The encouraging future of e-commerce in Pakistan

Pakistan has recently recorded massive rise in online shopping trends and other e-commerce businesses

The world of e-commerce has recently emerged and progressed at an astonishing speed in Pakistan with many new and existing organisations, businesses, and customers.

The e-commerce industry is booming throughout the region, with India’s leading e-commerce website, Flipkart, raising a record US$1 billion in investment and Alibaba’s – China’s e-commerce giant – market capitalisation estimated to be over US$250 billion.

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Pakistan, although a late entrant to the world of e-commerce, has recently recorded a massive rise in online shopping trends and other e-commerce businesses. Such exponential growth trends over the past few years – with US$30 million being spent on online purchases currently – depict a highly positive picture for the future and the size of Pakistan’s e-commerce market is expected to reach over US$600 million by 2017.

With many new online ventures springing up rapidly and existing businesses recording unprecedented growth rates, there is still a lot that needs to be done to reach the true e-commerce potential of the country and compete with other big players of the region. Several factors are responsible for drastically changing shopping trends over time and driving the growth of e-commerce in Pakistan.

One of the most important factors in the equation is the rate of internet penetration in Pakistan. Pakistan’s internet enabled population is limited to around 30 million users today. This, however, is expected to rise up to 56 million users by 2019.

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Pakistan’s much-awaited entry into 3G and LTE services in 2014 has increased internet accessibility and will also most likely propel the growth of online purchases. Statistics from the Pakistan Telecommunication Authority (PTA) reveal that the total number of third-generation (3G) mobile subscriptions have risen up to 10.3 million in 2015. The number of 4G or Long Term Evolution (LTE) subscribers also increased to over 68,000.

Over the next 5 years, 28 per cent of the country’s population is estimated to have internet access. With increased access to the internet and social media sites such as Twitter and Facebook, marketing trends are also rapidly changing and transforming the way opinions are now being shaped.

This will not only transform shopping trends but also significantly impact several other e-commerce arenas, such as online job hunts through Rozee.pk which has facilitated job hunts for over 1 million people, and land, property and rental transactions via Zameen.pk, to name a few.

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Along with increased internet penetration, 73.2 per cent of the entire population also have access to mobile phones. There is also a recent surge in smartphone usage with an estimated 9 million smartphone users in Pakistan. Internet-enabled smartphones have dramatically increased the ease of internet access and made online businesses much more accessible for all.

Both the rise of internet penetration and the declining costs of smartphones have accounted for this rapid rise in smartphone usage in Pakistan. Many Chinese brands have launched sophisticated devices at the fraction of the costs associated with the world’s leading mobile phone brands, which has augmented mobile penetration across the lower income strata of the country.

With such easy access to the internet via affordable smartphones, e-commerce trends in the country are expected to boom in the near future.

Online modes of payment

Even though Cash-on-Delivery (COD) payment methods continue to remain widely popular in Pakistan and account for more than 95 per cent of online purchases, other promising initiatives such as branchless banking (Telenor’s Easy Paisa, Zong and Askari Bank’s Timepey, Mobilink’s Mobicash etc.) and Inter Bank Fund Transfer (IBFT), are also underway.

Many banks and Telecom operators have introduced the concept of branchless banking, and the number of branchless banking agents facilitating offline payments for online purchases have recently tripled, making it much more convenient to transfer money in a secure environment.

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Online merchants now have much greater access to merchant accounts that enable them to collect payments electronically via the 12 million debit cards in circulation in Pakistan. Moreover, with more and more banks now offering consumers internet banking payment facilities, a vast volume of payments are made through IBFT which enables consumers to electronically transfer funds directly from their online bank accounts to online stores.

Logistics and delivery infrastructure

Delivery giants such as TCS and Leopard, as well other couriers, are providing COD delivery services across 150 cities nationwide.

The fact that 35 per cent of the total 70,000 COD parcels are delivered to cities other than the urban cities of Karachi, Lahore, and Islamabad, depicts the potential of the vast untapped segment of the population outside of these urban centres that is increasingly transitioning to online shopping due to the lack of options available for rural shoppers. This has also encouraged many specialised online grocery stores to recently pop up and tap into the need for specialized online stores, such as AaramShop, PakistanGrocery and Doorstep.pk.

These trends provide ample growth opportunities for emerging online business, as well as potential exploration and growth avenues for courier services by association.

Growing trust and reliance on e-commerce

The future of ecommerce trends lay in the ability of online business to gain their foothold and establish trust in online shopping and e-commerce initiatives.

There is a long way to go. With just 3 per cent of the Pakistani population indulging in online shopping, several initiatives are starting with online businesses in Pakistan to reach out to their potential market, build up their credibility, and garner consumer trust. This is especially true for risk-averse shoppers.

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Online brands such as OLX have now begun to set up significant advertising budgets for mainstream media advertising, as well as targeted digital marketing initiatives through social media. Rocket Internet, which operates different ventures in Pakistan, has injected a lot of capital into the Pakistani e-commerce market.

Unilever’s recent partnership with Daraz to utilize the platform for reaching out to consumers all over Pakistan for its beauty and personal care products signifies a shift of the FMCG sector towards e-commerce as well.

Kaymu.pk has established itself as a successful online marketplace through a consumer-to-consumer (C2C) and business-to-consumer (B2C) model. It has also launched a mobile phone app to provide widespread access and opportunities to existing and budding entrepreneurs. Approximately 17.3 per cent of ecommerce activities take place via smartphones.

Such marketing initiatives are generally successful in reaching out to first time consumers and generating overall awareness, acceptance, trust and credibility.

Pakistan’s new e-commerce horizons

Many visionary local players such as Shophive, Homeshopping, ROZEE, Just4girls.pk, and Pakwheels, as well as giant foreign investors such as Rocket Internet with their diverse online initiatives such as Jovago, Tripda, and Foodpanda, are all swooping in to establish their market share in the emerging e-commerce industry of Pakistan, within their respective domains.

Various other local and home operated business have also flourished through Facebook pages as a result of rapid penetration of the internet and smartphones, COD and IBFT services and the overall growing trends of online shopping.

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All these businesses have emerged in spite of all the barriers such as misconception and mistrust of e-commerce in Pakistan, security concerns regarding online transactions, low access to technology, low literacy rates, and limited infrastructure and logistical support.

All in all, this goes to show that the market and timing is ripe for e-commerce in Pakistan – irrespective of a few hiccups – and the industry is all geared up to create massive waves in the country, with colossal scope for innovation and improvement as well as exponential long-term growth.