Can Pakistani sellers culturally change for Amazon?

Published September 13, 2021
Amazon’s requirements for small businesses to be registered and within the tax net throw a wrench into the works before the whole logistic challenges can come into play.
Amazon’s requirements for small businesses to be registered and within the tax net throw a wrench into the works before the whole logistic challenges can come into play.

“The hidden costs on Amazon are roughly 55 per cent on any sale,” says Sajid Saleem Minhas, CEO of Delta garments.

“Furthermore, the cost of retrieving products left unsold in Amazon’s warehouses is prohibitively high and for which we have no government support,” he adds. Given the low-value nature of items sold on Amazon by Pakistani sellers, the high shipping costs associated with it make sales via Amazon less viable, he says as Pakistan Post offers courier services by air.

Seller woes

The beginner’s guide to sellers that is available on the Trade Development Authority Pakistan’s (TDAP) website states: “In order to complete your registration, make sure you have access to your bank account number and bank routing number, a chargeable credit card, government-issued national ID, tax information and phone number.”

The whole brouhaha on bringing the informal economy in the tax net that has taken place at various points, most recently before the pandemic that upended most plans, was because many sellers, traders and manufacturers refuse to be formalised. Most small and medium businesses, and many big ones, keep two sets of accounts to avoid paying taxes which is at times the only way for the business to remain viable.

Amazon’s requirements for small businesses to be registered and within the tax net throw a wrench into the works before the whole logistic challenges can come into play.

Emphasising the importance of learning, Ayesha Moriani, JS ministry of commerce, says that sellers have to talk to peers who are already doing business internationally

Furthermore, the document on TDAP’s website states a subscription fee of $39.99 (roughly Rs6,725) per month for the professional selling plan or a $0.99 (approximately Rs168) fee per item sold for the individual plan is charged. Then there are selling fees per item sold, which include referral fees and variable costing fees, shipping fees, and Fulfilment by Amazon for products that are stored and processed by Amazon.

The cost and registration structure may dissuade small businesses from opting for Amazon.

Media reports circulate that Pakistan Post is the official partner, a misconception that was cleared by someone in the know belonging to the state institution.

“It is clarified that Amazon has neither authorised nor declared any courier company including Pakistan Post as its official delivery partner. It is the responsibility and choice of the seller to find and select delivery mechanism,” said a document shared by Pakistan Post, a copy of which is with Dawn.

Another Pakistan Post official identified himself as a critic of the deal with Amazon. “Despite challenges, Pakistan post office has a strong postal network but we operate manually, we are not digitalised,” he said giving a history of attempts to digitalise the state’s arm of courier services that eventually came to nought because of lack of funding.

Everyone knows that Amazon is highly digitised — why does anyone think the current state of affairs would be compatible with the online marketplace giant, he wondered.

The way forward

“I know there are textile mills in Faisalabad that manufacture products for Amazon,” says Aisha Moriani, Senior Joint Secretary (e-Commerce) at the Ministry of Commerce, explaining that the business becomes viable when economies of scale step in.

But products can’t be sold on Amazon willy nilly, she explains. “One can’t say that I am making a certain kind of shoe so I will list it on Amazon and sell it. One has to hunt for the right product, do research and make a business plan to figure out which products are likely to be sold on Amazon. Sending a shipment of a thousand products that have no demand will end up being wasted.”

Emphasising the importance of learning, Ms Moriani adds that sellers have to talk to peers who are already doing business internationally for which purpose TDAP has organised seminars explaining how Amazon’s model works.

“There has to be a cultural change in how businesses sell internationally when selling through Amazon,” says Ms Moriani. It can no longer be about sending large shipments across without any interaction with end-users. The consumer experience of shopping is vital because sellers will now be directly engaging with customers through reviews.

Sellers on Amazon are free to use any courier services if the services of Pakistan Post are not cost-effective, she adds.

Published in Dawn, The Business and Finance Weekly, September 13th, 2021

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