International experts identified that e-commerce has revolutionized the way people shop, offering customers convenience and access to products from the whole world that would otherwise not be obtainable. With its rapid growth, it is said that more firms are investing heavily in technology to make sure their businesses remain competitive and their customers have a reliable experience. Pakistan’s growing e-commerce has also been booming based on this global revolution of technology.
The e-commerce sector in Pakistan has achieved significant growth over the past few years, thanks to the increasing internet and smartphone penetration. According to sources, Pakistan’s e-commerce sales are projected to stand at $2.1 billion by 2023, up from $1.2 billion in 2018. E-commerce in Pakistan is still in its nascent stages, but it is growing rapidly.
A report from the State Bank of Pakistan says the number of recorded e-commerce merchants grew from 571 in 2015 to 1,516 in 2019. Similarly, the number of e-commerce transactions also grew from 3.4 million in 2015 to 29.7 million in 2019. It is said that various factors are driving the growth of e-commerce.
Firstly, the growing use of smartphones and the internet has made it easier for people to shop online. Our country has 97 million internet users, representing 38.7 percent of the population. Similarly, the number of mobile phone users in Pakistan is expected to stand at 161 million by 2025, up from 113.6 million in 2020.
Secondly, the Covid-19 pandemic has accelerated the growth of e-commerce, as people are opting for online shopping to avoid physical contact. Pakistan Telecommunication Authority (PTA) says there was a 35 percent increase in e-commerce sales during the first wave of the pandemic.
Thirdly, the Government of Pakistan has been taking steps to promote e-commerce. In 2019, the government introduced the E-commerce Policy Framework, which is aimed at creating an enabling environment for the growth of e-commerce.
Experts recorded that the policy includes measures like simplifying the tax system, enhancing the logistics infrastructure and offering training and support to e-commerce entrepreneurs. The experts also identified that in today’s world where people cannot live without using the internet E-commerce has become a crucial part of their lives from purchasing a dairy product to buying a ticket with a click of a button without visiting a physical market it is all possible because of e-commerce. It has totally altered the traditional concepts of shopping, transactions, education, marketing and so on, particularly in the pandemic situation sales through E-commerce has been flourished.
Despite its rapid growth in Pakistan, experts identified that the e-commerce sector faces various problems. One of the biggest challenges is the lack of trust among consumers. According to the country’s experts, only 18 percent of Pakistanis have ever made an online purchase, citing concerns of fraud and security as the main reason. Another challenge is the lack of a robust logistics infrastructure.
World Bank says in its recent report that logistics cost accounts for around 18 percent of the value of goods in Pakistan, compared to 8-10 percent in developed countries. This is due to factors like poor road infrastructure, a lack of standardised packaging, and inefficient customs procedures. Payment infrastructure is also a major challenge.
According to the United Nations statistics, Pakistan is the world’s fifth-most populous country, with a population of over 220 million. This represents a huge potential market for e-commerce businesses.
Pakistan’s middle class is expected to double by 2030, reaching 100 million people. This presents an opportunity for e-commerce businesses to target a growing market of consumers who have the purchasing power to buy online.
On the other hand, social media platforms like Facebook, Instagram and TikTok are widely used in Pakistan, and many businesses have leveraged these platforms to reach potential customers. Pakistan’s e-commerce sector is expected to continue growing in the coming years, driven by factors such as increasing internet penetration, a growing middle class, and government support.
One thing which is also very important here, the Government of Pakistan and the private sector need to invest in enhancing the road infrastructure, standardizing packaging, and streamlining customs methods to reduce logistics costs and enhance the competence of the supply chain. There have been several studies that confirm that 18 percent of all online retail sales in Pakistan took place in 2018.
Forecasts show that by 2040 it is expected that 95 percent of all retail sales and purchases will be made and facilitated online. On the other hand, statistics identified that the global e-commerce market was valued at US $16.6 trillion in 2022, and the industry is expected to grow significantly in the coming years with no signs of slowing down. Market specialists expect a compound annual growth rate (CAGR) of 27.43 percent from 2023 to 2028.
According to data from Statista, global e-commerce sales stood at US $5.2 trillion in 2021 and are expected to reach US $6.3 trillion in 2023. This represents a 21 percent rise in just two years. It is recorded that China is the dominant player in this region, with e-commerce sales of US $2.1 trillion in 2021, followed by the United States with the US $1.5 trillion.
Pakistan no doubt has long been in a quest to transform its economy into a vibrant and technologically advanced country that has a trade surplus, and ample foreign exchange reserves, where its citizens have greater career opportunities with better incomes and higher standards of living. If there is one such sector that could be developed to attain the national vision of prosperity, it could be safely said that e-commerce is the one, as it tends to take almost all other sectors in stride.