Overall Market Size of ecommerce in Pakistan

There are many estimates floating around as to how big the ecommerce market is in Pakistan. We must first
divide up the ecommerce sector into various smaller divisions. This allows us to understand the dynamics of
each sector in a more comprehensive manner in order to estimate sales volumes.

Marketplaces or Multi-Category Stores

Tier 1 Stores: These are your multi-retailer and multi-category online stores. The biggest ones of the pack are
Daraz, Kaymu & Yayvo, with other e-tailers such as HomeShopping, Symbios, Shophive, Telemart also
competing.
Tier 2 Stores: There are stores which have been present for some time or have recently received investments
and are pushing hard to enter the Tier 1 category. Stores such as Well.pk, GoTo, The Warehouse are all part of
this group.
Tier 3 Stores: This would be a very large collection of e-stores that are trying to compete via a niche category
or as a multi-category store with a very limited team and marketing budget.
Facebook Stores/Group: These comprise of another considerably large segment and sales volume, with
examples such as Sheops taking top spot.
Brand Stores: This segment includes e-tailers such as Khaadi, Ego and Gul Ahmed who enjoy strong brand
awareness but are primarily focused on sales through brick and mortar means. These stores generally have a
high volume of sales and their basket size (AOV) is high. Its a good testing ground for new products for brands
and gives them the reach to capitalise on their brand identity without investing in retail locations across the
country.
Food/Takeaway Model: Enjoys a considerably large market in Pakistan monopolised by FoodPanda and
EatOye.
Travel, Ticketing & Holiday: Players such as Jovago sell hotel bookings and even PIA, Shaheen & AirBlue.
Traditionally these airlines and other transportation service providers are not associated with ecommerce
however they do conduct a sizeable amount of their sales online. Pakistan Railways alone made Rs 100 million
through e-ticketing in 2 months.
Ride Sharing: These include Uber and Careem along with sites such as Travly giving local competition.
Classified: These are listing sites such as PakWheels, Zameen.com, Rozee and of course OLX.
To accurately calculate the current size of the ecommerce market we need to include all these sectors. When
focusing on only the multi-category and brand stores, measuring sales becomes far easier as the market is still
primarily based on COD.
With 3 major COD couriers and several second tier couriers measurement can be fairly accurate. However,
measuring sales of Careem/Ubers and even sales of tickets via PIA is a much more challenging and difficult
task. Most of these companies do not release their numbers in sales volume and when they do questions on
whether those are GMV or NMV are not addressed.
Based on my knowledge and collection of data, I estimate in 2016 overall gross revenues stood well north of
$120 million.

Customer Acquisition
Massive Campaigns such as Black Friday not only help in increasing the number of transactions through
ecommerce stores, they also are a very valuable source of new customer acquisitions.
The biggest such event outside of Black Friday was GOSF the Great Online Shopping Festival which was
organised by Google and the Jang Media Group.
The event saw a dozen online stores participate in an event which led to a staggering 1 Million unique users
visiting the GOSF site. Over 25,000 orders were placed in a span of 3 days with sales estimated at around Rs.
133 million.
As we move into 2017, more and more large customer acquisition events are planned as they act as large
customer awareness programs which is crucial giving even the largest of ecommerce companies do not have the
budgets necessary to sustain long TVC campaigns like they do in India.

Major Areas of Improvement

In an industry thats still growing, there are always going to be numerous challenges. Some of these challenges
can be identified easily while others are still harder to pinpoint. The major issues that the ecommerce industry
faces have been outlined below:

An Unbanked Populace
We are living in a country where the majority of the population is unbanked. Those customers who have a bank
account cannot even use their debit/credit cards online as they are by default restricted from being used for
online shopping.

Unmapped Areas
Another challenge is posed by the lack of identifiable locations. Customers living outside of the major cities of
the country, at many times, fail to have specific addresses that identify the actual place of delivery. This can
make life extremely difficult for logistic companies and many orders experience long delays due to this issue.
Customers get understandably annoyed and many choose to abandon their orders.

