Dwindling purchasing power hurts e-commerce
KARACHI: Dwindling purchasing power amid record-high inflation and massive devaluation has put a serious strain on e-commerce companies operating in Pakistan.
According to a soon-to-be-released research report on the state of business-to-consumer (B2C) e-commerce in Pakistan, firms are struggling to even maintain their existing sales levels, let alone grow their operations.
“Discussions with e-commerce executives reveal a pretty bleak picture… percentage change compared to 2021 levels shows a clear declining trend up until September, before making a slight recovery in O-N-D [October, November and December],” said the report prepared jointly by Data Darbar, a private markets intelligence platform, and AlphaVenture, a high-touch digital agency with 30-plus e-commerce brands as partners.
Pakistan’s e-commerce market is ranked 47th worldwide, with an estimated revenue of $6.4 billion for 2023. Category-wise, electronics and media constitutes the largest share with a 34.1 per cent stake.
The analysis based on data from the country’s top online stores shows the expected compound annual growth rate (CAGR) over the next five years is 6.2pc. The expected growth rate is “relatively muted” owing to the continuous depreciation and the resulting cut in economic growth forecasts.
Even though the online B2C retail market has grown in size over the years, the report notes the country still “lags well behind” comparable economies like Indonesia, the Philippines, Egypt and Bangladesh. Pakistan’s market size in both absolute and relative terms is the lowest among the peer group.
“Moreover, a notable share of Pakistan’s e-commerce is not captured in existing data. For example, many prepaid orders are via interbank funds transfer and, therefore, not reflected in overall card-based e-commerce numbers,” it said.
Based on primary and secondary research tools that included online traffic, the report says the biggest click-and-mortar store in Pakistan is J., with global revenue of $71.8m a year, followed by Limelight ($50.3m), Gul Ahmed ($48.3m), Khaadi ($29.1m) and Sapphire ($34.2m).
Similarly, the biggest e-commerce platform in terms of traffic was Daraz with annual hits of 112.1m, followed by Priceoye (14.7m), Bagallery (13m), Laam (5.9m) and iShopping.pk (4.1m).
Funding to e-commerce startups since 2019 has witnessed a “steep upward trajectory” as it increased from $2.3 million in 2019 to over $190m in 2022. The sector’s share in the country’s total investment value increased tenfold, even though most of this capital was deployed in the B2B segment of late.
The number of deals hit a peak of 21 in 2021, before easing down to 16 in 2022 as venture-capitalist (VC) activity slowed down globally. The e-commerce sector accounted for more than one-fifth of all investments made in Pakistan last year.
The number of e-commerce merchants registered with banks has seen a steady uptake in digitally paid orders since 2018-19. The number of transactions went up, and so did their value in rupee terms. In the October-December quarter of 2022, the throughput reached Rs34.2bn while the volumes were still lower than the same three-month period a year ago.
Published in Dawn, April 26th, 2023