PR0BLENS 0F E-C0NNERCE IN

PAKISTAN

Among the wonderIul inventions oI twentieth century, Internet has come to wield immense
inIluence on our lives. From reading newspapers to monitoring the perIormance oI companies on
stock exchange, Irom learning the Iirst aid techniques when in emergency to learning the recipe
oI making a cake when guests visit, and Irom listening to music to keeping abreast oI the latest
cricket scores, our lives have got increasing intertwined with internet.
Doing business online is yet another application oI internet, which is changing the way business
is done. The term electronic commerce or E-commerce may loosely be deIined as doing business
over the internet, selling goods and services which are delivered oIIline as well as products
which can be 'digitised and delivered online such as computer soItware, videos, and music.
However, in general, iI we use any type oI electronic devices in getting orders and sending
catalogues, like telephone, Iax or any other such instruments, we are supposed to be applying
electronic business techniques. However, the real sense oI e-commerce is the business on the
internet oI which there are diIIerent modes, like opening a retail store on internet, where all
transactions are done on line, Irom selection oI product to payment oI bills.
E-commerce in its wider sense encompasses all transactions involving business organisations,
governments, or consumers that are done online through internet. However, the narrower view oI
E-commerce Iocuses only on transactions between Business and Consumers (Business to
Consumer E-commerce or B-to-C E-commerce) and among two or more businesses (Business to
Business E-commerce or B-to-B E-commerce).
Banking, entertainment, telecommunications, and manuIacturing industries globally have already
started using E-commerce business models, and have been reaping the beneIits in terms oI
greater revenues and lesser costs.
ithin these industries, Internet is used Ior Iour major tasks with respect to E-commerce: Firstly,
attracting new customers through online marketing and advertising; secondly, serving existing
customers via customer service and support Iunction; thirdly, developing new markets and
distribution channels Ior existing products; lastly, developing new inIormation-based 'digitised
products, which are then transmitted online.
Like every new technology, the potential uses oI E-commerce were at Iirst over-hyped, leading
to the Dot Com Boom oI 1996-2000, which was brieIly Iollowed by a crash that kicked many
companies out oI business; thereby, temporarily tarnishing the promising role oI internet as an
eIIective and state-oI-the-art medium oI business. However, with the survivors oI the crash and
the new comers doing well these days, the quantum oI business online is expanding with rapid
pace.
In Pakistan the size oI E-commerce is small and uncertain at the moment. Yet as in most
developed countries oI the world, it is expected that with the realisation oI Iull potential oI this
new mode oI commerce in Iuture, it is bound to gain a sizable chunk oI business in Pakistan as
well, due to the several potent advantages that E-commerce enjoys over the conventional mode
oI commerce like its open structure that surpasses all geographical barriers, low costs oI
transactions, low barriers to entry and improved access to inIormation, besides more eIIicient
management oI supply and distribution.
However, currently the growth oI E-commerce in Pakistan is hampered by a number oI Iactors,
which are discussed below. These barriers must Iirst be removed Ior E-commerce to grow in the
country.
1. MISCONCEPTIONS ABOUT E-COMMERCE IN PAKISTAN
Most people in Pakistan have developed wrong conception oI E-commerce. They take a very
limited view oI E-commerce, restricting it to only those products which may be 'digitised and
transmitted online through internet and the payments Ior which is also made online through
credit cards.
This narrow view excludes the other three main Iunctions oI E-commerce outlined above ie
attracting new customers, serving existing customers, and developing new markets and
distribution channels Ior existing products. This misconception is among the main reasons that
have held most Pakistani entrepreneurs with existing conventional business back Irom entry into
the cyberspace`.
. MISTRUST:
Among the most important impediments to the growth oI E-commerce in Pakistan is the issue oI
trust. CounterIeiting and distribution oI below par products in the Iace-to-Iace transactions is a
common problem in the country. How can people be expected to trust the sellers whom they do
not know, and who would deliver goods online/oIIline aIter the payment is made.The issue oI
trust is Iurther aggravated by the lack oI conIidence people have with respect to the security and
privacy oI their personal inIormation like credit cards, home addresses, phone numbers etc. The
emergence oI trustworthy web-based companies, with support/guarantees Irom Government or
trustworthy multinational companies, in the county is required to dispel these Iears oI the
consumers.
As Iar as E-commerce in Pakistan is concerned, a research was carried out solely that Iound
some hard realities. According to the result oI research given in table below, it is obvious that
considerable amount oI Pakistani population do not have internet which is a basic ingredient oI
e-commerce. It was Iound that people don`t Ieel secure doing online transactions, they are
mainly aIraid oI the Iact that their credit card can be misused. Despite oI all this, the research
Iindings suggests that online stores are the best options Ior your shopping

Research Findings:

