Retailing is not just booming on the floor, it is teeming online as well. Though varied, estimates for online shopping in Pakistan converge around $60 million per annum. That’s a tiny fraction of offline retailing, but growth has been coming in strong. Pakistan’s Internet retailing grew in double digits in 2015, as per Euromonitor International. There is plenty to sell to an aspirational, demanding and youthful middle class.
The demand-side seems ready and capable to hitch their ride to the online bandwagon. There is already a critical mass of users on board both the connectivity and payment infrastructure. As per the Pakistan Telecommunications Authority, there were nearly 29 million 3G users and about a million 4G users in the country as of May this year. These 30 million mobile broadband users are just the beginning – tens of millions more 2G subscriptions seem poised to be converted to 3G and 4G networks in coming years.
On the payment front, the numbers also look alright, despite low activity levels. Data from the State Bank of Pakistan show that there were 1.4 million credit cards, 26.5 million debit cards, and 15 million branchless banking accounts (m-wallets) in circulation as of December 2016. Registered users for mobile banking and Internet banking totalled 2.2 million and 1.8 million, respectively.
Challenge for folks on the supply-side has been to create platforms that harness these reasonable connectivity and payment subscriptions. In the absence of that, the dominant mode of transaction has been “cash on delivery” (COD), a trend that is not out of step with other developing markets. To avoid COD-related cash handling logistics, e-tailers like Daraz.pk last year introduced “swipe on delivery”.
But thankfully, last year saw a number of payment systems come online that make it less expensive and more convenient for folks to shop online. Easypaisa introduced “Easy Pay”, which can settle payments for online shoppers via mobile accounts, retail shops, and debit and credit plastic cards. Among the local banks, HBL, MCB and UBL have also launched their Internet payment gateways using different partners.
As obstacles are gradually getting out of the way, the supply-side is also expanding. Daraz.pk, Kaymu.pk, and Homeshopping.pk are among the major players in the local market. But there are at least a hundred more Pakistani online stores, selling an assortment of goods ranging from apparel and footwear to jewellery, watches and white goods. But presence is one thing, establishing credibility altogether another.
Repeat purchases will be the key for sustainability. The e-tailers can grow user traffic through attractive price offerings, predictable delivery schedules, and effective complaint management. User satisfaction, on which we don’t have a scientific study to attribute here, seems like a mixed bag, if anecdotal evidence is any guide. The e-tailers ought to generate trustworthiness out of this growing familiarity early on.
The proof is in the pudding. If what is promised online is delivered on time, is in one piece, looks exactly the same, and most important, if it functions alright, word of mouth will only grow. Serious e-tailers understand that it’s a loss-making cause in the initial years. One has to invest in building robust supply chains (for purchase, storage, packing, and returns). And take the hit on returned and rejected items.
Growing volumes can help break even early. For every online Pakistani, there are about five who are offline. A “brick and click” business model may bring more shoppers online in this market, a model which Alibaba.com is using to grow its business in rural China. Over at home, Daraz.pk and Easypaisa have recently started working on those lines. Using Telenor’s “Easy Shops”, folks can go online to Daraz’s marketplace, order what they want, pay at the shop, and receive their cargo at their doorsteps days later.
Pakistan is going to remain a young country for quite a while. As per the latest Demographic and Health Survey of Pakistan (2012-13), about 40 percent of Pakistan’s population is below 15 years of age and about 60 percent below 30 years of age. If the supply-side doesn’t shy away from investing and if the economy continues to ameliorate, online retailing’s future can only go north from here.

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