Modern grocery retail in Bangladesh-seven strategic levers for growth

By Syed Md Enamul Kabir

Bangladesh economy experienced strong growth over the last three decades; Gross Domestic Product (GDP) increased from US$ 31.6 billion in 1990 to US$249.7 billion in 2017 at a cumulative average growth rate of 7.96% per year (1) and according to one estimate, Bangladesh’s GDP is expected to be around US$773 billion in 2033 (2). This economic growth not only helped significant number of people escape poverty but also led to a ballooning middle and affluent class (MAC). According to a report, the size of Bangladesh’s MAC (includes people whose monthly household income is at least US$401) was 12 million in 2015 and is expected to be around 19.3 million in 2020; a 10.5% annual growth and, most importantly, around 61 cities in Bangladesh will have MAC population of 100,000 or more by 2025 (3).

Rising purchasing power, growing participation of women in economic activities and behavioral changes associated with rising purchasing power (e.g. looking for convenience and quality, brand loyalty) suggest a bright future for ‘modern grocery retail’ sector in Bangladesh. By ‘modern grocery retailers’, I mean grocers like Tesco, Aldi or Lidl. Shwapno, started in 2008, is the largest modern retail chain, in terms of number of outlets, in Bangladesh having 56 outlets across Dhaka, Chittagong, Sylhet and Comilla with a total retail space of 310,000 square feet (4). Shwapno operates outlets of different sizes, from small convenience stores to superstores (ranging from 1500 square feet to 27,000 square feet) (4). Meena Bazar, opened in 2002, has 17 outlets in Dhaka, Chittagong and Khulna (5). Agora, started in 2001, has 16 outlets across Dhaka, Chittagong and Sylhet (6). Apart from these well-known grocery retail chains, there are many local modern grocery retailers in Bangladesh with one or a few outlets.  According to our estimate, food and grocery market in Bangladesh is worth around US$ 36 billion and market share of modern grocery retail sector is less than 1%. Which means, like in many emerging economies, Bangladesh’s grocery retail scene is still dominated by traditional neighborhood shops and merchants in local bazaars.

Though modern grocery retail sector in Bangladesh is growing at a good pace (for example, Shwapno’s annual revenue grew from BDT 3,200 million in 2013 to BDT 9,099 million in 2017-18) (7), it is facing a few structural challenges like expensive retail space, discriminatory Value Added Tax (VAT) regulations and fragmented supplier base. Bangladesh is a densely populated country and property price in metropolitan areas increased almost in geometric progression over the last three decades. This has created a big problem for modern grocery retailers to find suitable retail spaces at reasonable rents in residential areas. Moreover, if you buy something from a traditional grocery retailer in your neighborhoods you don’t need to pay VAT, but if you buy the same thing from a modern grocery retailer you will have to pay VAT @5%. This discriminatory VAT regime keeps cost conscious consumers away from modern grocery retailers. Supplier base is very fragmented in Bangladesh. It is logistically difficult and expensive to buy, for example, agro-products from hundreds of farmers directly, and sourcing from intermediaries is often a costlier alternative.

Seven strategic levers for growth

All industries have their own challenges, but it is the responsibility of the top management to overcome those challenges and drive the business growth by using the right strategic levers. Here are seven strategic levers that can help modern grocery retailers in Bangladesh tap into the immense opportunities available.

Get your business model coherent and well communicated

It is most often not clear what to expect when I walk into a modern grocery retail outlet in Bangladesh: convenience (like 7 eleven), inspiring life-style (like Whole Foods Market) or low-priced goods (like Lidl). A well-defined customer value proposition (CVP) guides every aspects of the value chain (e.g. location of outlet and warehouses, product assortment, store layout, supplier selection and in-store services) and thus makes the parts of the business model coherent and integrated. A retail chain may have different formats of stores offering different customer value propositions, but that differentiation must be communicated properly via brand name, store layout and product range. For example, Tesco has Tesco Express (small convenience store), Tesco Metro (a wide-range store in city centers), Tesco Extra (out-of-town hypermarket) and Jack’s (discount stores); and each of these formats are different in terms of their product range, location and prices. Shwapno is trying to replicate Tesco’s this strategy in Bangladesh.

Everyday low prices

Discounters are controlling significant market shares even in developed markets (e.g. 20% to 50% market share in Germany, Ireland and the Netherlands) (8) and many established retail chains are opening their own discount chains (e.g. Tesco in 2018 opened its discount chain Jack’s) to fend off the discounters. In emerging markets like Bangladesh where a large part of the population is just being promoted from lower-income group to middle-income group, discount retail chain model is going to shine. Limited product range, narrow aisle, large packs and self-service tills are a few features of discounters that keep the cost low for customers.  Scale is the key for discounters, because scale provides economies in procurement, transportation and warehousing, a part of which then can be transferred to customers.

