Online sales slump

Economic volatility is taking its toll on e-commerce, with a new report by private companies suggesting that growth in the segment is slowing to just over 6% per year for the next five years. That number is extremely disappointing, but unsurprising: despite projections that the local e-commerce market will grow to about $6.5 billion this year, Pakistan is well behind comparable economies and regional countries on almost every metric related to e-commerce.

However, there were some positive signs showing that brick-and-mortar operations are adapting to the new ‘click-and-mortar’ reality and capitalising on both fronts. Clothing stores were especially adept, even though the online marketplace overall is still dominated by electronics and media — almost one-third of all revenue. It is also worth noting that e-banking adoption is still low, meaning that many online transactions do not register as such because of the use of cash on delivery or other payment channels independent of the goods exchange, which can make online transactions appear more akin to physical ones. Daraz was by far the largest e-commerce platform — almost ten times as large as its nearest competitor, which also shows how much growth potential there is if innovative players enter the market.

Despite the slowdown, e-commerce remains a potent investment engine, attracting around 20% of all foreign investment last year and growing almost 10-fold in the last five years, although a substantial amount of this was not in consumer-oriented industries. Meanwhile, recent years have also seen a few high-profile busts, including Airlift. However, optimists hope this may provide a market correction towards sustainable growth and realistic growth targets, as several companies have continued growing despite international economic uncertainty and the local crash because they were more prudent in their early days. E-commerce remains the way of the future, and while it won’t single-handedly turn around the economy, it will be integral to the rebound, whenever that happens.

 

Published in The Express Tribune, April 29^th, 2023.

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