Fulfillment Failures
The biggest challenge facing our industry is that of fulfillment failures. Failed deliveries occur as a result of
customer cancellations and even refusals to accept order by customer at their own doorsteps, but these are more
or less commonplace occurrences in the ecommerce business.
Where Pakistans ecommerce industry takes a bigger hit than it would in other places is in terms of ecommerce
stores not being able to fulfill their products 100% of the time due to unavailability. Even when customer
cancellations and refusal at doorsteps are taken into account, the number of orders that are cancelled due to the
vendor listing inaccurate stock levels or information, is far too high.
Regardless of the reasons regarding whether the vendor, the marketplace, the warehouse or the manufacturer is
to blame, and regardless of whether the solutions is technological, manual or has to do with planning, this
problem needs to be rectified quickly.
Since for many online customers ecommerce is still a relatively new retail channel. Delivery failures will only
make customers more reluctant to place their orders online a second time. This loss of trust by customers will
hurt our entire industry and not just the vendor who fails to meet his customers demand. This problem will lead
to reduced repurchase rates and cause increasingly bad word of mouth for the whole sector.
If this industry wants to make a dent in the retail market this issue needs to be addressed as growth will not be
achieved by simply hosting massive sales events every few months. We need to ensure that the customer who
purchases a Rs 200 charging cable and expects it to be delivered in 2 days gets it in 2 days rather than waiting 5
days only find out that the order has been canceled.
When customers shop online they do so for the convenience that online shopping offers. If they find that instead
of convenience they experience aggravation then the whole purpose of online shopping is defeated and its future
in a country like ours will not flourish.

The Growing Market Position

The online retail market is growing immensely on an annual basis. Yayvo has in the first 5 months of the
financial year exceeded its revenues of the previous full year. Other large ecommerce companies post growth of
as much as 300% per year and these growth numbers are apparent across the rest of the industry as well.
With growth accelerating across all sectors and estimated to reach $1 Billion in revenue in 2020, ensuring
positive customer experiences is the minimum requirement. In fact ecommerce should promise its customers an
above average shopping experience that surpasses all their expectations, this is the only way ecommerce sales
can start becoming a bigger chunk of retail sales.
To do this we have to realise the right levers that are necessary to enable great customer service. While a
customer will directly interact with 1 Website, that website is reliant on multiple industries and players to
ensure they deliver a seamless experience.

Vendors without vendors the ecommerce industry would not have any products to display. Vendors are
crucial to marketplaces in particular where any delay in receiving the product can ruin the customer experience.
Logistics: Once the product is procured having the right delivery partner is crucial. Factors such as service
quality and cost are both equally important as well as providing live tracking data and support.
Payments: Whether the payments is handled by the logistics players through COD or by Credit Card
merchants how easy and accessible the payment method is crucial for both the customer and the ecommerce
player. The ecommerce player needs to ensure he receives his payment on time otherwise can suffer greatly
from lack of working capital.
Technology: The backbone of the ecommerce site, technology whether its just the web store, the seller centre,
the warehouse management system or the customer support system. Without the right technology no
ecommerce company can succeed. Whether the technology is custom developed or bought is irrelevant,
however its requirement and proper usage is crucial to succeed.
Trust: Only when all of these elements are working properly will the customer end up getting a good
experience and therefore start to build trust in the overall sector. This will result in higher repurchase rates and
therefore retention which itself will then drive further acquisitions of new customers.