Partnership with traditional trade

Modern grocery retailers can think of partnering with traditional grocery retail outlets to expand their footprint faster and at a lower cost. One example of partnership with traditional trade comes from Grupo Exito in Colombia: small retailers who join its network receive signage and fixtures, access to its portfolio of private brands and business and management training (9). Grupo Exito rapidly built a network of more than 500 stores at a capital expenditure of only US$ 500 per store (9). 7 Eleven’s franchising model also can be used to penetrate smaller towns.

Introduction of private brands

Private brands (also known as retailers’ brands) account for a significant percentage of total sales for retailers around the world. According to one estimate, market share of private brands is more than 30% in 17 European countries (10). Private brands enhance retailers’ bargaining power with suppliers and thus enable retailers to offer better quality products at a relatively lower price.  Shwapno and Meena Bazar have launched a few lines of products under private brands. However, points of differentiation between some of these private brands and competing manufacturers’ brands are not clear to the customers and ,hence, these private brands may not win the customers.

Invest in online channel

Because of changing consumer habits and preferences, online channel is growing fast in many markets.  For example, online is expected to be the fastest growing channel, 52% over the next five years, in the UK’s food and grocery industry (11). Growing popularity of in Dhaka also shows people’s preference for online channel in Bangladesh. A few modern grocery retailers (e.g. Shwapno and Meena Bazar) in Bangladesh have launched online channel allowing customers to place orders for home delivery.  Modern grocery retail chains can use their physical outlets and online channel to offer customers a number of options; placing orders online for collection at stores at a later time or placing orders online for home delivery or placing orders at stores for home delivery. Delivery costs are the biggest hurdle to profitability in online grocery. According to one estimate, if online grocers can reduce home delivery costs by 50%, they would become more profitable than the offline grocers (8). Partnerships with package carriers, investment in data analytics, warehouse automation and relocation can help reduce delivery costs significantly. Amazon, for example, uses private package carriers and government postal services to make home deliveries. Ocado, an online supermarket, for example, uses robots in its warehouses for picking and packing ordered items. Subscription based delivery services like Tesco’s ‘Delivery Saver’ or ‘Amazon Prime’ can help reduce delivery costs on one hand and offer guaranteed quality delivery services to customers on the other hand.

Invest in information systems

Information is the main driver of supply chain performance in all industries and more so in retail industry. Success of Walmart, 7 Eleven and Amazon can largely be ascribed to their robust information systems. For example, information system in 7 Eleven Japan connects all its stores, headquarters, distribution centers and suppliers. All sales data gathered in each store by 11: 00 pm are processed and analyzed for use the next morning.  When store managers place orders, they can see sales analysis by SKUs and time, wastage and slow-moving items on the graphic order terminal. These sales analyses not only help better match demand and supply but also improve supply chain efficiency.

Work closely with government agencies and local authorities

There is no alternative to working closely with government agencies and local authorities to solve problems like discriminatory VAT regulations and shortage of appropriate retail space in city centers. For example, government agencies and local authorities have underutilized land in different parts of the cities and modern grocery retail chains can use those pieces of underutilized land in partnership with those government agencies and local authorities.

The modern grocery retail sector in Bangladesh certainly has immense growth opportunities; but only right strategic decisions on the part of management and policy support on the part of government can help this sector thrive in the future.


1.World Bank. 2019.  World Development Indicators database: Country Profile. [Online]. [Accessed 9 May 2019]. Available from:

2.Cebr. 2018. World Economic League Table 2019. [Online]. [Accessed 9 May 2019].Available from:

3.BCG.2015. Bangladesh: The Surging Consumer Market Nobody Saw Coming. [Online]. [Accessed 9 May 2019]. Available from:

4.ACI Limited. 2019. [Online]. [Accessed 9 May 2019]. Available from: (

5.BangladeshBusinessDir.2019. [online]. [Accessed 9 May 2019]. Available from:

6.Agora. 2019. [online]. [Accessed 9 May 2019]. Available from:

7. Annual reports of ACI Limited. [online]. [Accessed 9 May 2019]. Available from:

8.Mckinsey.2018. Reviving grocery retail: Six imperatives. [Online]. [Accessed 9 May 2019]. Available from:

9.Mckinsey.2015. Modern grocery and the emerging-market consumer: A complicated courtship. [Online]. [Accessed 9 May 2019]. Available from:

10.Private Label Manufacturers Association. Private label gains across Europe, climbing to all-time highs in seven countries. [Online]. [Accessed 9 May 2019].  Available from:

11.The Institute of Grocery Distribution and IGD Services Limited. 2019. [Online]. [Accessed 9 May 2019].  Available from:

About the author

Syed Md Enamul Kabir is the Managing Partner of ESS & Partners.

This content is for general purposes only, and should not be used as a substitute for consultation with professional advisors. Neither the author nor ESS & Partners provides assurance that pursuing any of the suggestions of this article will ensure business success.

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