August Issue 2018

By | Business | Economy | Published 2 months ago

Every so often, scrolling through any social media platform, amidst pictures of friends and family vacation selfies, quirky videos of an unlikely pair of animals playing together and posts on current affairs, will appear video clips of advertisements and small boxed click-ads targeting you with discounted goods, new arrivals and more products like the one you recently purchased online, or even Googled. It is the equivalent of billboards on the streets, only far more effective and very, very specific. Such is the power of e-commerce.

Defined as the “sale or purchase of goods over electronic-mediated networks,” electronic businesses or e-commerce can be divided into three categories: business to consumer (B2C), where enterprises sell directly to the customer, cutting out the middleman; business to business (B2B), where enterprises use the internet to conduct business activities, such as procurement of supplies, liaison with departments and sales channels, conducting audits; business to government (B2G), where enterprises engage directly with government institutions, such as supplies for hospitals and schools. Variants of these electronic business relationships, such as consumer to consumer (C2C), have diverged over time as the internet has become more accessible and electronic devices more readily available in Pakistan.  

With increasing internet subscriptions and a rising market of smartphones in the country, the country already has over 44 million broadband users – a number greater than that of the entire population of Canada. In spite of its growth, however, and the State Bank of Pakistan’s official estimation of Pakistan’s e-commerce market size being expected to reach $1 billion by 2020, Pakistan’s e-commerce sales in 2017 amounted to a mere $622 million, as compared to India’s $20.05 billion, and China’s $1.2 trillion. The potential retail market Pakistan’s e-businesses are capable of expanding into, holds enormous promise for producers within the country. Tapping into new markets and higher income countries, creating new trading opportunities for goods and for services and for mobile commerce (m-commerce), and globalisation initiatives and improvements in economic development across the board are a few of the benefits increased e-commerce can bring to Pakistan.

Though it makes up a mere 0.5 per cent of the retail market, electronic commerce in the categories of B2C and C2C, has bled into almost every niche of Pakistan’s wholesale marketplace. From online retailers selling home ware, appliances, fashion and beauty products, books, software, music and electronics, to online services such as banking, e-ticketing, share trading, food order and delivery, entertainment streaming services, online consultancy for medical services and data exchange, are all readily available to anyone who has access to the internet and the means to pay for the product or service being ordered online.

While in Pakistan, e-commerce began as the virtual procurement of online services from other countries, it has progressed to include consumers of the domestic market and their trading wants and needs. Information technology since then has evolved considerably, providing online consumers with access to information on products and services anywhere in the world, and not just from local sources. Combined with less time for shopping, this has met Pakistanis’ growing desire for convenience – as online shopping allows for virtual transactions to take place at all hours and locations. 

“I’m a shopaholic, but I wouldn’t say I have a go-to site for online shopping,” said Eema Alvi, a senior photographer at R Photography. “Online stores rarely have branded items, so I mostly go for electronics or electronic accessories online, as opposed to, say, clothes. If I had an option to shop online from a singular shopping portal dedicated to providing only official brands, I would!” Eema only visits sites based on how easy-to-use and striking the interface is: “I love The Warehouse’s site because it catches your eye, is clean and very organised. Daraz is good too, but there is so much going on all the time (on the webpage, the header, the discounts) that it becomes confusing.”

Being attentive to how usable customers find their site, and allowing consumers to have  greater control over their purchasing power – with information and comparative reviews available on nearly all products and services – paved the way for the eventual onslaught of e-business. Online shopping portals such as TheSportStore.pk, which sells original sporting goods, Shophive, one of the oldest online B2C portals, Careem, an online-ride sharing app, and FoodPanda, a mobile food delivery marketplace, are a few of the many sites and mobile applications which provide their respective services both across Pakistan and internationally.

Hum Mart, a Pakistani online grocery shopping portal launched in April by Hum Network, focuses on providing customers, in Karachi initially, with basic necessities and provisions. CEO and co-founder of Hum Mart, Malik Faisal Qayyum, spoke of how the site is intent on creating a complete customer journey, from a user-friendly site, to supplying quality products at competitive prices and swift delivery, all the while guaranteeing a hassle-free return policy. “We are focused on creating an environment that people feel comfortable buying in and we want to help faciliate an interactive and enjoyable purchasing experience,” said Qayyum. With a neat interface, incentivised purchases of Ramazan deals, and occasional collaboration with local vendors, such as Imitiaz Super Market, to boot, the site is a prime example of careful planning and execution.

The question then arises, why isn’t there more online shopping traffic in Pakistan when the facilities are all in place?

