Aurora Magazine

Promoting excellence in advertising

Published in Nov-Dec 2014

Transacting online

The broadening horizons of ecommerce in Pakistan.

Ecommerce started in Pakistan with in 2001. The online store displayed various computer accessories and their prices and one could order online or via phone and someone would come over to deliver the goods and collect the cash. Online payments have been an issue for a long time and remain so for most small websites. Even large websites (including Daraz, Kaymu, HomeShopping and TCS) continue to see a great deal of volume in cash on delivery (resulting in the creation of a sub-business unit for delivery firms).

Increased customer confidence in online stores, triggered by convenience, retailer credibility and ease of transactions has encouraged entrepreneurs to take the ecommerce route. At the moment two formats of ecommerce stores predominate in Pakistan. The first is a proprietary store format, where the company displays a range of products and sells directly to customers. Such stores may or may not hold inventory based on their market studies and requirements. The brand is visible to the customer, but the seller is not, except for the ecommerce outlet itself. For all you know those fancy headphones you bought today were probably ‘bought’ from the wholesaler yesterday before being repacked and delivered to you. The second format is the marketplace format, which operates much like a shopping mall. You come to the site and you can see not only the products, but who is selling them as well. The site owner is responsible for your experience at the site, taking your order, your payment and delivering the product. The product is stored and sold by the marketplace participant (brands) via the ecommerce store owner. You can compare it to having a shop in a popular mall. These marketplaces are either B2C (Daraz, JadoPado and TCS Connect) or C2C (OLX, Souq), or both (Amazon).

Small electronic brands and dealers, and even retailers have also been direct participants in ecommerce marketplaces.

The major brands tend to stay away from ecommerce sites, although they encourage their distributors to sign up, because every sale matters.

An interesting development has come from Unilever Pakistan, which decided to join hands with Daraz (a venture backed by German internet giant Rocket Internet) to sell Unilever products directly to end consumers. For the moment, Dove, Ponds, and Toni & Guy products are available to customers, but more products are expected soon. All this has great implications for ecommerce in Pakistan.

Cell phones, electronics and other products that are highly researched, planned purchases accounted for the largest share in terms of online transactions until not too long ago. Clothing brands such as Labels E-store and Daraz have now made some of the less research intensive, quick buy products available, thereby shifting the share from exclusively high- end purchases. Today, products that we use every day are available at online stores, backed directly by the manufacturer.

However, it is important to clarify that a few supermarkets already did have ecommerce outlets as did some purely online grocery stores where people could buy their favourite brand of ghee or cooking mix. Bookstores are already there and recently medical stores have jumped into the arena. This means that some of the products now made available by Unilever had already made it to online stores. The difference, however, was that while previously these products were made available by distributors, there is now an elimination of counterfeit possibilities, since the product is coming straight from the source.

What this means for the customers is that pretty soon many more products from more companies will be available directly to them online and all they will have to do is search, select the product and checkout.

Unilever Pakistan’s move is a confirmation of what we can expect the future to be. Customers will gradually move to online purchases for an increasing number of categories, especially those products and services that do not require someone to touch the product. Unilever expects its ecommerce venture to hit a turnover of four billion rupees over the next five years, with health and beauty taking a large share. (Source: Amir Paracha’s comment in the Unilever press release).

The recent 3G and 4G auctions, the exponential increase in smartphone users and recent developments in having a local payments gateway, all point to the fact that five years from now Pakistan will be in a different place in terms of ecommerce adoption as more and more consumer brands use the power of the internet to gain faster access to our homes.

Imtiaz Noor is a marketing technology consultant.