Pakistan’s been a late contender to e-commerce, but it’s far from left behind. The sector has seen exponential growth—up to a 100% in fact: a doubling of the industry. Shayaan Tahir, the founder of the biggest online shopping company in Pakistan, Home Shopping, claims that the market “is expected to surpass $1 billion in five years.” Investors and business people see this, and, subsequently, we have seen a rise in new e-commerce ventures. Expectedly, almost two-thirds of e-commerce consumers are located in urban cities, and among the younger demographic, constituting both the wealthy and the profligate, and most are centered in—surprise, surprise—Lahore, Karachi, and Islamabad. This makes natural sense: the younger population in urban cities is more active online and more capable of making online transactions. They, thus, form most of the consumer base.
The drawback remains, however, that a large part of the Pakistani market remains untapped, including the old, the remote, and the comparatively less-affluent. Even after the triple-digit figures, there remains substantial leeway for growth: The e-commerce sector forms barely 0.2% of the overall market.
Compare ourselves to one of our neighbors, India, large in size and doing economically better, dominated by a young consumer profile and bolstered by a rapid increase in internet usage: India’s e-commerce revenue is expected to jump from $30 billion in 2016 to $120 billion in 2020, growing at an annual rate of 51%. According to a joint ASSOCHAM-Forrester study paper (Gadgetsnow.com), that’s the highest in the world! By contrast, Pakistan’s value of the e-commerce industry is a meager $60 million—not a small number, but still dwarfed by India’s growth.
But how is India achieving this growth? Sure, having a middle class of 288 million provides it an advantage over us (especially when we have a total population of 200 million), but is that all? Apparently, no. You see, Pakistani awareness of the benefits of e-commerce, such as its lower costs and added convenience, is spreading at a snail’s pace when compared to India’s. Pakistan also has a number of barriers to electronic commerce, including inadequate infrastructure, a lack of security for online transactions, lesser government support for online projects, and infrastructural inhibitions. India on the other hand has worked hard to rid itself of all those barriers and then some: It receives foreign funding for its infrastructure, has access to cheaper resources, better communications, and, over the years, has managed a commendable increase in standards of living. Is it really so surprising that they are doing better?
On the other side of our border, there’s our other neighbor, China—Communist, labor-intensive, opponent of all things consumerist (in ideology, at least), and, just like Pakistan, entering e-commerce quite late. But it’s still dominating the sales in the sector on a global scale. Online retail sales amounted to $582 billion in 2015 and are expected to reach $899 billion in 2016, “representing about half of all such sales worldwide. These figures clearly overshadow any sales figure reached in the Sub-continent, particularly by Pakistan. Even though the number of internet users are increasing in both regions, Pakistan’s internet penetration rate and smartphone users statistics comes nowhere near that of China. The Pakistan Telecommunications Authority has reported 31 million active smartphone users in Pakistan, as opposed to China’s 563 million. Smartphones provide consumers with accessibility to mobile-friendly online shopping platforms. China’s rural areas have already integrated well with the technology, since online shopping is the most convenient for areas lacking shopping centers.
And then we venture outside of Asia, to the far left of the world map, to the west (to The West)—Europe and USA for our study, to be specific. What of e-commerce there, in continents thriving on wealth and goods and consumerism—eons beyond us in that regard, in fact. The turnover data comes from the new European B2C E-commerce Report 2015, compiled by E-commerce Europe. The report states that 28 member states of the EU together achieved a B2C e-commerce turnover of 368.7 billion euros last year, which means the EU accounts for 87% of total European ecommerce sales. The organization’s forecast is that online sales in Europe will increase by 12.5% and reach 477 billion euros this year. If this happens, Europe will increase its lead on North America, which is now ranked third. One main factor of this immense growth in Europe is the creation of 2.5 million jobs (Directly or indirectly) associated with the B2C E-commerce Sector. The study showed that small European countries topped the ranking of 137 economies according to their readiness for business-to-consumer (B2C) ecommerce, while these factors are absent in the Pakistan Ecommerce Sector.
Then, the next big player in the West: the United States, with sales in 2015 having crossed $340 billion. Annual growth for it, however, has been following a downward trend in the years preceding 2015. The US e-commerce market however, much like the European market, has become saturated, with little expectation of huge booms. Comparing the same against Pakistan’s tremendous 100% growth rate highlights how relatively new Pakistan is to the e-commerce market, and how mature the US market has become over time.
Seeing these astronomical figures for Pakistan, however, begs the question: How exactly did Pakistan manage to achieve this growth at all? The e-commerce growth in Pakistan, and in most places, is fueled by the increasing ease of access of web-pages and internet sites. Broadband penetration is currently at 12%, and mirrors the e-commerce growth. In one year, our broadband users have gone from 4.7 million to 23 million in October 2015, and has probably doubled by now. Furthermore, in 2014, 3G was introduced to mobile services and every month, providing 1 million new consumers potential access to new markets. With the internet at everyone’s fingertips, online browsing can easily turn into online shopping.
Moreover, with major brands marketing and advertising worldwide, Pakistani consumers continue to demand foreign products, which helped increase the e-commerce growth rate here, and which created a niche for online businesses to provide a delivery service for said foreign products. It’s also relatively simpler to start and manage an e-commerce business. Keep in mind that many businesses here operate solely through Facebook pages, the creation of which requires no specific technical knowledge. This helps entrepreneurs who are lacking capital, and also, especially, women. In our societal structure women often have to handle domestic duties, leaving them little time to be able to tend to tend to a full-blown business, but e-commerce is a convenient outlet for them, allowing them to work and manage their company from home.
Overall, a combination of all of these factors has helped lay the foundation for the fast-paced and continuously growing e-commerce market in Pakistan, and although there is still much to be learnt and much to be done as a country, a solid foundation in e-commerce has been rooted, and will hopefully lead to a much more connected and prosperous Pakistan in the future.
Writer: Noor Shahid
Editor: Uzair Shahed Islam