Based on BR Research’s interactions with stakeholders in the e-commerce space, it appears there is a clash of arguments between the need for sector’s growth and the need to secure consumer rights in this space.
Online retail has grown exponentially in recent years to come to a market size of around $100 million and is expected to cross a billion dollars in a few years (see the illustration). But that has happened amid a lack of policy focus. Rough estimates suggest the online cab-hailing market, which is defined and dominated in Pakistan by Careem and Uber, is also on a roll.
That kind of growth would have been somewhat acceptable, for sometimes a hands-off regulatory approach is required for nascent sectors. However, the existence of a regulatory vacuum may threaten the growth and sustainability of digital intermediaries going forward.
Currently, there is no one regulator who is clearly in-charge of the e-commerce space. That’s a natural result of this kind of economic activity being at the intersection of technology, commerce, and payments. But anecdotal evidence increasingly suggests that consumers are on their own, dependent on the businesses’ discretion. The Competition Commission of Pakistan (CCP) inquiry report earlier this year against Kaymu is Exhibit A on an online shopper’s ordeal to get his or her complaint resolved.
The lack of a comprehensive consumer protection regime in the e-commerce space is a threat to the sector’s growth. The service providers can only build users’ trust in the system if enough folks try the digital platforms enough times without hitches. That kind of familiarity is the key to building trust.
A recent survey, conducted by Gallup Pakistan in partnership with BR Research on retail preferences of urban Pakistanis, also gave a glimpse of the extent of issues faced by consumers in the digital realm. The survey comprised a sample of 1,252 respondents across urban areas in the four provinces and was conducted between May 14 and June 12, 2017.
Findings showed that 11 percent of respondents had made at least one purchase from an online shopping website in the past twelve months. Within that group, 27 percent experienced issues with their purchases. About two-thirds of the issues faced were of functional nature – the product didn’t match description (57%) and product was faulty/damaged/non-functional (8%). 35 percent of aggrieved respondents felt online shopping website didn’t resolve the issue to their satisfaction in a reasonable time.
The survey also included online ride-sharing/cab-hailing applications, like Careem, Uber, and A-Taxi. About 14 percent of respondents had tried these online cab services in the past twelve months. Within that group, 39 percent had experienced issues with the service. Majority of the issues faced were related to a human factor – lack of driver courtesy (49%) and unskilled/rash driver (31%). Some 36 percent of the affected respondents said that the negative experience deterred them from using the service again.
One has to be careful interpreting survey results. But the percentage of aggrieved folks in the Gallup survey is a bit too high, not to be ignored. This level of user dissatisfaction does not bode well for the growth in the digital space. One could argue that user trust is at stake. Especially where human factor is involved, unfortunately one has to be unlucky once to learn a hard lesson.
Sources in the legal profession tell BR Research that the existing provincial laws on consumer protection and the workings of the scant consumer courts wouldn’t be able to deal with the dynamics of the transactions taking place in the digital economy. The new economy demands a new set of laws, rules and guidelines to not only grow the new set of economic activities but also protect the end users.
There is a need for a consumer protection framework in the digital domain. A framework is reportedly in the works at the federal government level. Read this column in the coming days for BR Research’s take on what the contours of that framework should look like.