Since its inception, eCommerce has grown at an exponential rate around the world. According to a report by e-commerce giant Shopify, worldwide retail eCommerce sales are expected to reach $4.9 trillion by the year 2021. Websites such as eBay and Amazon have completely changed the landscape of shopping, forcing practically every retailer to create online options for the purchasing of their products.
Even in Pakistan, sites such as Daraz.pk, HomeShopping.pk and Yayvo.pk have created tens of thousands of jobs and helped boost retail in the country. A report published by online price comparison platform PriceOye showed that e-commerce sales in Pakistan reached Rs40.1 billion in 2018. Since the advent of coronavirus forcing people to shift all their operations online, the use of e-commerce is becoming more the norm.
The promise that was never fulfilled
Impressive as this may sound, when you compare it to the fact that approximately 80 million people have access to the internet, the accessibility and use of e-commerce should actually be much higher than it currently is. Pakistan’s neighboring countries, China and India, have seen explosive growth in their e-commerce markets yet Pakistan is miles behind. There are a few factors holding eCommerce back from the mass adoption it’s had in several other countries. Recently, we hosted Shayaan Tahir, CEO of e-commerce site Homeshopping.pk in our weekly SadaPay Rising FinTech webinar series. His conversation with our COO, Omer Salimullah, gave us the following as the most pressing issues Pakistan needs to address.
Major mistrust between buyers and sellers
eCommerce and online payments face serious drawbacks due to people not understanding or trusting these platforms and practises. For those who don’t fully understand the functionality of e-commerce, providing personal details such as your bank account number to make online payments or even your address and phone number can seem incredibly risky. Although a lot of e-commerce sites have tried to fix this by offering the option of cash on delivery, people still remain skeptical about providing personal details online. Implementation of appropriate consumer protection laws could help alleviate this issue, but another primary reason why this mistrust exists is the low quality items prevalent on most e-commerce sites.
Low quality products and poor marketing
A major issue that needs to be accounted for is the abundance of substandard quality products on eCommerce sites. Merchants who specialise in cheap knock-offs or substandard quality items find it easier to sell on e-commerce sites because photos and descriptions can be intentionally misleading. Aside from this, merchants who aren’t acquainted with how to market their products online end up presenting their items in a poor manner without relevant, organized descriptions and specifications, making people reluctant to purchase. Not being able to pitch a product properly or having an overload of subpar products tends to bring the entire reputation of the eCommerce site down.
The reason I started my own store in 2008 was because I could not find most of what I wanted to buy without leaving my houseShayaan tahir
Lack of investments in eCommerce
Given that e-commerce start-ups are usually operated by young entrepreneurs with limited budgets, they don’t have the capacity to engage in traditional means of marketing like TV ads or billboards. This doesn’t necessarily have to be a disadvantage if they can make good use of online channels for marketing but a limited budget means less investment in marketing and online ads putting them at a disadvantage to their physical store competitors. Since there is already a low digital literacy rate in Pakistan, effectively articulating the benefits of e-commerce and how to use it is vital in promoting its growth. Tahir further expanded on this point during the webinar by citing the lack of clear government policies to promote e-commerce, digitisation of most sectors in general, and support for smaller entrepreneurs as a major factor hindering the boom of e-commerce in Pakistan.
During the episode ‘The Promise and Reality of e-commerce in Pakistan’, Tahir discussed some of the drawbacks regarding the use of e-commerce in the country listing the nature of Pakistan’s market as one such drawback.
All the online shopping portals offer substantial discounts on their products. Discount is the most important factor for buying goods in the Pakistani market. As a result, the price competition leads to a decline in profit marginsShayaan tahir
No eCommerce sites in local languages
Unlike a lot of other countries that have gone through a boom in e-commerce, Pakistani sites primarily function in English. With Urdu being the most dominant language in the region, this leaves out a large chunk of potential customers making e-commerce a luxury of the comparatively smaller English-speaking population. If e-commerce companies were to add the option of multiple languages to their sites, they would likely be able to reach a much wider audience within Pakistan.
The way forward
eCommerce has the potential to provide a major boost to Pakistan’s economy if these issues are effectively addressed and dealt with. Some online marketplaces have already done remarkably well in the country, such as FoodPanda, Daraz.pk and Cheetay but even so, there still remains a great deal of untapped potential and a serious need to strengthen the foundation of digital commerce in the country. With the culture of entrepreneurship growing fast and the government starting to realize the importance of facilitating online businesses, especially in light of COVID-19, we hope this year becomes the turning point and we start to see bigger things happening in the Pakistani eCommerce space.
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