Conclusion
We have over the past 2 years seen massive strides in ecommerce. With the launch of 3G there was an
immediate boom in the industry, now as 3 of the 4 mobile networks have 4G/LTE we might be in for another
round of growth especially if we start getting cheaper 4G handsets.
Traditionally retail industries have also started to aggressively explore entry into ecommerce, either directly or
through marketplaces. The mobile networks are innovating rapidly and entering into the FinTech space. The
FinTech space is also seeing new entrants directly and the banks have started to consider digitisation. The
logistics players are trying to innovate more with two of the incumbents getting funding last year.
Overall I think we are on the cusp of a very exciting phase in ecommerce within Pakistan. There are still
significant challenges ahead, however we are also in the lucky position of not having to set this up from scratch.
The US ecommerce market currently sits at around 8-9% of total retail sales, while China is around 18-20%.
Pakistans ecommerce isnt even close to 0.1% of total retail sales as yet but considering the overall size of our
market we should be able to achieve better results soon.
As Benedict Evans of A16Z stated Everything bad that the internet did to media companies is going to happen
to retailers, if it hasnt already. We are in a market that is growing and it is upto us to ensure we look after all
customers who do come online to shop so that we create an online shopper for a lifetime.
Adam Dawood heads Yayvo and has over 5 years of experience in the eCommerce industry. He is an MBA
from Tsinghua University and has a Finance degree from Durham University, Prior to joining Yayvo, Adam
Dawood was the Managing Director of Kaymu in Pakistan.

How much e-commerce is effective in Pakistan?

The world of e-commerce has recently emerged and progressed at an astonishing speed in Pakistan with many
new and existing organisations, businesses, and customers.
Pakistan, although a late entrant to the world of e-commerce, has recently recorded a massive rise in online
shopping trends and other e-commerce businesses. Such exponential growth trends over the past few years
with US$30 million being spent on online purchases currently depict a highly positive picture for the future
and the size of Pakistans e-commerce market is expected to reach over US$600 million by 2017.
With many new online ventures springing up rapidly and existing businesses recording unprecedented growth
rates, there is still a lot that needs to be done to reach the true e-commerce potential of the country and compete
with other big players of the region. Several factors are responsible for drastically changing shopping trends
over time and driving the growth of e-commerce in Pakistan.
One of the most important factors in the equation is the rate of internet penetration in Pakistan. Pakistans
internet enabled population is limited to around 30 million users today. This, however, is expected to rise up to
56 million users by 2019.
Pakistans much-awaited entry into 3G and LTE services in 2014 has increased internet accessibility and will
also most likely propel the growth of online purchases. Statistics from the Pakistan Telecommunication
Authority (PTA) reveal that the total number of third-generation (3G) mobile subscriptions have risen up to
10.3 million in 2015. The number of 4G or Long Term Evolution (LTE) subscribers also increased to over
68,000.
Over the next 5 years, 28 per cent of the countrys population is estimated to have internet access. With
increased access to the internet and social media sites such as Twitter and Facebook, marketing trends are also
rapidly changing and transforming the way opinions are now being shaped.
This will not only transform shopping trends but also significantly impact several other e-commerce arenas,
such as online job hunts through Rozee.pk which has facilitated job hunts for over 1 million people, and land,
property and rental transactions via Zameen.pk, to name a few.

Does e-commerce prove itself as a growing side in Pakistan?

The future of ecommerce trends lay in the ability of online business to gain their foothold and establish trust in
online shopping and e-commerce initiatives.
There is a long way to go. With just 3 per cent of the Pakistani population indulging in online shopping, several
initiatives are starting with online businesses in Pakistan to reach out to their potential market, build up their
credibility, and garner consumer trust. This is especially true for risk-averse shoppers.
Online brands such as OLX have now begun to set up significant advertising budgets for mainstream media
advertising, as well as targeted digital marketing initiatives through social media. Rocket Internet, which
operates different ventures in Pakistan, has injected a lot of capital into the Pakistani e-commerce market.
Unilevers recent partnership with Daraz to utilize the platform for reaching out to consumers all over Pakistan
for its beauty and personal care products signifies a shift of the FMCG sector towards e-commerce as well.
Kaymu.pk has established itself as a successful online marketplace through a consumer-to-consumer (C2C) and
business-to-consumer (B2C) model. It has also launched a mobile phone app to provide widespread access and
opportunities to existing and budding entrepreneurs. Approximately 17.3 per cent of ecommerce activities take
place via smartphones.
Such marketing initiatives are generally successful in reaching out to first time consumers and generating
overall awareness, acceptance, trust and credibility.
Many visionary local players such as Shophive, Homeshopping, ROZEE, Just4girls.pk, and Pakwheels, as well
as giant foreign investors such as Rocket Internet with their diverse online initiatives such as Jovago, Tripda,
and Foodpanda, are all swooping in to establish their market share in the emerging e-commerce industry of
Pakistan, within their respective domains.
Various other local and home operated business have also flourished through Facebook pages as a result of
rapid penetration of the internet and smartphones, COD and IBFT services and the overall growing trends of
online shopping.
All these businesses have emerged in spite of all the barriers such as misconception and mistrust of e-commerce
in Pakistan, security concerns regarding online transactions, low access to technology, low literacy rates, and
limited infrastructure and logistical support.
All in all, this goes to show that the market and timing is ripe for e-commerce in Pakistan irrespective of a few
hiccups and the industry is all geared up to create massive waves in the country, with colossal scope for
innovation and improvement as well as exponential long-term growth.

