E-commerce in Pakistan: Customer Ease & Business Opportunity

Posted on Sep 11 2014 - 2:35pm by Huzoor Bux
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While the size of the ecommerce sector in Pakistan is estimated to be in the region of only $30 million, as compared to the Indian market of $2 billion, it is important to understand the potential for growth and market trends to fully analyze the sector.

Customer Ease & Business Opportunity

Pakistan is hampered by many factors which prevent the expansion and consolidation of the ecommerce industry. The first, and possibly most critical factor, is the lack of a dedicated ecommerce gateway to facilitate online payments. Examples of such gateways are PayPal (which operates globally), and Alipay (which handles transactions in China). These gateways are critical in fostering trust as they guarantee the safety and security of transactions from the point of view of a consumer, as well as making payments to the acquiring merchant. While there are ecommerce websites in Pakistan such as Daraz.pk that accept credit/debit card payments online; these transactions are not expressly backed by a third-party guarantor and rely on the back-end systems of the issuing banks. The federal minister for information technology, Anusha Rehman, has also spoken about the need for an ecommerce gateway to drive growth in the sector. As a result most transactions currently are done on a cash-on-delivery model, which has its own set of risks and drives up costs such as insurance premiums.
The second factor hampering growth in the sector is the slow rollout of next-generation internet services. Pakistan is now finally embracing 3G/4G technology, many years after the rest of the world, but it remains to be seen how quickly the service can be introduced to cities and towns outside the large urban centers of Karachi, Lahore and Islamabad as this will be the main driving force behind ecommerce growth. Simply put, the majority of Pakistanis still reside in smaller cities, towns and villages, and as ecommerce is an extension of how digitally connected consumers are, it is fair to assume that increasing internet connectivity will drive ecommerce growth.
A growing number of online fashion and electronic stores in Pakistan signify the interest that companies are now exhibiting in the country. While Rocket Internet has been around for the past couple of years through its ventures such as Kaymu, Daraz and FoodPanda, the newest entrant is Asani which will provide competition for the likes of OLX. As the ecommerce sector heats up significantly, we are bound to see some interesting developments ahead.