As Pakistan stepped up its internet game to 3G and 4G networks last year, it escalated the growth horizon for e-commerce exponentially. From a handful of online retailers in the country a couple of years back, the industry has expanded to an extent that the market sees new entrants every week.
Currently, e-commerce is an insignificant part of our economy - fraction of a percent of Pakistans GDP. For the industry to be honoured with "changing the way of doing business," the tally must reach at least 2-3 percent. In China, online shopping makes up 8 percent of the countrys total consumption.
The e-commerce industry in Pakistan is still invisible to most; it does not qualify as an employment option for income tax purposes, and isn even regulated. There are some sizeable foreign-money ventures, like Daraz and Kaymu, and some local ones too like HomeShopping and Telemart that have won customer loyalty to some degree. Their size however, remains small. In India, seven e-commerce companies have hit the billion-dollar valuation mark, and the industry there still considers itself in the infancy phase!
If one accounts for Pakistans late arrival to the 3G party though, the situation isn disappointing after all. The government should pay due attention to the booming industry, yes, but from the perspective of the e-commerce community - buyers and sellers - the growth has been phenomenal and the outlook looks even more so.
Since the (mobile internet) upgrade, internet penetration rates have soared significantly, and are expected to remain this way in the foreseeable future. From a population of 200 million, there are over 36 million connected individuals in the country. Nearly half of these are 3G and 4G subscribers who are growing at a monthly pace of 6-8 percent. Smartphone tally is expected to reach 40 million by 2016-end.
The rapid expansion in our internet user base translates into greater online transactions. The size of the e-commerce market in Pakistan is around US$100 million, compared to $60 million in December 2014. In absence of a standard industry source, or a trade body, these figures cannot be trusted a hundred percent, but they are sufficient to highlight the growth trajectory.
Research by Kaymu Pakistan, one of the industrys leading players, shows that the industry grew 40 percent (quarter-on-quarter) in the 4QCY14. From there, the company estimated a rather over-optimistic trajectory - 10 percent exponential growth in e-commerce transactions for each quarter, meaning an expected (QoQ) growth rate of 72 percent in 4QCY15E and 95 percent in 4QCY16E.
Kaymu, backed by German web-business incubator Rocket Internet, itself saw steep growth in its numbers. In the past year, number of (product) listings on the online marketplace has jumped 246 percent and the orders saw a 365 percent rise. The company was launched in March 2013.
Around two-thirds of the traffic on e-commerce sites in Pakistan is directed through either Google or Facebooks paid advertisements. The small contribution of organic traffic to the mix entails that companies wish to excel, need to spend big on e-marketing, along with having a strong product offering, great service and a working site interface. This means that many of the new entrants will not survive once the dust settles.
With e-commerce promising to take off in all its shapes and colours in Pakistan, there will be a large spill-over on infrastructure and logistics investments. The need for warehouses, sortation and delivery centers, and employment can only rise from here.
There are plenty of growth drivers to this nascent industry, whichever way you look. The tech-savvy millennial who are becoming the largest chunk of population, the soaring mobile (internet) penetration, rising number of ventures and incubators, and the growing realization to make everything "a click away," all make e-commerce in Pakistan a sure bet.
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