E-commerce in developing world:

Online shopping has become commonplace in many parts of the world including the United States, Europe and
Asia. The main reason for the growth in eCommerce and online business is the convenience that it offers to
customers, who have begun to fall in love with this new way of shopping. Actually, year-over-year, eCommerce
revenue is increasing by double-digit percentage points.
This trend is not going unnoticed around the world. People in developing countries are increasingly showing
their tendency for eCommerce and online shopping, which has made savvy retailers in these countries sit up and
take note of this phenomenon.
According to reliable research, Latin America was host the fastest-growing online population in the world last
year, which saw a big rise in both eCommerce and digital advertising. The main trend which has caused this
huge wave of online shopping is the 2013 holiday shopping season, which continues to grow in Latin America
with the total number of shoppers now up by 16% compared to the previous year.
This trend of eCommerce going big in Latin America is being replicated in developing nations in other parts of
the world as well. Worldwide, people are sitting up and taking notice that the use of eCommerce is changing the
conventional way that business has been conducted in the past. The growth of eCommerce is closely related to
the growth of the Internet in developing countries. According to reliable statistics about Internet Growth
worldwide, out of the top 10 countries online, the USA sat quite near to the bottom of the table at #8. However,
China tops the list at #1 with India following close at #2.
Considering percentage figures, Internet users grew 38% in India, 44% in the Philippines, and 26% in Turkey.
Internet users also grew in China (12%), Indonesia (22%), and Mexico (19%). However, internet users in the
USA grew marginally (1%) and Russia (3%). Based on the ITUs 2010 stats, for countries like Nigeria and
Japan, Nigeria maintained 28% population penetration while Iran increased its internet users from 13% to 48% .
Encouraging figures also prevail for other countries, making it safe to say that developing countries are driving
growth worldwide. Hence, it can be safe to derive that eCommerce, piggy backed on the growth of the Internet
in developing countries, is riding the growth wave currently.
As eCommerce goes forward to convert the entire world into a small village, barriers such as distance are not a
hindrance for conducting business nationwide or even worldwide. In developing nations, small and medium
sized enterprises (SMEs) are beginning to be the segment most benefited by eCommerce. No wonder, SMEs
hold the key to eCommerce growth in the developing world. eCommerce works by offering global access to
these businesses by linking them up with the more competitive world around them. Through this method,
developing countries get an opportunity to increase their competitiveness and offer better quality and services to
the global world.
Developing countries have the potential within them to offer and promote their products and services as a way
to increase business and thereby their GDP. This is why eCommerce is being touted as the next big thing for
developing countries. Through SMEs and eCommerce, developing countries get a chance to showcase their
business to the worldwide community. Online promotion changes the equation in the favor of the participating
SMEs and therefore in the favor of developing nations ultimately. eCommerce thus opens up a wide spectrum
of market opportunity for its participants. Participating SMEs in the developing nations get an opportunity to
discuss a wide range of business opportunities and discuss their problems as well as opportunities with a global
audience. At the same time, eCommerce connects developing nations with their peers worldwide, so that they
are able to share related information, knowledge, experience, as well as solutions.
Consequently, developing nations are able to grow faster, see a wide range of opportunities, and broaden their
vision for a prosperous future.