Taking e-commerce to the next step

MARYLOU ANDREW: How long have you both been in the business of digital and e-commerce?
UMAIR AZIZ: Creative Chaos has been in business since 2000 and we are a digital and tech company. Sixty percent of our business is with US based customers; within Pakistan we have been working with a lot of FMCGs and telecom companies. Our focus is on technology platform development for e-commerce and payments primarily, we are also into big data and analytics. As the Chief Technology and Innovation Officer here, I look after everything strategic we do in the company. HSN Ventures is again something very strategic and we see this becoming very important for Pakistan and e-commerce.
SHAYAN TAHIR: I started Homeshopping in 2008 as a bootstrapping startup and was able to be there at the right time; I then scaled my business to a 65-member team which is growing by the day in every possible way. I have been the sole owner of the business for the past eight years and HSN Ventures will give us the opportunity to start working in collaboration with like minded people who have been in this industry and who have a certain set of expertise. I am mostly an operational person – we excel in execution but when it comes to technology we could do much better.

MLA: What is HSN Ventures?
UA: It is collaborative effort between Creative Chaos and Homeshopping.pk. Creative Chaos has been working with global e-commerce players and we saw an opportunity within Pakistan. Shayan has been working in the local e-commerce space for a while and he needed help to scale. That is when we sat down together and talked about what we want to do over the next five years. We believe the e-commerce market in Pakistan is going to grow, and that people need a better product range, good value and more importantly, they need to see good service. In Pakistan, the big problem is that businesses are not very service oriented. The more we talked the more we felt that we should do this together. Obviously, Shayan brought in years of experience running Homeshopping and we brought in years of experience in technology building platforms, helping companies grow their businesses on the digital side. We felt that if we create a new entity and bring Homeshopping into that entity we would be able to do a lot more than just focus on one thing. So Homeshopping is a part of HSN Ventures now. HSN Ventures is going to be looking at the e-commerce marketplace as a whole and we will be making strategic investments and plays to grow this market.

MLA: As a digital agency, why is e-commerce important for Creative Chaos?
UA: We are not only a digital agency; we are a technology company that happens to do digital as well. When we talk about why it is important for us, we have been helping businesses grow by using digital, whether it is building their campaigns, executing them, building digital assets, managing their communities and ad spend – we have done it for a lot of people and we do it really well. We can do the same thing for Homeshopping as well and create that additional value that Homeshopping itself was perhaps not able to do.

MLA: Is HSN Ventures a new company?
ST: Yes.

MLA: When do you mean by strategic investments in e-commerce?
UA: There is very little we can talk about right now, but what I can share is that we are looking at both e-commerce horizontals and verticals. There are some plans to have niche stores and to expand the category range that Homeshopping has and then there are strategic initiatives that we want to take around the operations and logistics of the business and scale those for some of the growth assumptions that we are making for Pakistan. All the work we will be doing is around the e-commerce space and it is going to be driven with the mindset of providing better service and value to our customers.

MLA: What are Homeshopping’s major challenges that you are hoping this collaboration will help to solve?
ST: Competing with new players is a challenge because financially they are pretty sound. I need to keep up with the fact that my employees are being hired by XYZ company for three times their existing salary. It is good for them but it is not good for me. By collaborating we should be able to attract foreign investment and this will put us in a much stronger position to address these concerns. We also want to increase our number of orders and scale forward and not twice the existing orders but 10 times.

MLA: What are the challenges of scaling up an e-commerce business right now?
UA: Having seen how some of the global players structure their e-commerce operations, we see the need to build a platform that is scalable, secure and provides a good user experience. Putting together an e-commerce store is the easiest thing to do, in fact two kids can do that over a weekend, but making a business out of it and scaling it is very difficult and requires money and a certain tech mindset. When I talk about scalability, this doesn’t happen by adding more servers, it happens by engineering the platform in a certain way so that it can scale to the demands of the user. I know a bunch of sites which have had problems over one of the e-commerce events that took place a couple of months ago and it was a function of not understanding the demand and scaling their platform accordingly. People also don’t think about creating an experience where they optimise for conversion. If you look at the product content itself, it has either been copied off from different sites or you just find a title with a really crappy picture and then expect people to buy it. People are already sceptical about buying stuff online and the worst thing you can do is give them a bad picture with a poor description and then ask why it is not selling.

MLA: What is the size of latent demand in ecommerce?
ST: We account for just 0.1% of the overall retail market, so there is a lot of potential for growth and with the high numbers on mobile penetration and a lot of people adding on to 3G and 4G penetration on a day-to-day basis, we should expect our online retail market to account for three to four percent of the overall retail market. That number should be around $80 billion in the next five years. The big three will definitely be tapping into 70 to 80% of the market share.

MLA: What needs to happen for the market to grow to the size that you are talking about?
UA: The customers; at the end of the day they have to show intent by making a purchase and then the marketplace (the e-commerce companies) have to deliver on that promise. If they do not deliver, e-commerce will fail in Pakistan.

####If you look at India, although they have a lot of payment options, people still prefer cash on delivery. I think it is a cultural thing. People in Pakistan also feel that they would rather exchange money once they have the product in their hands.

MLA: So one part of the issue is delivery, but the other is online payments. How do you go about resolving that?
UA: I think that problem will be resolved over the next few years. If you look at India, although they have a lot of payment options, people still prefer cash on delivery. I think it is a cultural thing. People in Pakistan also feel that they would rather exchange money once they have the product in their hands. Having said that, we will see a lot of different payment option whether it is credit cards or other variants coming into the ecosystem as the market grows.

MLA: Is there competition in the e-commerce space in Pakistan?
UA: Not really but we will start seeing it in the next year or so. Any new incumbent who does things right by delivering on their promise and providing good value, stands a chance of making a business out of it. There are about 200 players dabbling in different areas of e-commerce at this point in time but of those 200, how many are really running a proper business? The answer is not more than 10% and of those 10%, how many are providing the value and service delivery to their customers? Again, it is probably just a handful. The market is so big that you can probably have 200 more players, all active, all doing well and we still will not be eating into anyone’s share.

MLA: What can we expect from HSN Ventures within the next year?
UA: The first thing you will see is Homeshopping going through a major overhaul. Shayan and I are committed to making e-commerce seamless and convenient. We want to remove the apprehensions and bring that experience into Homeshopping. What you will see in 2016 is our effort in making this happen. The vision is to make sure that we are very customer centric and providing good value. We are very fortunate in that we have a very good, loyal customer base and not many companies in Pakistan can say that.

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