1) Do you use internet: 65 people use internet, at least once a week
) Are you satisfied with downloading speed of internet: 98 were not satisIied
3) Have you bought Online (if yes then what is frequency): 2 people have bought online out
oI which 99 people bought only once
4) Do you feel Secure Doing Online Transaction: 99 people Ieel insecure doing Transaction
online
) Are You satisfied with shipment: 100 were satisIied with shipment
6) Is it convenient to buy Online: 100 were saying that purchasing online buying is
convenient
There are very Iew Pakistani businesses that maintain or run their online stores. TCS, a Pakistani
based courier and Carriage Company pioneered ecommerce business in Pakistan by oIIering giIts
and other gadgets to be purchased Irom their online store and then shipped to destined address oI
purchaser. However, the idea could not get popular due to lack oI awareness regarding the
Iacility and discomIort, which Pakistani customers Ieel while giving away their credit card
numbers to websites. This level oI security concern is due to the overall corruption scenario in
Pakistan, which make the website visitors not to easily trust agreement licenses provided by
webmasters. Other reasons oI low online purchasers include credit card culture, e-commerce
awareness, illiteracy, limited access to internet, etc.
1. TRADITIONALIST NATURE OF PAKISTANI SOCIETY:
A large number oI people in Pakistan will take a long time to come round to the idea that they
can order goods and make payments through internet Irom their homes without physically going
out. This is due to the Iact that on-site commerce has a socialising eIIect, which is altogether
absent Irom E-commerce. In a strongly relationship-oriented society like Pakistan, people tend to
Iorm individual relationships and long term associations with the businessmen and vendors.
These relationships are maintained over the years and may not be easily replaced by the
anonymity oI the E-commerce transactions. Moreover, most oI the retail business in Pakistan is
conducted through small local enterprises rather than chains oI departmental stores. These small
local businesses are run by relatively less educated entrepreneurs who are least eager to embrace
the new technology.
People in Pakistan do not derive satisIaction iI they are able to physically touch n try the product
beIore buying it. As we as the mode oI payment through cash is more popular among the society.
. LOW LITERACY RATE:
The literacy rate oI the country, according to oIIicial Iigures, is around 54 percent. Out oI these
54 percent literate people at least 50 percent are computer illiterate. Thus, with around 75 percent
oI the population without computer literacy, the growth oI E-commerce in the country cannot be
expected to progress at any Iaster pace.
3. ACCESS TO TECHNOLOGY:
In order to undertake E-commerce transactions, one must be connected to the orld ide eb,
Ior which possession oI a personal computer (PC) or a laptop is a basic requirement. Although
the prices oI computer hardware have declined in the past Iew years, yet a personal computer is
still not aIIordable by vast majority oI the people oI the country. Besides a personal computer, a
telephone line or cable line are also required Ior a user to get connected to the orld ide eb.
Thus, high costs oI computer hardware are proving to be a bottleneck to the growth oI the E-
commerce in the country.
4. ACCESS TO INTERNET SERVICES:
It is true that in the past Iew years there has been a signiIicant increase in the number oI internet
users in Pakistan, with some observers claiming that in Pakistan the internet access is now
available to 800 cities, towns and villages covering almost 97 per cent oI the population.Even iI
this, seemingly exaggerated, estimate is accepted, the per hour cost oI internet use in Pakistan,
along with the common problems oI low speeds and getting disconnected Irequently, render this
wide accessibility oI internet useless. For e-commerce to Ilourish we need high speed, cheap and
reliable internet connections available to the vast majority oI the population.


. LACK OF E-TRANSACTION SUPPORT IN PAKISTAN:
Online payment systems are an essential part oI e-commerce, which require, inter alia,
possession oI personal credit cards by consumers. However, Iew people in Pakistan have
personal credit cards. Among the various reasons people avoid getting credit cards Irom banks
include possibility oI unnecessarily getting into the debt trap.The unpopularity oI personal credit
cards in Pakistan is responsible Ior the weak e-support inIrastructure, Iorcing the use oI old
mechanism oI money transIer like, cash payments, cheques, and postal orders which may work
as viable substitutes to credit card Ior a short term to accommodate limited existing commerce oI
the country but cannot be relied upon Ior long.
6. POOR TRANSPORTATION/DISTRIBUTION CHANNELS
An essential part oI e-commerce is establishment oI cheap, quick and reliable transportation
channels Ior the physical distribution oI those products which cannot be digitised and distributed
online. In Pakistan, the Pakistan Postal Service, despite its extensive network and large number
oI employees is ineIIicient, to say the least; hence, unreliable. The private courier services, on
the other hand, are expensive.In the absence oI any reliable and economical distribution channel,
the web-based companies in Pakistan will be Iaced with the challenge oI delivering their
products at the doorsteps to their consumers without adding to price oI the product
The over-all volume of e-commerce is more than $4 billion annually. Doing business on
internet is not a very costly investment. It is estimated that in near future, almost per
cent of the traditional business will be converted into internet business.

