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Immense scope for e-commerce growth in Pakistan

Published on 28th Dec, Edition 52, 2015

 

With a population of around 200 million individuals, Pakistan has the potential to become next major Internet market in terms of number of connected people in the next coming few years. According to one estimate, 9 percent of the country’s population goes online during last year while another 30 percent are likely to get connected to Internet in next three to five years. The trend to use Internet has been growing fast in Pakistan for the last one decade. As the trend grows faster, traditional business is being converted into Internet business where all transactions are done online, from selection of product to payment of bills. The business on the Internet is less costly and more beneficial. It is becoming very popular mode of trading around the world particularly in the West.

Electronic Commerce or e-commerce is actually the business done through the Internet in the present era of modernization and technology. The rapidly growing usage of Internet is shifting the world towards the e-commerce.

Phenomenal advancement in Information and Communication Technology (ICT) has not only brought a revolution in the life styles of the people but also in the business and marketing strategies of the people. Today, a company creates, maintains and optimizes business relations with consumers and other businesses using tools and practices involving Internet technologies. This is precisely e-commerce, which is an information technology trend developing fast in the business world. It includes selling, buying, advertising and contacting buyers with credit card or digital cash, by transfer of data between different companies using Internet through online facility.

Pakistan needs to place ICT on its priority list to keep pace with the advancement in technology and minimize digital divide. The government needs to take measures for creating a conducive environment for technological innovation and its effective use in trade and commerce.

Presently, there are roughly 30 million Internet users, who are the focus of entrepreneurs in Pakistan. The arrival of 3G and 4G mobile networks is further strengthening the trend towards e-commerce in the country. According to one estimate, the total volume of online sales was around $35 million last year. A race seems to have started among young Pakistani entrepreneurs market share pushing sites to offer better services and driving up the number of customers.

The Pakistani ecommerce market is alluring the interest of international investors. For instance, Daraz.pk and Azmalo.pk are some of the most successful and popular Pakistani ecommerce websites developed by Rocket Internet (GmbH), the world’s leading online venture builder.

Lacking of awareness

There is lack of awareness among the masses regarding e-commerce. Most of the people consider online transactions as a risky activity. Some people strongly believe in physical dealing.

People are accustomed to the traditional mode of shopping – they go to the market, visit shops, bargain to get a good deal, and return home with the product. A change in this trend is slowly taking place. The customers and businesses have begun to switch to e-commerce, providing new experience of shopping. The people seem to be adopting e-commerce trend. Online transactions have had an impact in the past few years, convincing more consumers to digitize their shopping experience.

 

Challenges ahead

Though Pakistan has a lot of scope for growth of e-commerce, yet it still faces enormous challenges in Pakistan. Firstly, Pakistan has a low literacy rate, and hence many do not know how to use internet. Secondly, there is still a majority of people who lack access to technology. There is a low percentage of entire population having access to the Internet. The Internet penetration in Pakistan is quite low in comparison to the West. There is about 28 percent of the population having access and using the Internet in the country.

Moreover, the local businessmen still believe in traditional mode of doing business and show a lack of trust in e-commerce. There is a lack of trust because there is absence of any laws or rules. Merely the trust element poses threat to industry in long run. There is also a dire need to remove the misconception of e-commerce in business circles in Pakistan.

Fourthly, there is lack of proper infrastructure like telephone line and frequent power breakdown in cities and towns across the country. And finally, security of online transactions, high bandwidth rates and monopolistic role of the PTCL are the issues hampering the growth of e-commerce in Pakistan.

The country cannot make better use of e-commerce opportunity to tap the global market without meeting these challenges and removing the barriers on the domestic front. Most of the Pakistani firms give low priority to e-commerce due lack of knowledge and low level of understanding, which is the result of unavailability of proper framework for the Internet in the country.

Absence of any e-commerce policy framework has been a big hurdle because of what many companies have held their plans to start e-business in Pakistan. Presently, the e-commerce industry is operating on trust with zero regulations.

The e-commerce industry has a bright future with high growth prospects in Pakistan. The industry is set to flourish at a faster pace if the government takes serious measures to remove barriers hindering its growth and expansion. Presently, customer satisfaction is gradually gaining trust amongst customers.

The country’s e-commerce industry must be regulated in order to provide a set of defined rules to the corporate sector and the local business community for carrying out e-commerce business processes. The government must announce a comprehensive policy to promote e-commerce in the country. The government should make taxation rules for e-commerce. The government should establish regulatory authority to regularize e-commerce businesses and to implement commerce policies. Similarly, e-commerce should be made the part of syllabus in colleges and universities.

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