E-commerce: growing apace

Digital retailers seem to be having a superb time amidst the pandemic. As per the latest e-commerce sector-related payments data from the State Bank of Pakistan (SBP) that is available for the Jul-Sep quarter of FY22, the non-cash/digitally-paid e-commerce transactions (which are reported by locally-registered e-commerce merchants having local accounts with Pakistani banks) grew by 226 percent year-on-year in volume to 12.7 million and 88 percent year-on-year in value to Rs22.4 billion.

It’s been an impressive run for the non-cash e-commerce transactions over past two years. This suggests that cash-based e-commerce transactions (which dominate the sector, by the way) may also be growing at a brisk pace. As per the SBP data, the FY21 annual growth in digitally-paid e-commerce transaction-volumes went up by 115 percent (thus reaching 22 million transactions), and the yearly growth in transaction value was 74 percent (to click almost Rs61 billion). It was the best growth year since 2017-18.

Now the data for early FY22 also show continuation of growth momentum in this space. The positive trend is the growing documentation in this sector as more and more e-commerce merchants are registering with the banks, in their bid to offer their customers seamless digital payment options. As per latest SBP data, as of September end 2021, there were nearly 3,000 e-commerce merchants registered with the banks, which is a growth of 38 percent (800+ more merchants) relative to September-end 2020.

In terms of sequential growth analysis, too, the pre-paid transactions in e-commerce sector stand out during Jul-Sep quarter of FY22. On quarterly basis, transaction volumes grew by 87 percent and value by 22 percent.

The 1QFY22 QoQ growth rate by volume, especially, is one of the largest on record. It appears that customers are posing growing trust in both the e-commerce space and the digital payment sphere – this provides for such huge growth on both quarterly and yearly levels in the analysis period.

Folks are always interested in knowing e-commerce market size. Using 1QFY22 numbers, the annual market size of e-commerce sector (in terms of pre-paid payments) comes to roughly $500 million. Assuming that 75 percent of overall e-commerce market is dominated by cash-on-delivery (COD) payments (and the remaining 25% by pre-paid payments), then the overall market size of e-commerce sector payments in Pakistan can be estimated at $2 billion per annum. Let’s see what the rest of FY22 has in store for this growing space!