Well, for starters, the internet is still a relatively new medium for exchanging information, communication and trading. This, despite the fact that the number of internet users in Pakistan is constantly increasing – as reported by Phone World – aided by a recent surge in smartphones availability with Chinese brands launching smartphones within Pakistan, at a fraction of the cost compared to leading phone brands. This has resulted in easy access to internet services and online shopping apps. However, research has identified the Pakistani shopper as being more inclined to frequenting stores. People are still apprehensive about purchasing pharmaceutical goods or medical services, electronics or larger appliances online. “There is a marked inability to keep uniformity in shipping across cities, and in discount incentives and sales,” said Nabeel Ahmed, a research associate at the Global Health Directorate. “My pet peeve is that there’s no guarantee of quality; all products seem to be lumped in together.”

“With the internet, shopping is no longer limited to a physical experience.” – Hira Saya, Co-founder, DIVA, online shopping page.

What was the inspiration behind the page and when was the initial launch?

As someone who was always fond of shopping, following international brands and fashion bloggers always excited me. It was May 2017, exactly a year ago, when my mother showed me pictures of Michael Kors scarves being offered at very good rates. Upon inquiring, I found out that a family friend, Anum, was getting them from the USA and had asked my mother if she needed them for me. I contacted her and asked her if we could work together and embark on this as a proper business. Within 24 hours, she agreed and we formed a partnership, decided on the name, designed the logo and began working on the launch of DIVA. The following week, we managed our supply chains from the UK and USA and officially launched DIVA. The initial period was tough. Getting the word across was tricky, as there are many home-based businesses working on the same platform. Nonetheless, it was exciting.

Did your page followers grow naturally, or were there tools you used to boost your numbers? If so, how effective were they?

Most of the following on our Facebook page has come organically. When people started purchasing from us, referrals came, and we started attracting the audience we needed. Furthermore, we have personally paired with social media bloggers and fashion-oriented Facebook groups, using giveaways and contests to get the traffic to our page and group. DIVA has collaborated with Zunairah’s Fitness Challenge four times in the past year. We sponsored gifts for winners and runners-up and also personally visited the workout group on the last day and gave our business cards, so that people knew who we were as a brand, and what we were doing. We have collaborated with various local makeup artists in order to boost our following and theirs. Furthermore, we have sponsored ads that run on Facebook and Instagram to spread the word. 

There are people in Pakistan who love international brands but obviously, they are unable to travel or don’t have their relatives/ friends abroad who can shop for them and ship them here. Sales happen at different times of the year, and people want to take advantage of those sales and promotions. We want to cater to these people. Our target audience is such that our business is focused on the sale of imported goods, and providing a personal shopping experience for the customer.

How have the tools that online shopping provides, changed the business for you?

Previously, when people thought of the word ‘shopping,’ the images that came to their mind was a shop, a seller, actual stock and other potential buyers. Now, with the internet, online shopping and the power of social media, shopping is no longer limited to a physical experience. Technology has enabled customers to trust and invest in the online shopping experience. This leaning towards online shopping is what has changed the business for us.  

Through online shopping I, as a buyer, can keep track of the purchases made with a certain brand and realise the potential it has with a certain target audience. I have access to tools through which I can compare prices both in the UK and the USA and choose a better alternative. There are Facebook groups where page owners interact regularly, keeping me updated about sales, marketing tools, fraud and other learning experiences. Constant emails from brands also help us stay updated regarding upcoming or ongoing sales. 

Payments to and from the business have also been immensely easy because of technology and online banking. Our promotions are more personalised and focused due to the Facebook ads and the relevant target audiences selected. Having online portals for delivery has also improved the business as we can keep track of the parcels and so can our customers. ‘Insights,’ an option which monitors our activity, coming from the Facebook page has turned to be a very important tool for us in order to keep a check on engagements and marketing activities planned for each day.

Where do you plan to take DIVA and online shopping in the near future?

The past year of DIVA was filled with many learning experiences and challenges which most start-ups face in their initial launch period. Now that we have moved past those challenges, our aim for the future is to improve customer service. We are working on ways to provide swifter delivery while keeping the price margins as low as we do. We also aim to focus more on men’s items as we believe that is a largely untapped market. 

Online shopping portals usually operate on their own policies, following their own guidelines in terms of quality control, delivery and transport, and marketing tactics. With few laws on electronic commerce in Pakistan, it can be difficult to set a standard procedure which all businesses would follow. Even with regard to taxation, most e-businesses face a danger of double taxation, as the unclear laws could allow for them to be held accountable to several boards of revenue, should their consumers be in different cities. As a result, not all entities out there operate strictly legally. With the rise of online businesses, there is a very urgent need to streamline rules of business. 

There is also the problem of bridging the digital divide that has arisen from poor telecom infrastructure and a finite shortage in Pakistan’s domestic IT skills industry, and the lack of regulatory policies to cover online markets and consumers. 

More than that, however, is the psychological insecurity of conducting monetary transactions online, that has led to a prevalent fear that the internet cannot be trusted by customers. Similarly, Pakistani consumers’ fears of not being able to examine the product or service before its purchase, was reported as a major deterrent to online shopping.

