Pakistan’s 5mn+ SMEs building on rented land

Pakistan’s digital economy is growing. Its commerce infrastructure isn’t. Our country’s more than five million small and medium-sized enterprises (SMEs) account for over 90% of businesses and around 40% of gross domestic product (GDP). Their importance to Pakistan’s economy is undeniable. But many of these businesses depend on digital platforms they neither own nor control.

Over the past seven years, the way businesses sell online has quietly transformed. Fashion labels that once depended on exhibitions now launch collections through Instagram and TikTok Reels. Homegrown beauty brands find customers through short-form video. Handmade businesses reach buyers through WhatsApp communities. A new generation of entrepreneurs has built businesses without a physical shop, a registered company, or even a dedicated website.

This shift deserves to be celebrated. It has lowered the barriers to entrepreneurship and given thousands of Pakistani brands access to customers they could never have reached through traditional retail.

Yet it has also created a structural dependency.

For many growing brands today, visibility is no longer determined by a website or even a physical shop. It’s increasingly determined by algorithms. Their growth depends on platforms they do not own, recommendation systems they cannot influence or fully understand, and policies that can change overnight. Customer relationships are increasingly being built on rented infrastructure, where accounts can be suspended, organic reach reduced, and the rules changed overnight.

Shopping is no longer driven primarily by search. Increasingly, it begins with discovery. Consumers are introduced to products through stories, creators, recommendations, and short-form videos long before they actively search for them.

Globally, the social commerce market has grown from an estimated $1.3 trillion in 2023 to roughly $2.6 trillion today, with some industry forecasts projecting it will exceed $8 trillion by 2030, fundamentally changing how products are discovered and purchased. Yet Pakistan’s commerce infrastructure still assumes a traditional buying journey.

Trust is no longer simply a consumer concern. It has become economic infrastructure, and that is precisely the layer that artificial intelligence is about to put under new pressure.

A typical purchase may begin with discovery on Instagram, move to WhatsApp for availability and order confirmation, and then shift again for payment or checkout. Every additional step introduces friction and another opportunity for the transaction to fail.

Consumers must also worry about fake stores, misleading product images, counterfeit goods and advance-payment scams. In a customer discovery research involving 200 online shoppers, nearly one in three respondents said they had encountered a fraudulent brand on Instagram. While a small, self-reported sample, it points to the growing trust challenge as commerce fragments across social media and messaging platforms.

For the brands, the journey is even longer. They handle repetitive inquiries, manually verify orders, coordinate logistics, and often face last-minute cancellations or rejected Cash-on-Delivery (COD) orders after investing in advertising, packaging, and shipping.

Every additional step creates friction and another opportunity for fraud.

The financial cost is significant. Cash-on-Delivery still accounts for the majority of Pakistan’s e-commerce transactions, while published research estimates Return-to-Origin (RTO) rates at 30–40%. For SMEs already operating on thin margins, failed deliveries mean lost advertising, packaging, and shipping costs. The challenge is no longer simply generating demand, but converting it into completed, profitable transactions.

Trust, therefore, is no longer simply a consumer concern. It has become economic infrastructure, and that is precisely the layer that artificial intelligence is about to put under new pressure.

Today, launching an online brand can begin with little more than creating a social media page. Generative AI is making content faster and cheaper to produce, intensifying competition for consumer attention. Content is becoming abundant. Attention is not. The same tools that help legitimate SMEs build professional-looking storefronts also make convincing fake ones easier to create. The fraud problem isn’t going away; it’s becoming harder to police.

Every interaction across the digital commerce journey generates valuable customer data. Yet because these interactions are spread across social platforms, messaging apps, logistics providers and payment systems, that intelligence remains fragmented. Most SMEs never develop a complete understanding of their customers because they do not own the infrastructure through which commerce takes place.

In an AI-driven economy, the ability to capture and learn from these signals may become as important as the transaction itself.

The next generation of commerce is no longer just about enabling transactions. It is about creating an ecosystem where discovery, trust, identity, payments, reputation, logistics, and intelligence reinforce one another. Just as roads enabled industrial economies and broadband enabled digital ones, trusted infrastructure can enable the next generation of Pakistani entrepreneurship.

The country has successfully digitised selling. It has not yet digitised commerce.

That distinction matters because commerce extends far beyond product listings. It includes trusted discovery, verified businesses, seamless transactions, reputation systems, intelligent recommendations, and customer confidence throughout the buying journey - a set of capabilities, not isolated features.

Pakistan has spent years encouraging entrepreneurship. Thousands of founders are now building remarkable products from Karachi, Lahore, Faisalabad, Peshawar, Quetta, and beyond. Yet discovering these brands remains surprisingly difficult, especially for smaller ones, not only for consumers within Pakistan, but also for millions of Pakistanis overseas and international buyers looking for authentic Pakistani products. Global platforms are exceptional at distributing content at scale, but they were never designed to showcase any single country’s entrepreneurial ecosystem, let alone Pakistan’s.

The next chapter of Pakistan’s digital economy shouldn’t simply focus on helping more people start businesses. It should give those businesses the foundation to compete: trusted discovery, verified identity, seamless payments, reputation, logistics, and the ability to learn from commerce data.

Pakistan has already demonstrated that it can produce resilient entrepreneurs despite limited resources. The last five years were about helping those businesses sell online. The next five will be about helping legitimate Pakistani brands become easier to discover, easier to trust, and easier to buy from. Getting there will take more than marketplaces. It will take infrastructure designed around Pakistan’s own entrepreneurs, consumers, and digital economy, not borrowed from someone else’s.

The article does not necessarily reflect the opinion of Business Recorder or its owners.