Pakistani farmers gather at a fruit market to sell watermelons in Lahore. File photo: VCG

Inset: Crowds throng the street at Gunpat Road market in Lahore, Pakistan in August. Photo: VCG

With increasing digitization and internet accessibility, Pakistan's e-commerce market is one of the fastest growing in the world, with a considerable surge in online merchants, e-commercial platforms and online payment facilities. 

According to new data released by the State Bank of Pakistan, the size of the country's e-commerce market has increased by 92 percent to 99.3 billion rupees ($640.3 million) during the fiscal year 2017-18 as compared to the previous year. The size of the market was 51.8 billion rupees ($332 million) in the previous fiscal year.

The number of registered e-commerce merchants was 496 in the first quarter of the fiscal year 2017-18, reaching nearly 1,100 by year end, and was over 1,200 in the first quarter of 2018-19, showing an exponential growth in e-commerce activities in the country. 

Pakistan has e-commerce companies in almost every major sector from retail and ride-hailing to property and car purchasing. Benefits such as lower transaction costs, ease of selection of various products while sitting at home, wider selection range, opportunity for making informed purchase decisions based on online reviews and on-time delivery process are the main sources of attraction for consumers, paving the way for the industry to flourish.

Leading online businesses in Pakistan in retail are Daraz, Yayvo and HumMart, whereas ride-hailing services have been overtaken mostly by the global and regional giants Uber and Careem. 

Additionally, PakWheels and Zameen are the largest online marketplaces for car and property shoppers and sellers in Pakistan. Among food delivery service providers, FoodPanda is most popular.

The industry has not only helped major players in expanding their businesses, it is also an effective tool for small- and medium-sized enterprises due to low costs and increased accessibility of sellers to customers.

In its efforts to increase the growth and development of the industry, the federal government has recently framed a draft e-commerce policy aimed at achieving higher export growth through enhanced activities from e-commerce platforms, promoting small e-businesses and creating employment opportunities.

The main goal of the policy is to augment the e-commerce industry's growth to make it one of the key drivers of Pakistan's economy.

Though data shows a steady rise in digital transactions and the number of registered vendors, the country's successful e-commerce entrepreneurs believe that Pakistan can learn much from China to further boost the industry, which is still in its infancy, as the latter has an immense knowledge base, experience and advanced technology in this field.

In a conversation with the Xinhua News Agency, Adam Dawood, head of Yayvo, one of Pakistan's largest online retailers, said that China is the world's biggest e-commerce market with annual online sales worth hundreds of billions of dollars.

As a neighboring country, China is eyeing the huge untapped potential in Pakistan, with Chinese e-commerce player AliExpress, part of tech giant Alibaba, recently acquiring Daraz. 

"Apart from investment in Pakistan, China has such a big market for products that we could increase our product assortment overnight," Dawood said, adding that there is a lot of learning required in terms of product-market fit, legislation, and route to market that would help Pakistan increase not just the online shopping base, but also the internet penetration rate.

Talking about the challenges the e-commerce industry is facing, Dawood said that Pakistan needs to focus on optimizing overall service delivery and customer experience aspects.

"Our logistics and payments systems need to evolve to be better suited; it behooves the government to pass legislations and cooperate and collaborate with regional players including China to further support and actively promote the digital businesses."

Pakistan needs to encourage Chinese enterprises to explore opportunities in the Pakistani e-commerce industry and join with local start-ups for new business ventures, said Shehryar Hydri, secretary general of the Pakistan Software Houses Association, a trade body promoting and developing software and services industry in Pakistan.

"We need to partner with Chinese producers and help them open hubs in Pakistan for onward export to regional markets," said Hydri, adding that something that has been ignored so far is the opportunity to sell back to China and discover new niches through these online platforms.

"As Chinese company AliExpress already on-boards more local vendors to sell products locally as well as to other countries, [the] Pakistani e-commerce ecosystem will get mature and sellers will be able to tap new markets," Hydri said.

Brakaan Saeed, chief executive officer at Vizteck Solutions, a leading Islamabad-based software company, said most of the country's e-commerce industry is still based on a cash-on-delivery system and that is about 90 percent. 

People are reluctant to pay through online payment methods as there is a huge trust deficit between buyers and sellers which is hindering the growth of e-commerce in Pakistan, he noted.

"China can help bridge this gap by establishing payment model called escrow in Pakistan as adopted by various e-commerce companies in China." Saeed said.

Earlier this year, in an effort to further develop mobile payment modes and digital financial services in the country, Telenor Microfinance Bank, Valyou, and Telenor's Easypaisa in collaboration with Chinese company Alipay, the world's largest mobile payment platform, have jointly launched a blockchain-based international remittance service in Pakistan.