Despite efforts to minimise these concerns, with over 95 per cent of online purchases being conducted through Cash on Delivery (COD) in Pakistan, and delivery giants such as Leopard Courier and TCS on board with online stores, physical payment solutions do not guarantee consumer interest. Shayaan Tahir, CEO of one of Pakistan’s oldest e-commerce sites, online retailer Homeshopping.pk, believes he knows why. 

“E-commerce in Pakistan is an untapped source,” Tahir told Newsline in a telephone interview. “I started Homeshopping.pk in 2008, about 10 years ago, when I was 22. I spent the next decade learning and developing the business, of which the key factor I found in retaining customers, is consumer engagement.”

Having started the online shopping network at a time when no one quite understood the mechanics of an e-business, Tahir spent his time developing the network and his clientele, not wanting to make too many mistakes on a large scale, but to operate on the basis of trial and error. He soon found that a team of 50 people, focusing on customer service and consumer satisfaction while providing consistent service, was what mattered the most, leading Homeshopping.pk to operate on its own funds and still turn in a profit, all without the financial backing of outside investors. 

“I realised very early on that the consumers’ needs and wants are what was most important,” said Tahir. “Pakistanis rely heavily on word of mouth, and that is exactly how we built up our clientele.” Tahir also champions the need to engage with the offline retailers, in order to encourage more online interaction and trust.

“Surprisingly, we receive most of our orders from tier two cities and rural areas. While we plan on making Homeshopping.pk global, an untapped source which would contribute greatly to Pakistan’s retail market would be taking offline stores online. We’ve already trained about 10-15 local stores, taken stock of their inventory, interacted with the shopkeepers, put them online and helped them manage their own wares. This is where the future is.” 

 

“This model creates job opportunities.” – Bilal Mumtaz, Co-founder, Sehat.

 

Was Sehat one of the first purveyors of medicinal and pharmaceutical goods online?

Yes, we were one of the first online retailers offering nationwide delivery. There have been a few players who set up shop before, but they were localised operations. Overall, the pharmaceutical retail industry in Pakistan is valued at around 2-3 billion dollars. Although online buying of medicines is a fairly new phenomenon, we already have a return clientele rate of nearly 20 – 30 per cent, which is unusually high, compared to other e-commerce sites.  Sehat started out by providing B2C services, where we developed the mechanism for supplying medicines directly to individual consumers. We have now expanded, and provide B2B services as a sideline.

What checks and balances are in place to make sure quality control does not fall below par?

We deal, by and large, with medicines, which obviously go through a very lengthy and arduous registration process, as do for medical devices.  Pharmacies operating in different provinces need to have a provincial license. There are plans for separate licenses to be issued for online pharmacies now, in addition to needing a provincial license.

We have actually developed Standard Operating Procedures (SOPs) for the online pharmaceutical business. One of them pertains to time and temperature-sensitive delivery for particular items. Before 2017, there was no clause in the drug laws which specified that medical goods be transported or sold in proper conditions. We’ve been aware of this and  equipped ourselves for it since we launched Sehat in 2014. 

We have an internal audit system in place; we have a separate department that gets in touch with the distributors and manufacturers that we order our medicines from if there’s something wrong with the medication, or there is an informational disparity, such as, for example, their batch numbers being marked incorrectly. The products that are entered go in the warehouse via a barcoding system. All the information is checked and put in the system. When the product is dispatched, the batch number, the item number, even which processing room prepared the order, is noted, and only then is it packaged and dispatched.

What was the benefit of creating an online pharmaceutical e-commerce site?

When we started Sehat it was with the thought of providing everyone immediate access to medicines. Most startups these days operate a model that focuses very little on holding physical assets, and many online shopping portals don’t store or keep the products at hand. For the most part, most e-commerce sites in Pakistan employ a just-in-time model. We maintain a large stock in our warehouse. We’ve delivered to 220 cities so far. In the past six months, on average, we’ve been delivering to 90-95 cities within Pakistan, with a refund rate of only five per cent of our orders. 

We’ve partnered with a health insurance company in Pakistan — Allianz EFU Health Insurance Limited and a few others – to insure medical services. This model creates job opportunities, it increases momentum in the healthcare industry. We hope to create a media platform that highlights healthcare in Pakistan. That is all you really need to do. 

The founder of Homeshopping.pk is not alone in taking online interaction with local vendors into his own hands. With the potential to reduce costs with each transaction, increase efficiency and connect markets like never before, it comes as no surprise that C2C transactions are also at the forefront of Pakistan’s burgeoning e-commerce. Customers can sit in the comfort of their own home, school or place of work, and scroll through the limitless options available on online sites and social media. Facebook and Instagram users have deftly tapped into a market for providing social media-users with electronic goods and accessories, fashion items, beauty, health and skin care products. 

