Encouraging Future Predicted for Ecommerce in Pakistan
By Junaid Ahmad
The world of ecommerce has recently emerged and progressed at an astonishing pace in Pakistan with many new and existing organizations, businesses, and customers.
The ecommerce industry is booming throughout the region, with India’s leading ecommerce website, Flipkart, raising a record US$1 billion in investment and Alibaba’s – China’s ecommerce giant – market capitalization estimated to be over US$250 billion.
Pakistan, although a late entrant to the world of ecommerce, has recently recorded a massive rise in online shopping trends and other ecommerce 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 ecommerce 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 ecommerce 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 ecommerce in Pakistan.
Internet penetration 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. It is expected to rise to 56 million by 2019. 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.
In the next five years, 28 percent 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 ecommerce 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.
Access to smartphones
Along with increased internet penetration, 73.2 percent of the entire population also has 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 a fraction of 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, ecommerce 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 percent of online purchases, other promising initiatives such as branchless banking (Telenor’s Easy Paisa, Zong and Askari Bank’s Timepey, Mobilink’sMobicash 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.
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 is 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 percent 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 centers that is increasingly transitioning to online shopping due to the lack of options available to rural shoppers. This has also encouraged many specialized 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 ecommerce
The future of ecommerce trends lies in the ability of online businesses to gain their foothold and establish trust in online shopping and ecommerce initiatives.
There is a long way to go. With just 3 percent of the Pakistani population engaging 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.
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 ecommerce 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 ecommerce 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 percent 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 ecommerce 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 ecommerce industry of Pakistan within their respective domains.
Various other local and home-operated businesses 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.
All these businesses have emerged in spite of barriers such as misconception and mistrust of ecommerce 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 ecommerce 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. ((Junaid Ahmad holds an MBA Marketing degree from Lahore School of Economics. He has been working for many reputable organizations since 2010. He has a passion for creative and analytical writing. TechInAsia )
