NationalVOLUME 17 ISSUE # 9

Growing e-commerce in Pakistan

Despite rapid strides made in the last few years, Pakistan’s e-commerce market is much smaller in size as compared to other countries. There are many factors hindering the growth of e-commerce in Pakistan, including customer trust, payment and logistics problems. But there are also tremendous opportunities which can be exploited with careful planning.

E-commerce is universally recognized as a useful vehicle for youth entrepreneurship and employment and must, therefore, be encouraged and incentivised by the government through appropriate policy tools. According to a report, the government has now decided to lay the foundation of Pakistan’s first e-commerce university.

Disclosing the good news, the Special Assistant to the Prime Minister (SAPM) on E-Commerce Aon Abbas Buppi told the media last week: “The first e-commerce university will enhance the capabilities of e-commerce stakeholders not only in Pakistan but also in the emerging global e-commerce segment.” He hoped that the establishment of the e-commerce university would provide employment opportunities to the youth so that Pakistan could become a part of the global supply chain which would enhance its economic strength. He also said that the government would establish the first e-commerce web portal of Pakistan in a bid to curb illegal trade. He informed the participants in a seminar that the e-commerce portal would be created with the help of Chinese giant Alibaba and transparency would be brought to the sector.

All over the world, e-commerce has witnessed exponential growth in the wake of the Covid pandemic. According to an estimate, global online sales in 2021 are expected to be 19.5 per cent, compared to 13.9 percent in 2019, a 45 percent increase in two years. The trend has also increased in Pakistan. According to data published by the State Bank of Pakistan, the number of registered e-commerce merchants in Pakistan increased from 1,707 in 2019-20, to 3,003 in 2020-21, a 76pc increase.

At present, Pakistan’s e-commerce trade figures total around $4.5 billion, but given the right incentives the total could easily reach $9 billion by 2023. In Pakistan, e-commerce is dominated by business-to-consumer (B2C) companies and the transactions are mainly conducted in three main sectors, general e-commerce, groceries/quick(q)-commerce and fashion.

Most of the activities are confined to quick commerce/groceries, where Foodpanda and Airlift are the main players. Both companies maintain stocks at different strategic locations to ensure delivery within 30 minutes in major cities. Many start-ups are also entering the field but since maintaining stocks all across Pakistan is not easy, new firms have to mobilise large amounts of money to start businesses. Munchies, Carrefour, Al-Fatah, Metro, Grocer app, Hum mart, Cheetah and Bykea are some of the players which are active in the field.

Pakistan’s lifestyle is different from the US and Europe. Most people do their own shopping. There is also the question of trust. There is a general feeling that online shopping is not trustworthy.

The biggest player in e-commerce in Pakistan is Daraz, which has the financial backing of AliBaba and has been spending huge sums of money to bring e-commerce to the forefront through special deals and sponsorships. Daraz is known for its efficient service and quick delivery. But it has yet to overcome the challenge of trust as reflected in its low scoring in surveys conducted by relevant international agencies. To meet the challenge, Daraz launched DarazMall in 2019, where only established brands sell their products to customers.

Needless to say, a lack of trust is the biggest hurdle to the growth of e-commerce in Pakistan. There are some bad experiences due to which people refuse to pay in advance. Cash on delivery is still the preferred method for payment for the majority of online orders, which further compounds the problems for ordinary vendors. A lack of liquidity retards the growth of the business.

For e-commerce to grow in Pakistan, these problems need to be tackled. To this end, digital payments need to be made easier, and special safeguards must be put in place to protect customers. Ethical business practices must be strictly implemented to gain clients’ trust. One way to do this is to enable customers to claim refunds and return the products if they are not satisfied.

The good aspect is that the e-commerce situation is gradually improving in Pakistan. The Covid pandemic provided a big boost to online shopping and the trend has continued. Apart from big players, small enterprises have sprung up all across the country. Everything considered, e-commerce has a bright future in Pakistan.