Sole proprietor Mahwish Bhatti, runs a Facebook page called Eela Cup, which supplies women with medical-grade feminine hygiene cups. “This venture wouldn’t have been possible without e-commerce,” said Mahwish. “Female hygiene is widely ignored in Pakistan but through an online portal, one can get familiarised with the product as well as engage with Eela Cup on the programme for sponsoring sanitary hygiene products for women who cannot afford them.”

Many other home-based business owners and online suppliers of products, like Mahwish, have burgeoned over the past few years due to the breakthrough of online shopping portals by well-known entities. The European internet company, Rocket Internet’s Daraz.pk, the largest online shopping portal in Pakistan, was a platform which accomplished one of the country’s biggest advances in virtual retail. Daraz.pk hosted Pakistan’s first Black Friday on November 27, 2016, and broke all national sale records, with $1 billion in sales from 1.5 million visits to the website, and 55 times more orders than that of a regular shopping day. The shopping frenzy started around midnight, and led to an influx of thousands and thousands of people onto the website. The traffic inflow was so high that, for the first few minutes, international cloud servers for the online shopping portal assumed Daraz.pk was under attack by hackers, and started shutting off components of the site, stifling customers at checkout to protect it. 

In 2017, sales went up three times, solidifying Daraz.pk as a force to be reckoned with in the online South Asian marketplace. On May 8, 2018, Alibaba Group purchased Rocket Internet’s online retail unit, Daraz.pk, and signed an agreement with the Trade Development Authority of Pakistan.

“This service worked to fulfill a basic need.” – Sibtain Naqvi, Head of Public Affairs, Careem.

Careem has changed the face of Pakistan’s transport industry. What is special about the app and how has it benefited the e-commerce system?

The Careem platform, which is a homegrown product, created by Pakistani engineers who graduated from Pakistani universities and maintained by local engineers, is used nationwide and in 16 other countries. Normally when you think about tech within Asia, one thinks of India or South Korea; Pakistan does not come to mind. Co-founded in 2012 by a Pakistani, Mudassir Sheikha, the six-year-old company is now valued at one billion dollars. It is operating in the greater Middle East and Turkey. Launched in Pakistan in October 2016, within just two-and-a half years, it has managed to provide coverage in 15 cities in the four provinces.

As Pakistan doesn’t have a proper metropolitan transport system in most cities, this service worked to fulfil a basic need, while operating as a growth driver and a huge job enabler. There are only 142 degree-awarding institutions recognised by the Higher Education Commission, and a shrinking market where the formal economy is concerned; so the question arises, where are the youth going to find jobs? Careem provides them with an opportunity to pursue a career and earn an income. It’s a win-win situation.

What was the objective behind Careem?

The first thing we wanted to do when we started out, was to create a safe and reliable service that a huge segment of the population could use. We’ve developed a strong base of female customers. Even before the workplace harassment policies were passed by the Senate, we came up with our own policies regarding training and certification against workplace harassment. The captains have to sign an affidavit in Urdu, once their training is completed, that they have understood the implications and that they will be held accountable for penalties should a harassment complaint be made, and proved, against them.

One unexpected fallout has been a chance for people from different social and income strata to interact. It offers a chance to talk to people you normally consider the ‘other’ in the time it takes for you to commute from one place to another. If considered from this aspect alone, Careem has worked wonders in bringing people together.

It has given captains the opportunity to earn an independent income and passengers freedom of movement in safety, which in turn, creates a behavioural change in consumers.As Careem has grown, it’s taken along a few industries with it: banking and finance, telecommunications, automotive, cellular device providers. People like my own parents, very happy with their own tablets, would never have bought a smartphone, had it not been for Careem. The platform has had a cross-country and cross-industry impact.

Has Careem benefited commuters with lower incomes?

When we started scoping out the market, we wanted to fulfil everyone’s needs. We brought on a range of vehicles, with no compromise in quality, but at varying prices. There are a lot of people who will happily pay Rs. 80 to commute somewhere via a motorbike, and there are a lot of people with motorbikes who are happy to earn money that way. We provide the link.

In terms of bikes and cars right now, it’s more C2C, but we are seeing a lot of people use it for B2C or C2B. For instance, the other day I wanted to get some food delivered to my house, and I just told a Careem captain to go somewhere to pick up the order, which he did, and delivered it to me.

How does Careem ensure that the quality and safety of the ride are not compromised?

We conduct a very thorough training for the captains, so there is no compromising on the quality of their service in the Careem ride. It’s measured all the time via customer ratings and feedback. We have in-ride insurance as well, with both the captain and the passenger covered against any hazards and injury during a ride.

One can also track a ride through the location sharing option. There is call-masking, to provide anonymity while talking to the captains and customer service representatives are accessible through the helpline, email and social media.