BANGALORE: When computer engineer M Saad Jangda sent a casual email to friends with pictures of digital diaries eight years ago, he had little inkling that it would trigger the launch of the online retail industry in Pakistan.
Besieged by friends who were anxious to lay their hands on the product, the then 22-year-old techie who was building websites for electronic importers in Karachi procured a few diaries, packaged and delivered them within a few hours, collecting cash-on-delivery
In the following days, as the email went viral, queries poured in from other Pakistani cities — Islamabad and Lahore. Sensing that he was onto something big, Jangda pooled in seed capital of Rs25,000 and set up Symbios, an online electronics store, that would become the first ecommerce business in Pakistan. “The country has broken roads but the digital highway (Internet) reaches remote areas from where people are ordering the latest mobile phones and laptops,” said Jangda, whose company now sells 1,000 products daily at an average selling price of Rs8,000.
Estimated to be worth about $25 million (Rs150 crore) in 2013, the Pakistani online retail industry bears little comparison to India’s $2.3-billion (Rs13,700 crore) retail ecommerce sector. But the one aspect uniting them is the high percentage of cash-ondelivery transactions. In addition, rising mobile penetration — 131 million Pakistanis now use mobile phones in a nation of 181 million — is expected to boost digital commerce, same as in India.
“The challenges in all South Asian countries are structurally similar,” said Ashish Kashyap, CEO of Ibibo India, which is evaluating opportunities, specifically for its online ticketing business redBus in the subcontinent. Currently parent company Naspers runs the online marketplace Olx in Pakistan.
In the years since Jangda first stoked the fire, nearly half a dozen online retail companies have sprung up in South Asia’s second-largest country, where online retail is growing at 40% every year.
Electronics, fashion and apparel, children’s products, healthcare as well as Internet services such as listings are the top products and services on offer.
For global investors this offers fertile ground to build businesses and reap the first-mover advantage. “It’s cheaper to build a business in Pakistan currently than to acquire. Lack of big investors also means lack of competition,” said Muneeb Maayr, who runs fashion portal Daraz.pk, which is backed by German incubator Rocket Internet that is also an investor in India’s Jabong, an online retailer of fashion and accessories.
The advertising blitz on television by Indian portals such as Flipkart and Snapdeal has also done much to build consumer awareness about online shopping. “People are becoming aware that they can buy a product sitting at home,” said Maayr, who is yet to spend on marketing for Daraz.
Next month, Maayr aims to begin retailing electronic products on his portal in a bid to compete directly with early entrants Symbios and HomeShopping, Pakistan’s largest ecommerce firm with sales of about $6 million.
Shayaan Tahir, 28, who was forced to launch a startup after he couldn’t find a job in a commercial carrier despite having a commercial pilot’s licence, launched HomeShopping.Pk in 2008 with a seed capital of Rs 10,000.
“There are tonnes of opportunities for entrepreneurship. One just needs to be persistent here,” said Tahir, who has employed about 60 people to manage the operations. The company aims to target $10 million in sales this year. Entrepreneurs said the biggest challenges for online retail are the lack of payment gateways and sufficient interest from investors.
“Owing to security concerns, majority of e-commerce companies have adopted the ‘cash-ondelivery’ model,” said Ahmed H Khan, MD (Asia Region) at Rocket Internet GmbH, which owns Kaymu Online.
With 95% of consumers paying by cash, it has created a unique problem for startups. “Logistics companies take three weeks to remit the money, and startups are often starved for cash to stock inventory,” said Jangda.
“Currently the most used method of payment for online purchases is through Cash on Delivery services offered by local courier companies such as TCSBSE -2.36 %, BlueEx, and Leopard,” said Adam Dawood, CEO at DYL Ventures and country head-designate at Kaymu, an online retailer.
PayPal is also banned in the country and the first payment gateways emerged only this year. Despite the challenges, investors are beginning to see the potential.
Indian Angel Network, which has over 250 investors, in collaboration with SEED Ventures of Pakistan has floated an initiative called Startup Dosti. “We are looking forward to create a local investor ecosystem in Pakistan which can encourage their startups,” said Padmaja Ruparel, president of IAN.
“Startup Dosti is a joint platform for exchange of ideas, mentoring and assistance in access to markets to startups across the border,” she added.
“It’s just a matter of time that our borders will open up,” said an optimist Maayr, who sells about 1,500 products a day. “After all, it is faster to ship our shawls and suits to Amritsar and Delhi on a train than within Pakistan,” he added.
Source: The Economic Times