The Promise of Ecommerce in Pakistan

Businesses go where people go, and right now it’s online, mobile and eventually on wearables. Globally a large population shops on the go, and increasingly look for ways to know more before they spend, and how quickly they can be delivered, at the most acceptable price. But more importantly, it’s an experience that sets your business and the rest apart.

Hence the subject of my talk recent at The Nest I/O, a technology incubation house in Karachi, Pakistan. I was invited to speak to them given my experience and understanding of ecommerce, and surprisingly most of the incubated businesses at the venue are developing ecommerce related products.

The agenda for the talk was as follows:

  • What is ecommerce
  • E-Tailer vs E-Marketplace – understanding the difference
  • Key ingredients of any ecommerce business
  • Accessibility to the product by the masses
  • The tools to make your business successful

Wherever appropriate I have included relevant statistics pertaining to ecommerce globally and within Pakistan. However in this post I intend to add some more material that should be useful.

What is ecommerce?

In simple terms, it can be defined as:

The buying and selling of products (goods and services) over the internet.

My definition is slightly different, and intended to incorporate factors related to different countries:

A transaction (buying or selling of goods) completed in full or in part through an electronic system, can be considered as an ecommerce transaction.

I say “in part” because every country and every people have different beliefs and values. In the US, Europe and in the rest of the developed countries, including South East Asia, have no problems in using their credit cards, banks, and even services like PayPal for any form of ecommerce transaction.

This is not the case in the developing world. In South Asia and to a certain extent in the Middle East cash on delivery is still a norm, though there is now a growing trend backed by convenience and incentives to transact online.

The trend is also driven by the increasing number and types of businesses that have progressed towards transacting online, and increasing accessible on mobile phone apps. Websites and services such as Amazon, eBay, Walmart, Liberty Books, Kaymu, OLX, Elance-Odesk (now Upwork), ClearTrip and even cinemas are just some examples of the businesses you can see online.

E-tailers and E-marketplaces

A few of these are e-tailers, and the rest are e-marketplaces. E-tailers are essentially stores in their own right. They may even have a brick and mortar presence, and driving sales through their website. These are most suited for B2C and B2B businesses and bear the responsibility of managing sales, logistics, payments, customer care, inventory and the website all by themselves.

E-marketplaces, on the other hand, are more like a shopping mall where several outlets are present, which again may have a physical presence as well. The difference here is that the shopping mall has a single checkout process for all the brands and products that are sold on it.

The e-marketplace manages the sales, logistics, payments, and customer care, while their stores address the inventory and supply of products and services on their part and update the e-marketplace accordingly.

Other than B2B and B2C, an e-marketplace is suited for C2C transactions, for example Kaymu or similar websites may have individuals or very small businesses also enlisted and doing business. Other examples are Elance-Odesk or any classifieds website.

Ecommerce today, and ahead

Ecommerce as a way of business and transactions is heading “to infinity and beyond”, because it clearly transcends the traditional brick and mortar business model. Although I still believe that having a physical presence or place of contact is required by businesses who have a massive FMCG style footprint to cover. Ecommerce then takes over once that initial trust factor has been covered.

Let’s take a look at where the global business revenues are heading.

Global b2b Sales

As you can see, these are steadily growing sales figures. There is an increasing sales driven thanks to use of mobile devices.

Global Mobile Transactions

So by the end of 2015, it is predicted that about 40% of all ecommerce transactions globally will be on mobile, be it on a phone or a tablet, native app or responsive website. My experience suggests that websites that have adaptive features for mobile devices have a chance to offer comparatively better experiences than just responsive websites. Take Emirates for example. They have an adaptive website for mobile devices, and a really immersive experience for iPhone and iPad users.

Ecommerce in Pakistan

Since the presentation was for the Pakistan audience, I had concentrated on a few relevant facts.

Most small businesses operate without being banked, so you’d have cash on delivery as a primary medium of payments, while the businesses are not tax registered. However, given the limited businesses that are registered and banked and market study, it is suggested that Pakistan saw about $35 million of revenue in the last year. Though not too encouraging from a regional standpoint, but it is also predicted to reach $100 million in just a few years.

This is based on the fact that there are over 200 small to large ecommerce businesses thriving successfully, and very safely I can assume that there are more than 2,000 orders placed everyday. Not all manage to gain a high ticket price, but businesses like TCS Connect, Kaymu, Daraz and HomeShopping manage to gain an average of above PKR 7,000 value per order.

Retail Facts about Pakistan

Pakistan is a largely under-served market. Most brands and products are logistically captive within urban cities or semi-urban areas. The rest although ready to consume, don’t get to experience other products until one of them go to urban areas to purchase them. This is the experience we had when I was working with TCS Connect.

Hence, the majority of high value orders end up being shipped to semi and non-urban areas of Pakistan. And we are so far only talking about typical product based ecommerce businesses, the tip of a huge iceberg.

Beyond retail and products business

There are definitely more business areas worth exploring. For example, The Readers Club by Usman Siddiqui is Pakistan’s first and probably the only reliable book lending service. He later founded Kitabain, a book store. Similarly, there are a number of “service” providers who have made a mark in the country. A brand new service Sukoon was recently launched from The Nest I/O, to connect people with household repair and maintenance personnel available. Their promise, enlisting only pre-screened and qualified professionals who will provide quality workmanship. Recently we saw the launch of Jovago in Pakistan, the accommodation booking service that already has a number of hotels of Pakistan listed in their database and sees regular updates in prices, availability, user feedback and offers online payment too.

And this is just a few of the many services that exist, catering to the varying needs of people.


In the next post…

We will cover some of the key areas that small entrepreneurs need to look at as they aspire to grow into sustainable businesses.


Image credits:

Click here to view the complete presentation from The Nest I/O session.


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