Pakistani cities have been seeing a boom in retail, offline and online. An internet penetration of 29 million in Pakistan (Source: International Telecommunication Union) suggests that over 15% of Pakistanis are online. These numbers may be small compared to other parts of the world but in absolute terms they represent an enormous market.

Over the past few years, Pakistani entrepreneurs have ventured into marketing products and services aimed at tapping into this online purchasing power. At first businesses used to sell gadgets, books and gifts, now however, food, DVDs, clothes, accessories, shoes and even groceries are sold online.

According to Shayaan Tahir, CEO, Homeshopping, “Everyday 14 online stores register with dotpk.”

The category is still in an emergent stage, however in a couple of years the competition is likely to intensify.

“I see a lot of new businesses coming in and a lot quitting,” says Shahrukh Chaudhary, CEO, Dealtoday.

A recent case in point is Azmalo.pk, a website selling electronic gadgets which was launched by the global internet business giant, Rocket Internet. A big splash was expected because of the large investment the group made, yet Azmalo.pk eventually closed down. According to Ozair Bokhari, CEO, Urbanite, this may have been due to the fact that it was too big an investment for too new a market. In his opinion, new online retail businesses have to take it slow and steady.

Online retail in Pakistan faces multiple challenges, the major one being payment. Although people use their credit card to make purchases the world over, the most preferred method in Pakistan is cash on delivery (COD); it is in some cases the only option, the main problem being there are no payment facilitation vendors like PayPal in Pakistan.

Yet despite this, online shopping is alive and thriving, whether it is through a website or through Facebook. Here is a brief look at some of the most interesting players.

Homeshopping was established four years ago in Karachi as a website selling electronic items such as MP3 players and cellphones.

Twenty-six-year-old entrepreneur Shayaan Tahir says that “at the time there was no online scene. Homeshopping was started in a room.”

Since then, the line-up has expanded to include watches, car parts, jewellery and clothes. Staff strength has also increased from two (Tahir and one rider) to 30 people divided into sales, marketing, HR and accounts. With this internal and external expansion, traffic now stands at four million page views a month, with customers spending an average of six minutes on the site.

“Our books have shown a growth rate of 300% every year and currently we are processing hundreds of orders a day,” says Tahir.

Homeshopping’s business model is based on cutting out the middleman and making products available to customers at cheaper prices. Tahir says that because prices are competitive in Karachi, he is able to attract customers from other cities. To keep prices low, products are bought from the international market where prices are lower compared to the local market.

However, it isn’t always the low prices that bring in business. Even premium products attract customers because of the site’s seven-day return policy. Added to this is the trust factor that Homeshopping has developed with its customers, which not only include people living in Karachi, Lahore and Islamabad, but also farther afield in small and rural cities.

In terms of deliveries, in Karachi, Homeshopping has its own network of riders who deliver and collect cash payments. Outside Karachi, they use courier companies. Tahir says Homeshopping is the pioneer of COD payments in Pakistan, without which online retail would have no future in Pakistan.

“When we started Homeshopping, courier companies used to laugh at the viability of a COD system, but eventually it worked out,” recalls Tahir.

Homeshopping is also constantly evolving its processes and revisiting the business model.

“We were initially an e-store, but now we are moving towards the model of Best Buy, by establishing brick and mortar stores for walk-in customers,” says Tahir.

Launched in April 2012 as a ‘deal of the day’ website, Dealtoday sells discount coupons from salons, dentists, photographers and other businesses. Although it was not the first website in this category to start in Pakistan, Dealtoday is the only surviving such website, a fact that can be attributed to the owner having had prior experience in this kind of business.

Shahrukh Chaudhary, CEO, Dealtoday was involved with Home Express (the coupon magazine), MyOffStreet.com and Teamants (the social media agency) and was well aware of the e-commerce picture and the dynamics of coupon selling when he launched Dealtoday. In fact, Dealtoday follows a simpler version of the business model of two well known global deal-of-the-day websites, Woot and GroupOn.

Chaudhary says that “Dealtoday enables retailers to market their products and services at a 50% or higher discount.”

The discount deal is valid for a limited number of days, therefore encouraging impulse buying. Retailers are charged a percentage fee only if the deal is sold (i.e. people have bought it). The coupons are then delivered and the money is collected.

“This boils down to ‘no loss marketing’ for our partners. It is making a choice between advertising with money, and advertising with no money. If a person visits the website, even if he doesn’t buy the deal, he gets to see your product,” says Chaudhary.

The viability of this model can be gauged by the website stats and the growth Dealtoday has seen over a short period.

According to Chaudhary, “We started with two slow months and only 200-250 orders in April, but in the last two months we have serviced 4,000 orders.”

Dealtoday is now servicing 60-70 orders a day and in terms of monthly traffic it has 2,000 visitors spending an average of three and a half minutes on the site.

Customers are mostly young people between 20-35 and are geographically limited as the website only sells in Karachi. Expanding Dealtoday outside Karachi in the near future is not a priority.

“The concept of online coupon purchase is still very new and there is still a huge market to be tapped in Karachi only,” says Chaudhary.

A venture of UK-based firm Ozzit Creations, Urbanite was launched in May 2012 as an online portal delivering food in Karachi. Delivery was first limited to Defence and Clifton but has now expanded to other areas. Urbanite also expanded its product portfolio and is now delivering books, DVDs and flowers.

According to Uzair Bokhari, CEO, Urbanite, “We are more than just a food delivery service now. Urbanite is Pakistan’s first online community portal, a one stop shop solution.”

Urbanite not only works with its partners to sell products and services, it also provides them with a complete product delivery solution as the portal has its own in-house logistics, cold storage facility, IT team and marketing specialists. As a result, the partnering businesses can take advantage of these services as well as benefit from the free visibility, as Urbanite has been using online marketing, BTL and PR to build awareness.

“We charge our partners Rs 5,000 a month if they have their own delivery setup, otherwise we charge Rs 10,000,” confirms Bokhari.

As a result of these benefits Urbanite has acquired over 50 clients in a very short space of time. Within six months it was able to process 4,000 orders, with the last 2,000 orders being serviced in the last six weeks. Urbanite is currently processing 40-50 orders in week days and 80-100 orders over the weekend. Added to this, the portal attracts 150,000 visitors per month, with average time spent between three and five minutes.

Urbanite’s customers range from kids to stay-at-home mums and professionals. The majority are 18-40 year-olds. Shahryar Ahmed, MarCom Manager, Urbanite, says that 60% of their daily orders come at lunchtime. Clearly food delivery is still the cash cow of their product portfolio.

This notwithstanding, Urbanite is expanding their portfolio, with clothing brands set to become a new addition to their portfolio. They are also working on making their ordering system more sophisticated.

“We have launched an Urban Mobile App to facilitate orders,” says Bokhari.

Motivated and optimistic about the future of the business, Urbanite is also planning to expand delivery services in Karachi as well as cover Islamabad and Lahore.

Anam Hakeem is Strategy Planner, IAL Saatchi & Saatchi.
anam.h@ialsaatchi.com