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Almost non-existent a few years ago, Pakistan’s online retail market witnessed a significant growth last year, thanks to the rollout of mobile broadband technology.
With $100 million milestone on the cards, the financial sector joins the bandwagon by launching new payment solutions.
The ecommerce sector that had so far been driven by cash-on-delivery (COD) model had an important breakthrough after Habib Bank Limited launched its Mobile Point of Sale (mPoS) service recently, enabling online retailers and merchants to accept debit and credit cards on delivery of goods at customers’ doorsteps.
This development comes at a time when the ecommerce sector is witnessing high volumes in both traffic and sales.
Though no public data is available to calculate the exact online retail figures in Pakistan, industry sources say the country’s ecommerce market, based on the sales of major players, has more than doubled in 2014 to $60 million.
According to Daraz.pk, the market will grow manifold by the end of 2015 and surpass $100 million.
“The last quarter of 2014 saw a massive increase in traffic as more than one million additional customers accessed ecommerce sites through mobile broadband,” said Shayaan Tahir of Homeshopping.pk.
He attributed this growth mainly to the launch of third-generation (3G) mobile internet technology – the country had 7.6 million 3G users at the end of December 2014, six months from its launch.
“All online retailers received a good response from customers and every player’s sales grew in 2014,” Tahir said.
He said the market is likely to attract new players – the likes of ecommerce giant Naspers, which already dominates online classified market through its subsidiary OLX – which will further drive this growth. The strong growth in ecommerce sector has already earned the attention of major players in the financial services sector.
Towards the end of 2014, United Bank Limited had already launched its GSM machines to accept plastic cards and HBL has now come up with an improved technology.
Industry sources say Telenor’s EasyPaisa is also in the process of launching its own debit card, which combined with products like mPoS would provide further boost to the ecommerce sector.
The mPoS provides an alternative to the existing and only mode of payment, Cash-on-Delivery, by introducing a more safe and secure Card-on-Delivery solution, according to HBL. This new service reduces the responsibility of handling cash from the delivery cycle and accepts VISA, MasterCard and UnionPay cards, says the press release.
“The product will change the landscape of how payments are made via merchant acquiring business and enable the POS to go to people instead of people coming to it,” the statement said. “The reduction of cash dependency from delivery cycle will further increase the average ticket size of such transactions, enabling merchants to sell more in a secure way.”
The mPoS is very convenient to carry and is compatible with any Android phone, says Daraz.pk. “It also reduces the risk of carrying cash.”
Though a significant addition to the ecommerce sector, not all players think it could have any major impact on their sales.
“I don’t think it will make much difference because we are a cash-based economy overall. Moreover, only a small number of people across Pakistan have debit or credit cards,” Tahir of Homeshopping.pk said.
As of September 30, 2014, there were less than 25 million debit and credit cards in the country and it recorded a little over 1% growth on quarterly basis. The actual number of plastic card holders is far less than the official figure as a bulk of card holders have multiple cards.
Even after mPoS, most transactions will be cash-on-delivery, Tahir said. However, he added that if a player like EasyPaisa with its vast customer base launches a debit card, then that will certainly change the whole dynamics of ecommerce in the country.
Whether it is Cash-on-Delivery or Card-on-Delivery, ecommerce is certainly on a growth path. Despite its highest ever growth last year, the ecommerce market is still in its early stages.
According to Tahir, ecommerce segment is less than 5% of the country’s overall retail market – which the Small and Medium Enterprises Development Authority (Smeda) estimated to be $42 billion in 2006.
The writer is a staff correspondent
Published in The Express Tribune, February 16th, 2015.
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