The final frontier: Retailers go digital to tap $25 million online market

Despite growth, country’s ecommerce business is far behind many other markets.

KARACHI:

For a consumer base as big as 190 million people with approximately 20 million broadband users, it was natural for retailers to go digital. Experts estimate Pakistan’s ecommerce – still a developing concept in the country – to be a $25 million market with a lot of room to grow.

The growth of online retail industry heavily depends on the growth of broadband users. Simply put, the more the number of internet users the bigger the market is.

Despite a low broadband penetration that recently entered double digits, several ecommerce portals were launched during the last few years. Daraz.pk, Homeshopping.pk, Symbios.pk and Tohfay.com to name a few are some of the players bullish about this online segment.

According to sources, these portals are doing good business with sales growing at a decent pace – a sign that the online shopping trend is growing in the country. However, the fact remains that the country is still far behind many other markets of the world. Pakistan’s ecommerce business is limited to and driven by a few metropolitan cities only.

According to a consumer analysis by Symbios.pk – one of the top five ecommerce portals in the country – Karachi (18%), Lahore (22%) and twin cities of Islamabad and Rawalpindi (10%) account for half of the total online retail sales. Sialkot and Faisalabad each had 10% share, taking the combined share of these major cities to 70% of the total sales.

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Total online retail sales in Pakistan in percentage
Infogram

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Though the breakdown of consumers’ location exclusively reflects the business of Symbios.pk, it is actually these cities that account for more than 80% of the country’s broadband user base, endorsing the fact that ecommerce is still limited to the big cities.

Broadband connections

According to the Pakistan Telecommunication Authority (PTA), the country had three million broadband connections at the end of October 2013. Considering the average household number to be 6.7 persons per family, as calculated by Population Census Organization, this translates to a total of 20 million broadband users.

Of the total broadband connections, 2.5 million (83.3%) come from big cities namely Karachi, Lahore, Islamabad/Rawalpindi, Faisalabad and Gujranwala, according to the data compiled by the Universal Service Fund (USF) as part of its projects in more than 300 cities of Pakistan.

In other words, only half a million broadband subscriptions were sold in the rest of the country or rural Pakistan, which accounts for more than 60% of the total population. With a broadband penetration rate of 10.5%, the country has a lot of room to grow, experts believe.

This gap, experts say, is going to be filled by mobile broadband as the country is heading for the auction of spectrum for high-speed mobile internet services in a month or two.

The introduction of high-speed mobile internet, according to industry experts, will not only attract investment but also boost internet penetration, increase smartphone usage and spur the growth of local IT content – in short provide a spur for the growth of ecommerce and digital economy.

In fact, there are already some encouraging signs that the country’s digital economy is about to click. Ansr.io – a mobile survey blog – published a detailed report last year supported by key statistics demonstrating why the country’s online economy is about to expand.

For example, it said 70% of the country’s population was less than 30 years of age. These are the people getting new jobs and contributing to the incomes of their families and would most likely come online as a result of the spectrum auction.

The trend was also reflected in Symbios.pk’s consumer analysis. People who aged between 25 and 35 years had the highest share (40%) in total purchases made on its platform.

the writer is a staff member

Published in The Express Tribune, February 10^th, 2014.

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