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'SAMENA Daily' - News

E-Commerce: Major players see increase in size of pie

Almost non-existent around five years ago, Pakistan’s e-commerce sector has grown significantly as new players, including international companies, enter the market.

With revenue growth clocking in double digits, the sector is likely to cross the $1-billion mark in the next three years, estimate major players.

Despite all the challenges facing the online retail sector, which is not even 5% of the country’s retail market, size of the pie has been increasing courtesy aggressive marketing strategies of new entrants, driving the growth by creating awareness among masses.

Major e-commerce portals, The Express Tribune surveyed, witnessed between 15% and 30% year-on-year growth in their sales last year. In one case, the number goes as high as 80% on a quarter-on-quarter basis.

Some of the major players who have set up a brand name and expanded include Homeshopping.pk, Symbios.pk, Rocket Internet, olx.com.pk, Tohfay Group, Shophive.com, Galaxy.com.pk, Dealtoday.pk and Eatoye.

Though there is no official data available to measure the current size of the country’s e-commerce market, a conservative estimate, based on the combined sales of all major players, yields a range between $25 million to $30 million. One company even says that it will alone gross $10 million this year if iPhone 6 sales meet their expectations.

“We can become the region’s second largest [e-commerce] market after India,” said Shayaan Tahir, Chief Executive Officer at Homeshopping.pk.

Tahir is not alone in his optimism about the sector’s growth. Almost every major player had similar expectations. “The industry is projected to expand by hundreds of millions of dollars as consumers become more aware and top brands push their products on e-commerce,” Saman Javed from Daraz.pk replied in an email.

Even in the short-term future, most players believe the industry will achieve the billion-dollar milestone. “I can see it [e-commerce] growing 100 times – to over $2 billion from the current $25 million – in the next five years,” said Tohfay.com’s Mehdi Hasnain.

To understand the current scenario and make reasonable assumptions about the future, Tohfay Group’s chief said the growth cycle needs to be understood. The e-commerce industry in any new region follows a four-phase cycle from infancy to maturity, according to Hasnain.

Giving examples, he said that China has entered the third phase, while India is close to finishing the second.

In Pakistan, the industry got a boost before stabilising to a pattern, he said. This is where the key players get traction and new, smaller players make the move with sustainable efforts, he added.

“In a few years, we could see the real foundation of a broader industry with 15% to 18% of consumers using the channel,” Hasnain said. “To achieve that, we could see some years of even 700% to 800% growth.”

The industry’s projections seem practical. Mobile phones, tablets, fashion accessories, apparel and food are the top-selling categories across the industry.

While these categories mainly drive the industry’s revenue, they keep switching in terms of top-selling category for different operators. For example, Tohfay’s best sellers are decorated flowers, chocolates, cakes and sweets that make 40% to 50% of its sales.

Galaxy.com.pk, on the other hand, deals in mobile phones and high-end electronic devices while Eatoye and Foodpanda focus exclusively on food. Similarly, fashion accessories and apparel remain the top category for Daraz.pk.

Suffice to say that the future looks bright for the e-commerce industry.

Challenges facing the sector

While the underlying confidence of major players remains, several challenges could slow down, if not hinder, growth.

Slow rollout of next-generation mobile internet services, lack of a dedicated online payment gateway such as Paypal and bottlenecks in distribution and delivery channels to rural areas – which is where the true potential of e-commerce can be unleashed – are some of the main challenges, according to Saman Javed of Daraz.pk.

Despite a huge mobile phone user base, about 85% of consumers still use desktop computers to access websites, according to statistics compiled by the industry. Increase in broadband penetration through 3G could increase customer base, said Shayan Tahir of Homeshopping.pk.

In the absence of an online payment method, Tahir said the vendors have to wait for two weeks to receive payments from courier services — their partners who deliver the product and charge customers on delivery.

Another is lack of venture capitalist activities, believes Hasnain, Tohfay’s chief. There has been an increase in such activities but its scale is small compared to the Indian market, he said. “There are several big players in India who are looking to invest because they see the potential for growth. In contrast, Pakistan possesses fewer players who are willing to go the whole nine yards.”



Source: http://tribune.com.pk/story/765303/e-commerce-major-players-see-increase-in-size-of-pie/

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