The e-commerce market in Pakistan is gaining momentum sharply, during the fiscal year 2017-18 Pakistan’s e-commerce market sales reached $40.1 billion as compared to $20.7 billion during the fiscal year 2016-17.
The internet, mobiles and digitalization efforts contributed to gross domestic product (GDP) from 52% to 60% according to the figures of State Bank of Pakistan (SBP). E-commerce in Pakistan is growing at an unprecedented rate which is mainly due to the greater penetration of internet services and smartphones, the business-to-consumer B2C market is growing even faster than the business-to-business B2B market.
Pakistan’s e-commerce market has witnessed a whopping 93% growth in just one year from Rs20.7 billion in FY2016-17 to Rs40.1 billion in FY2017-18.
According to the annual report of State Bank of Pakistan FY18, the data acquired for transactions only include digital channels including credit/debit card transactions, bank transfers, mobile wallets and payments via prepaid cards and other online payment systems.
This shows even larger growth which is not accounted for, in Pakistan, there is a huge chunk of payments which is completed via cash-on-delivery system hence leaving the data out of SBP radar.
However, according to the report, the cash-on-delivery settlements are estimated 80 to 90% of the total volume of sales and around 60% of the total e-commerce value in Pakistan. This indicates that the total e-commerce volume during FY17 and FY18 could have reached Rs51.8 billion and Rs99.3 billion respectively.
Online retailing makes it possible for sellers to connect to their respective buyers directly and commence transactions while reducing the cost of sales via traditional channels, therefore, businesses in Pakistan are now focused more on opening their retail channels online, the leading producers of apparel, food, electronics, and smartphones now have more than one retail channels online.
The e-commerce market growth in Pakistan is evident and it’s expanding fast despite many obstacles, Pakistan is currently facing three major obstacles in e-commerce growth,
1- Internet services
2- Postal services and delivery mechanisms
3- Payment services
Currently, Pakistan has 73% of the cellular subscribers and only 59% of those use 3G/4G services in Pakistan, the total number of internet subscribers in the country is 62 million.
The problems in internet speed, coverage and service also hinder the growth of e-commerce which is coupled when delivery mechanisms are not right, longer delivery times and expensive delivery services are making it harder for sellers and buyers to make their choices.
Secure, widely used and swift payment systems in Pakistan is another big issue, payment services like PayPal are much needed in Pakistan.
If Pakistan is able to remove these three obstacles from the way the country might be able to expand to other regions and export billions of worth products from Pakistan to other countries.
The McKinsey Global Institute (MGI) reported that Pakistan could increase its GDP by 7% ($36 billion) and it could create roughly 4 million jobs during 2016-2025 by increasing the use of digital financial services in the country.