, such as Facebook and WhatsApp. In formal e-commerce, the buyer and seller experiences are mediated by an e-commerce platform from start to finish, from the matching of supply and demand all the way to payment and order fulfillment. In informal e-commerce, buyers and sellers leverage social media platforms. The platforms connect supply and demand but do not necessarily engage directly in other aspects of online commerce. Social media doesn’t generally accommodate payments or delivery services. Consequently, those steps happen off-platform in whatever configuration works for the buyer and seller based on their circumstances. We therefore make the distinction between formal e-commerce (end-to-end) and informal e-commerce (fragmented and highly situational).
The typical buyer starts by researching product options, reading reviews from trusted sources like family and friends as well as others in a social network. She scans social media for information about product features, price, reputation, payment options and delivery time frames. She then places an order through social media apps like Facebook Messenger. If advance payments are required, she uses mobile money and pays the remainder with cash upon delivery.
From the perspective of both buyers and sellers, the experience between the two variants is markedly different. In fact, many buyers we spoke with seemed to prefer the social nature of the informal e-commerce transaction to the impersonal, regimented e-commerce one.
Why does informal e-commerce matter?
To better understand informal e-commerce in Bangladesh, CGAP and pi STRATEGY conducted several one-on-one interviews, held multiple focus group discussions and ran a small online survey of online sellers and buyers in late 2019. Preliminary survey evidence points to women being over represented in this type of online commerce, suggesting that informal e-commerce could be a popular use case for digital financial services among women.
As these charts show, engagement in formal and informal e-commerce is gendered in Bangladesh, with women gravitating toward informal e-commerce and men concentrated in formal e-commerce. Anecdotal evidence from Myanmar and Pakistan points in the same direction. While women face systemic challenges to becoming sellers in e-commerce, they have found significant opportunities in informal e-commerce, which they dominate both as sellers and buyers. A value chain analysis conducted as part of this study also revealed that women are carving out niche market segments in informal e-commerce where some degree of value addition is possible. Such segments include women’s clothes (design, embroidery, pairing), jewelry (design, pairing) and skin and hair products (personalized recommendations based on skin and hair types).
Overall, informal e-commerce appears to be creating economic opportunities for women, enabling them to run businesses with greater flexibility in terms of what they do and when and where they work. Women are earning through informal e-commerce, and with income, financial freedom and empowerment often follow. In addition, informal e-commerce seems to be creating such opportunities on a large scale. In our discussions with stakeholders in these countries, we learned that up to 80 percent of online commerce transactions happen “socially” or “informally,” with product discovery, payment and fulfillment happening outside of a formal e-commerce platform. (Facebook appears to be a common platform for informal e-commerce, but it is not the only one.) These opportunities are not limited to women. We have seen some evidence that large low-income populations in countries like Myanmar and Bangladesh are beginning to engage in online commerce, both as buyers and sellers.
Beyond its impact on livelihoods, online commerce entails payment activity and therefore the potential to advance financial inclusion. In Bangladesh, multiple respondents confirmed their engagement with financial services had deepened thanks to informal e-commerce. However, cash-on-delivery is still the most popular way for both men and women to purchase goods in formal and informal e-commerce, but especially in informal e-commerce. Debit and credit card use is far lower for women in informal e-commerce and e-commerce (a 32 percentage point gender difference in social commerce and a 19 percentage point difference in e-commerce). However, women are about 5 percentage points more likely than men to pay with mobile financial services in informal e-commerce and e-commerce.
Despite the benefits and potential for women’s livelihoods and financial inclusion, informal e-commerce also poses potential risks for women in male-dominated societies. A few participants in our study indicated that buying and selling online led their families to place more restrictions on their mobility. One woman told us her parents now ask, “Since you can run this business from home, why do you need to go out so much anymore?” Stories like these underscore the sad reality that women’s online savvy may be used against them.
CGAP’s ongoing research on informal e-commerce
CGAP continues to research informal e-commerce and its connection to women’s livelihoods and financial inclusion. In the next stages of our research, we are conducting an in-depth segmentation of those engaged in this variant of online commerce to better understand who they are and what motivates them.