The e-commerce market in Pakistan has now been around for nearly 18 years. Though, the e-commerce sector has focused mainly on consumer products, the State Bank of Pakistan (SBP) puts the size of the e-commerce market in Pakistan at Rs.99.3 billion in FY18 (FY17: Rs51.8 billion) with a year-on-year growth rate of 92%. This enormous market has recently attracted global e-commerce giants including Alibaba, which has acquired Daraz.pk; and Ant Financial that acquired a 45% stake in Telenor’s Tameer Microfinance Bank.
Still there is huge untapped potential in e-commerce as only 0.34% of the retail market is online and is doubling every year. It is expected to reach 1 billion US dollars by 2020. This data for total digital payments includes credit/debit cards, interbank funds transfer (IBFT), prepaid cards and mobile wallets. Cash-on-delivery (COD) roughly makes 60% of e-commerce transactions but they are mostly undocumented. It is interesting to note that around 35% of country’s monthly 70,000 COD shipments are delivered outside of Karachi, Lahore and Islamabad, the major urban areas. It shows that despite the fact that rural shoppers are also willing to make online purchases for goods they cannot find in locally.
Main examples of e-commerce sectors and businesses in Pakistan at present are as follows:
- Retail e-commerce is defined as the online sale of physical goods and consumables. Marketplace competitors include such as Daraz, OLX and HumMart.
- E-ticketing includes start-ups such as Bookme.pk, Easytickets and Sastatickets. It’s important to note that this sector also comprises of online ticketing businesses built for large transportation service providers such as PIA, Daewoo, and Pakistan Railways.
- Classifieds Pakistan’s largest property classified player for job ads is Rozee.pk and Zameen.com for real estate.The oldest, however, is PakWheels which started in 2003, as an automobile buy and sell platform.
- Ride-hailing has been overtaken mostly by the global and regional giants Uber and Careem. Local player has also emerged namely Bykea and Cheetay.
- Food Delivery service providers include start-ups such as FoodPanda and Eat Mubarak.
Sudden rise in e-commerce indicates a paradigm shift in international trade and market dynamics. This technology not only disrupts supply chains and logistics but also changes consumer behaviour. Though, being online comes with its own set of advantages and disadvantages. One of the biggest challenges online is trust between consumers and suppliers majorly due to the limitation in terms of physical interaction. According to a survey by Centre for International Governance Innovation on internet security and trust, 49% of those surveyed (25,000 internet users) reported distrust resulting in avoiding disclosing personal information and using internet more selectively making fewer online purchases.
This distrust and uncertainty around compliance and policies for refund, data protection etc. are placing a downward toll on online shopping activities. Based on insights from a paper published by The Global Governance of Online Consumer Protection and E-commerce, this article discusses few measures to be considered by policymakers to improve trust in online transactions to boost e-commerce.
Firstly, policymakers need to formulate relevant policies for consumer protection online. According to a report, by United Nations Conference on Trade and Development only 52% of countries have an updated legal framework for consumer protection. For developing countries, mostly the policies are at draft stage with no formal implementation plan. Similarly, the current policy for Pakistan devised by Competition Commission of Pakistan does not outline any specific practice for online consumers related to unfair treatment. There needs to be an emphasis on personal data protection. As almost every online purchase requires sensitive information like card details and residential address. Thus, rules for protecting personal information should be an essential part of the online consumer protection guidelines. There should be special focus on regulation for information exchange between business and consumer. A clear and concise policy will help develop online trust.
Secondly, once the policies are introduced they need to be standardised. Countries that have online platforms that operate universally need to have standard regulations related to major challenges like information sharing, unfair marketing, e-spam, contract terms, payment security and returns and refund. For example, in case of misleading marketing by a third-party creates a problem of accountability so some countries require online marketplaces to inform customers about who is the third party contracted. Though this is not always the case and sometimes too much information can be confusing for the consumers.
However, standardized policies will help increase international cooperation. Globalization has made E-commerce increasingly important in recent decades. Cross-border e-commerce has still been hovering around 7% as reported in 2015. This has to do with logistics as well as the perceptions of people attached to shopping from abroad. Therefore, highlighting the need for coordinated international policies to improve system wide online trust and reducing international friction.
Lastly, in order to encourage cooperation in policies, countries need to align their approaches for online consumer protection rules. This can be done by engaging international experts to discuss modifications in the regulatory environments, minimum legal frameworks and convergence on standards. In January 2019, international players that are responsible for 90% of global trade began negotiations on e-commerce related aspects.Experts can discuss preferential trade agreements to ensure transparent approaches and reinforce standards to be adopted globally.
To reap maximum benefits from globalization and e-commerce, it is important to plan for future in lieu of this technological change. Policymakers need to develop governance standards specifically for online consumer protection in the context of the global digital economy. It is time to accord the highest priority to forging Digital Pakistan to build a globally competitive economy. Proactive engagement between policymakers and private sector can drive truly transformative change in Pakistan. The emergence of a digitally empowered population and economy, however, hinges on the effective integration of digital services, innovation and entrepreneurship. Enabled digital entrepreneurship will not only reduce inequalities, create jobs and boost the economy but will also give Pakistan a fair chance to compete with other regional economies.