A taste of e-commerce

The foundation of e-commerce has already been laid in Pakistan. Talking about recent developments, the approval of Pakistan’s first e-commerce policy framework by the federal cabinet is indeed a great step towards moving towards a more progressive nation.

The e-commerce policy framework primarily focuses on providing ease to both consumers and online retailers while protecting them by implementing effective regulations.

The policy took more or less three years to be approved, but the good thing is that extensive consultations have been made by private- and public-sector stakeholders such as e-commerce conglomerates, ministries of IT and commerce, FBR, the central bank etc.

The vision behind such an initiative is to cater to the growth of this industry while facilitating, promoting and regulating nine policy areas. These include e-commerce regulation and facilitation, financial inclusion and digitization through payment infrastructure, youth and SMEs empowerment, consumer protection, taxation structure, ICT infrastructure and telecom services in Pakistan; logistics, data protection and investment, and lastly, global connectivity and participation in multilateral negotiations.

According to the Global Consumer Insights Survey 2018 by PricewaterhouseCoopers, e-commerce now accounts for an estimated one-tenth of worldwide retail sales. Similarly, according to eMarketer, global retail e-commerce sales touched $2.304 trillion in 2017.

Since we have not established a ballpark number depicting the size of the e-commerce industry in Pakistan, we rely on the sales statistics to get a better understanding of the total quantum. In 2017, e-commerce sales were Rs20.7bn, and surged by 93.7 percent to Rs40.1bn in 2018. While this is an impressive figure, it is still relatively low compared to the e-commerce sales in India and China, being $33bn and $1,526bn respectively. Considering the global or even regional statistics, we can safely assume that there is a lot of potential in the e-commerce sector which is still untapped.

Online businesses in Pakistan have grown tremendously in recent years due to advancements in information technology, combined with the expansion of internet access and online banking. According to a marketing firm Kepios, Pakistan has approximately 35 million active social media users and from what the trends suggest, there is always a ready market for all sorts of artifacts. It goes without saying that companies like Daraz, PakWheels, OLX or even FoodPanda have taken their due advantage of it.

To understand e-commerce better, one has to first understand the dynamics of the two very crucial sectors which play a vital role – Information Technology and banking. While the use of IT manages entire e-commerce avenues from its development to maintenance to everyday functioning, the banking sector strives to provide newer, easier and convenient methods of processing payments.

The concept of plastic money has proven to be very effective in other economies; however, penetration of this instrument does not happen to be a popular choice in Pakistan. While a certain percentage of people do use their debit/credit cards, not all are familiar or even comfortable with it and hence, they prefer the option of cash-on-delivery (COD).

This gap has been seen as an opportunity by telecom service providers. They have collaborated with financial institutions to come up with mobile-based payment solutions such as Easypaisa etc and data suggests that a vast percentage of the population prefers this over using plastic money solely because of the mechanics. However, due to limitations of networks in such mobile-based solutions and lack of access to the international markets, soon-to-be entrepreneurs find it very complicated to use such platforms.

A major concern to unlocking our market potential remains online payment systems. To reap the fruit, authorities such as the State Bank of Pakistan (SBP) and Ministry of Information Technology will have to open up to the global market and trends such as PayPal, which accounts for 16 percent of all global internet-based transactions or AliPay, which accounts for approximately 50 percent of all transactions based in China, amounting to nearly $300 billion. Integrating such platforms in Pakistan’s e-commerce community will aid in building numerous payment gateways to support our economy while also proving to be a blessing for online consumers both locally and internationally.

Regardless of which sector it is, e-commerce is ever-evolving and it is indeed great that Pakistan has taken its first step in the right direction which will undoubtedly bear fruit in the near future. I hope the authorities, along with the public and private sectors work together to maintain this framework, all while further adding amendments to strengthen it.

The writer is a freelance journalist and a communications professional.

Email: nuzairvirani@gmail.com