AN estimated 70pc of e-commerce site visits in Pakistan are made via smart phones. This number is up from well under 20pc in less than a year.
With a whopping 60m low-cost smart phones expected to flood the telecom market by 2017 because of price reduction and increasing 3/4G coverage and a youth bulge of over 100m people between the ages of 14 and 34, e-commerce in Pakistan has the potential to boom. The building blocks now exist and it is up to the industry players to connect the dots.
Pakistan, like other developing countries, is fairly consumption-oriented. The country’s consumption expenditure has reached 79pc of GDP. Our retail sector accounts for 17pc of the economy, demonstrating the society’s affinity to spend.
Given this trend of consumer behaviour and the emerging alignment of industry variables, e-commerce is poised to make a strong tech-based addition to the financial services sector.
To propel this promising industry in the right direction, a multi-pronged approach is needed, especially to amplify both the supplier and the buyer segments. The approach should tackle five problem areas that, once addressed, should allow e-commerce to break away from its impediments.
To reach critical mass, Pakistan needs more than half a million e-merchants across the country, from mom-and-pop stores to established brands. Once this is achieved, the value of activity conducted will go up from approximately $100m today to $3bn in three years
To reach critical mass, Pakistan needs more than half a million e-merchants across the country, from mom-and-pop stores to established brands. Once this is achieved, the value of activity conducted will go up from approximately $100m today to $3bn in three years and $5bn in five years.
To make this happen, a combination of stakeholders needs to come together to ensure the following things: supplier- and buyer-protection; standardisation of a simple five-click facility for merchant on-boarding; creation of awareness among consumers and merchants; and the strengthening of platforms for payment and distribution.
To build the desired merchant network, it is imperative to perfect quick and easy on-boarding, much like the minimal input registration to set up shop on Facebook. Platforms that offer online shops on an online market must also have simple plugins for payment and logistics services available to their clients.
The State Bank of Pakistan should consider introducing a special bank account, as it did for domestic remittances, to enable easy account documentation for on-boarding e-merchants. For Tier 2 and 3 merchants, education and facilitation will play a big role in building a level of comfort with internet retailing.
The market has to ensure that the average micro-entrepreneur, for example a woman selling achaar (local pickle) in interior Sindh, has access to consumers all over the world through e-commerce. Not only will this genre of merchant require trusting and easy plugins, but informational services should be available in local languages both online and via call centres.
On the flip side, what do we need to do to attract the hundreds of millions of potential consumers to the market? Consumers want convenience in today’s world of multiple choke points. The tipping point, for instance, for branchless banking was domestic remittances.
Here, the code was cracked by providing distribution (thousands of branchless banking agents located in neighbourhoods), ease of making payments (only requirement was the national identity card), and a transparent complaint redress mechanism. These actions were followed by a customer education program.
The e-commerce code needs to be cracked in a similar manner. Customer and merchant education, transparent and efficient complaint redress mechanism, combined with easy payment solutions, and an efficient and reliable delivery mechanism will give it breakthrough momentum.
The potential for a perfect sweet-spot business alignment is very much on the cards. With an e-commerce potential of $10bn, Pakistan is already on the radar of giants like Amazon, Flipkart and Souk. The opportunity calls for leadership and vision and Pakistan surely has plenty of both.
Published in Dawn, Business & Finance weekly, November 30th, 2015