Trends:
E-commerce is an inIormation technology trend developing Iast in the business world. The
corporate and the business world, aptly supported by the IT industry, already stands transIerred,
which by recent estimate will exceed $400 billion this year.

As we start warming up to global e-commerce in Pakistan, we must understand that almost 78
per cent oI the e-commerce activity takes place in the USA, obviously driven by the use oI
internet in that country. As the January 2000,over 110 million people have internet access there
compared to 279 million the world over.

Nevertheless, Pakistan can make good use oI this opportunity with proper planning and
execution. To begin with, let us Iocus on the domestic Iront beIore going all out Ior the global
market.

Domestic activity:
OIIer Ior improving and productivity to bring it to the excellent level. It also allows our
entrepreneur to test their web business and marketing skills beIore taking on the international
markets. E-commerce is not Ior all but Ior those who understand it. Yet, e-commerce is not a
technology.

The issue at the individual level, it is purely a business matter. At the govt level, it is a matter oI
providing inIrastructure Ior transactions on internet. E-commerce or business through internet is
becoming very popular mode oI trading around the world particularly in the developed world. E-
commerce is a broad term used to quantiIy the trading taking place on the internet.

Most studies, however, suggest that e-commerce runs through Iour steps. The very Iirst step is, to
build a website to let the world know about your existence. The website contains inIormation
about the company, product/services and other related inIormation, which can help visitors to
learn more about the hosts. The second step involves asking customers to loose their pockets and
buy on line.

This step requires adopting advance level oI soItware capable oI handling orders. In the third
stage inventory, management adds to the system and lastly, providing provisions oI payments
through online banking partnership between buyers and sellers, the most diIIicult and complex
part oI e-commerce.

The most common and popular Iorms oI e-commerce are business-to-consumers (B2C) and
business-to-business (B2B). Business-to-government (B2G) and government-to-citizens (G2C)
are other Iorms, running on the internet but with low steam. However, the use oI Iormer two still
dominates the internet.

However, Pakistan is still Iar behind in chasing the west in this regard. Entrepreneurs in Pakistan
are oI the opinion that e- commerce means being able to make and receive payments through
internet and any other activity through internet is not considered as e-commerce. This low level
oI understanding has led many Pakistani Iirms to give low priority to e-commerce due to
unavailability oI proper Iramework Ior the internet in the country.

In Pakistan, e-commerce is still in its inIancy and Iaces many barrier to grow. The notable
barriers are: unavailability oI proper inIrastructure |telephone line oI stem lines oI steam age,
Irequent Iailures oI power| limited user oI internet hardly one per cent oI the entire population
have access to the internet|, the issue oI security oI transactions on the internet, high bandwidth
rates, and last but not least the rigid and monopoly role oI the PTCL.

However, the SBP has recently put a crack on the barriers when it approved the merchant ID
accounts to Iacilitate online transactions. But there is still a long way to go and requires
government to continue to grease the wheels oI e-commerce to speed up the process.

Prospects:
Those who create, distribute, and sell goods and services to consumers also have reason to look
Iorward to this new mechanism. All enterprises, including the small and medium sized can reach
customers throughout the world instantly and comparatively inexpensively. Many vendors can
sell globally without the costly inIrastructure oI worldwide retail stores, sales oIIices,
distributors, or warehouses.

Greater sales and inventory eIIiciency maybe possible through the increased interaction with
prospective customers that electronic commerce can aIIord. One to one marketing becomes
possible on massive and global scale. Active and alert supplier will also beneIit Irom the new
structure oI product and service distribution likely to results Irom electronic commerce. ith
conventional distribution ,a manuIacturer must reply to wholesalers and retailers to serve
customers in large volumes. E-commerce's automated customers selI-service capabilities can
eliminate the need Ior these intermediaries .The manuIacturer no longer has to share proIit with
others. In addition, the manuIacturer gains direct contact with consumers that can Iacilitate Iuture
sales.

ith this, as the role oI conventional intermediaries-such as retail store clerks, travel agents,
bank tellers, and wholesale representatives may diminish or end, new intermediaries have started
to appear.

Electronic commerce connects manuIacturers directly to consumers. The consumer gets product
inIormation directly Irom the ultimate source. The manuIacturer can get customer preIerences
and needs directly Irom the ultimate source. Each consumer's physical location no longer
determines whom the consumers contacts to purchase a product. ith the purchase oI intangibles
that can be delivered electronically, physical location becomes irrelevant to product delivery as
well. The internet makes the connection between a French consumer and an Egyptian supplier
virtually indistinguishable Irom the connection between a Persian consumer and a Parisian
consumer and Parisian manuIacture.

