E-commerce industry in Pakistan is in growing stage where a lot of space in products and services still exists. E-commerce is not much different than conventional commerce where supply and demand plays a vital role for growth. The demand is still quite low in Pakistan if we compare with India. In urban areas the high income people having knowledge of internet and technology use online payment systems such as debit/credit cards, have friends and relative who make purchases online.
Almost 95 percent of UK populations buy goods or services from the internet retailers. But people in Pakistan have preconception of being cheated online or they have heard some reviews from others which makes them unwilling to make online purchases. In Pakistan retailers must create offers for user registrations and allow heavy discounts, giveaways or monetary benefits to users for bringing more users for registration.
E-commerce industry is wanting in demand and this can be filled up by creating chain reaction which is having a multiplier effect in users and finally in demand for products and services. E-commerce retailers should not always concentrate on making money from sales, their key target should be making money from users. Offers and discounts play a vital role in making products and services more and more appealing.
Customer service should be the top priority for online retailers in order to remove those barriers which could curb the future growth. Not everyone uses credit/debit card online nor online banking and transfers, this is one of the biggest hurdle in user growth. There should be an online payment system which can be accepted by almost every online retailer.
Retailers should build trust in customers and customers should build trust in retailers. Retailers must not misguide customers when selling online. For instance, product images, descriptions, prices and other details should accurately reflect the original product that would be delivered.
Customers should also be honest. They should not force retailers for unnecessary refunds, returns or exchanges. Honesty is the heart which will build trust in both communities. Retailers have more obligations. In this context they should do every possible thing to make customer happy and build trust, even if they incur some lose in doing so. They should always make customer friendly policies. The user would happily try to purchase from them if they know their money would not be wasted and they always have a room for settlement.
More online access
E-commerce is flourishing in our neighborhood region. India’s leading e-commerce website, Flipkart, recently raised a record $1 billion in new investment, handling 5 million shipments each month. The website sees so much prospective in mobile shopping that it has a stated goal of becoming “the mobile e-commerce company of the future”.
China’s e-commerce leader, Alibaba, set a global record when it listed its shares on the New York Stock Exchange in September. Alibaba’s Initial Public Offering raised an amazing $25 billion, making its record-breaking IPO the biggest in the world. The Chinese e-commerce giant’s market capitalization is over $250 billion exceeding that of Wal-Mart, the world’s largest old economy retailer.
The market value of e-commerce companies in Pakistan’s immediate vicinity including Turkey, the Middle East, India and China exceeds half of a trillion dollars.
By 2017, the size of Pakistan e-commerce market is expected to reach over $600 million from its current size of $30 million spent on online purchases annually. There are several factors driving this growth, which will phenomenally change the way we buy things over the next several years. Pakistan’s Internet penetration rate historically exceeded that of India until 2009. In 2009, India launched 3G and its Internet penetration sky-rocketed.
With Pakistan’s long awaited entry into the 3G club a few months ago, there will be a similar burst of Internet accessibility which will further shoot online purchases. Pakistan’s Internet enabled population will increase from 30 million users today to 56 million in 2019.
Over the next five years, 28 percent of the country’s citizens will have Internet access. This unprecedented reach will transform not just how consumers purchase goods, but will also significantly impact several other industries. Along with the rise of Internet accessibility through 3G, Pakistan is simultaneously witnessing a rise in smartphone usage. There are an estimated 9 million smartphone users in Pakistan, using handsets that are fully equipped with web browsers and online connectivity. Smartphones have become increasingly sophisticated, but also greatly increasing the ease of going online.
The Internet becoming more accessible to consumers, consumers are also becoming more accessible to Internet merchants through the everywhere of the Smartphones in our pockets.
While the growth of smartphones in Pakistan is linked to the rise of Internet penetration, it is more so driven by the declining cost of increasingly sophisticated devices.
Chinese companies which have traditionally manufactured devices for the world’s leading mobile phone brands including Apple and Samsung, are now OEM’ing their own handsets for a fraction of the cost powered by Google’s Android operating system.
The low price point of relatively powerful smartphones in Pakistan is enabling online accessibility to penetrate lower untapped income strata of society.
India’s Flipkart sees so much potential in mobile shopping that it has a stated goal of becoming “the mobile e-commerce company of the future”.
Many banks and telcos alike have launched branchless banking and m-commerce initiatives ranging from MCB Banks’s MCBLite, Telenor’s Easy Paisa, Mobilink’s Mobicash, Zong and Askari Bank’s Timepay, UBL’s Netbanking and others. The number of branchless banking agents which facilitate offline payments for online purchases tripled from 41,000 in 2012 to 125,000 in 2013, making it increasingly easier and more convenient to transfer money.
One of the most frequent complaints from Pakistan’s online sellers of not being able to get merchant accounts that allow them to card payments online, has been abated.
Citibank Pakistan was once the only bank in the country to offer online merchant accounts, it was also notably difficult for businesses to get approved.
United Bank Limited (UBL) has since launched its Go Green Internet Merchant Account product for businesses which is far more reasonable in its on-boarding criteria. Online merchants can now potentially collect payments electronically from 12 million debit cards in Pakistan.
The most successful online payment solution currently available in the country is Inter Bank Fund Transfer (IBFT). A large volume of payments are made by consumers directly going to their bank’s website to electronically transfer funds to online stores.
Most banks are now offering their customers net banking IBFT payment facilities through their websites, bringing a majority of the country’s banked population into the fold of electronic payments. 95 percent of online purchases are paid for through COD at the time the parcel is delivered to customer. TCS, BlueEX, Leopards and other couriers are providing COD delivery services across over 150 cities in the country. Approximately 35 percent of the country’s monthly 70,000 COD shipments are delivered to cities outside the three main urban centers of Karachi, Lahore and Islamabad.
Urban shoppers are more online as a percentage of population, the value for rural shoppers is higher as many products are not available in their local markets.
Over 72 percent of Internet users in the US are digital shoppers. This contrasts sharply with less than 3 percent of Pakistani Internet users who have bought goods online.
In Pakistan we are seeing online brands deploying significant advertising budgets for mainstream media advertising. General classifieds sites like OLX, funded by the South African mega media group Naspers, and Asani, a Schibsted funded company from Norway, have embarked in our online industry’s first media war with ads . Rocket Internet, which runs Daraz and Kaymu in Pakistan, recently completed an $8.2 billion IPO in October of this year. Daraz and Kaymu are well funded and will be pouring capital into the Pakistani e-commerce market in a magnitude not seen here before.
Several other Pakistani online players will be launching their TV ads in the coming months, giving new credibility to the online medium and e-commerce.
All of these developments will lead to a rapid increase in trust as first time online shoppers experience e-commerce and generate acceptance through word-of-mouth. Big foreign investors are to become first movers in emerging from our ecosystem and bootstrapping to success. This industry has an insatiable appetite for capital. The e-commerce party has started now all we need to get in and shine.