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The meteoric rise of e-commerce

Updated June 25, 2018

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LAST year the news of IKEA, the global furniture behemoth, tinkering with augmented reality to offer customers a unique virtual shopping experience dominated online spaces.

It was almost surreal, being able to navigate around a pristine kitchen like a character from the computer game Sims, preparing meatballs, (which, according to the store’s website, was the most recurring activity, strangely).

When it comes to buying, our appetite for exciting new experiences is never fully satiated. General perception now is that consumers are increasingly opting out of the traditional means and instead, being creatures of comfort, relying on digital avenues for retail therapy.

When it comes to buying, our appetite for exciting new experiences is never fully satiated

E-commerce now accounts for an estimated one-tenth of worldwide retail sales, alleges the Global Consumer Insights Survey 2018 by Pricewaterhouse Coopers. According to an estimate by eMarketer, a market research company, worldwide retail e-commerce sales touched $2.304 trillion in 2017, making a 24.8 per cent leap from 2016.

At home, e-commerce transactions in the January to March period alone were worth Rs4.4 billion. This rising trend is confirmed by the State Bank of Pakistan (SBP), whose data shows that the number of merchants operating online, which was 905 in the second quarter of fiscal year 2018, grew to 1,023 in the third quarter.

“Growing incomes, coupled with advancement in communication technology and expansion of internet access and branchless banking,” are to account for the surge of business-to-consumer e-commerce states the central bank.

An estimate by the International Telecommunication Union — the United Nations’ agency for information and communication technologies — suggests that with a staggering 44.6 million active users, the internet penetration in the country stands at 22.2pc.

This is a heartening rise from only two per cent around four years ago. With the internet, and thus social media’s omnipresence, there is always a ready market for all sorts of artefacts. In fact, data from Kepios, a strategic marketing consultancy firm, shows that Pakistan has approximately 35m active social media users.

And sellers over the years have taken due advantage of it. Whether it is e-tailers the likes of Khaadi or Sana Safinaz, online marketplaces such as Daraz, OLX, or social media- based sellers, there is no dearth of hawkers online.

Just last year during the chaotic occasion of Big Friday (or Blessed Friday, whichever you prefer), online sales broke previous records, surpassing Rs3bn at Daraz.pk.

“We are always working towards enhancing the customer experience,” says Mehdi Raza, Director Marketing at Daraz. “Our focus now is to offer our customers a much more personalised experience on the app, faster load times, direct interaction with sellers, and access to a huge number of local and international products at competitive prices.”

The days of suspicious elders of the household restricting online purchases are long gone. Market research provider Euromonitor International relays that, “Trust in the internet has developed sufficiently to incentivise shoppers to order different items.”

A fact which Mr Mehdi confirms when he adds: “Cash-on-Delivery is definitely the preferred payment option; however, we have seen a massive increase in online payments over the last year. People are a lot more comfortable paying online as there is more trust now.”

Sheops, an online marketplace providing a platform for women sellers and consumers, boasts of over 96,000 members on its Facebook page. Another success story for women entrepreneurs is that of HerFloor.

With its android app launched on Feb 23, it has already had upwards of 10,000 downloads to date. “What is different about us is that HerFloor is completely commission-free. Other places have a commission of around 15-20pc, which is too much,” says Abdul Muizz, the founder of HerFloor.

He talks about how a community of over 30,000 women can easily buy and sell from the comfort of their homes using the option of chat-to-buy, with the chats being encrypted end-to-end, thus protecting the privacy of both parties.

In a population with mobile broadband subscribers standing at 42.1m as of June 2017, harnessing mobile phone apps for business is the sensible course of action. Furthermore, with growth touted at $1bn by 2020, the opportunity for e-commerce to bring in tremendous foreign investment must be realised.

The need of the hour is a comprehensive e-commerce policy that simplifies payment gateways and harmonises business regulations across the sector.

“We were working on an e-commerce policy which didn’t go through,” lamented Ather ul Islam, chief operating officer at Ecom.

“When we were working on it, we were constantly telling the government one thing: remove double taxation. What happens is in e-commerce if you ship one thing from Karachi to Lahore, the Sindh revenue board demands a tax and the Punjab revenue authority also demands a tax.

“So you get stuck in double taxation. In e-commerce you’re mostly selling other people’s products to which sales tax has already been applied, but when the e-commerce company sells the self same product they will also have to pay a tax.”

Published in Dawn, The Business and Finance Weekly, June 25th, 2018

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