It can be concluded that there is a lot oI scope oI e- commerce in Pakistan, and most companies
are eager to going to the digital world, but at present due to absence oI any policy Iramework and
limited internet market, companies are holding their plans to start e-business until clouds oI
barriers as discussed are disappeared.
Delayed adaptation oI the Internet and the prohibitive costs involved to have an access to it
including unaIIordable prices oI PCs, hardware, soItware and the internet connection itselI are
the major hindrances to the development oI e-commerce in Pakistan. In addition, poor service
quality due primarily to the Iact that the state-owned Pakistan Telecommunication Company
Limited's (PTCL) inIrastructure is not geared towards high quality Internet service and dearth oI
contents are also restricting development oI e-commerce in the country.
This was pointed out by AIaq Hussain Rizvi while sharing the corporate experience oI
multinational Procter & Gamble Pakistan at the lecture organised by e-Pakistan Initiatives, a
non-proIit organisation which sees % as an elixir Ior all economic woes. The chairman oI the
organisation, Khurram RaIiq, cited dearth oI quality human resources, an almost non-existing
domestic market Ior the locally developed soItware used globally and the unwillingness oI the
domestic soItware houses to use e-commerce as a marketing tool as major obstacles Ior the
development oI an electronic Pakistan. He also introduced AIaq as one oI the pioneer oI the early
data base back in early 1980s.
AIaq, an engineer and a senior % specialist, is currently the % Manager at Procter & Gamble
Pakistan. He has been associated with the P&G Ior over a decade and has served at various
international stations including his immediate past assignment in Saudi Arabia.
hile PG, being a consumer goods company, specialises in developing brands over 300 oI its
brands enable it maintain a heavy household presence worldwide AIaq said that his corporate
experience show that in the % world oI today Iocus is not on brand-related website but rather a
people-related site: 'Our website in Australian is aimed at young Iemales.'
P&G, he said, is engaged in three types oI business activities in Pakistan local manuIacturing
and packaging plant at Hub near Karachi, local contract manuIacturing and importing and
marketing items produced at one oI its plants overseas. He claimed that P&G's Ariel detergent
and Pampers diaper are leader in their respective markets while it enjoys halI oI all the shampoo
market in Pakistan
Talking about the beneIits oI the e-commerce, he narrated some interesting Iacts. The IBM, he
said, saved some $ 4.2 billion by redesigning the Internet procurement processing by using e-
commerce around web-based technology. In the contemporary physical world oI today, he
added, 15 per cent oI total payment transactions are done through credit cards compared to the
Internet realm where 99 per cent oI the Iinancial payments are done through credit cards.
This also explains the reason Ior the massive credit card transactions oI $ 6 billion last per year
between the US and UK oI which $ 585 million took place in December 1999 alone, as the
Iigures given by AIaq.
In addition, e-commerce oIIers unmatched savings in terms oI transaction costs it costs just
about a cent to do a single transaction over the www compared to an average oI $ 1.13 through a
bank, $ 0.54 over the telephone or $ 0.25 through the PC/soItware, he added.
Saying that the number oI Internet users is projected to surpass 280 million by end this year,
AIaq added that 56 per cent oI the Internet users are non-US. Putting the number oI websites at 4
million around the world he expressed apprehensions at an acutely low Internet penetration in
Pakistan at just 0.4 per cent, a negligible low compared to 30 per cent in the developed world.
He said that indicators show that e-commerce will enjoy exponential growth in the coming years
it stood at $ 180 billion globally in 1999 and is expected to surpass $ 1,300 billion by end
2002. Business-to-Business e-commerce is projected to grow ten-times than the Business-to-
Consumer, he added. The question is: ill Pakistan beneIit Irom it?
Observers say that the creation oI a massive % awareness alone will not help the country to share
even a small percentage oI the massive global e-commerce market the reasons oI which are
highlighted at the opening oI this article. An example given by AIaq can explain why not.
Internet was introduced in Saudi Arabia in January 1999. During the Iirst year the number oI
registered internet users in the Kingdom surpassed the target set Ior that initial year Irom
50,000 to 200,000. In two years since, by end last year, number oI internet users in Saudi Arabia
crossed 400,000 which is more than the registered users in the much more populous Pakistan.
AIaq attributed the rapid growth in number oI registered internet users in Saudi Arabia on one
simple Iact per capita income in Saudi Arabia is IiIteen-times that in Pakistan. In addition,
while the local banking sector like their counterpart in the developed world has decided to play a
pioneering role in the development oI the e-commerce much remains to be done to expand the
base oI credit card use in the country one oI the major prerequisite. As is 42 per cent oI
people in the developed world don't trust using credit card Ior an e-commerce transaction due to
concerns about conIidentiality and misuse.




sComparison of Indian Ecommerce Industry with Pakistan
Internet has changed the way people used to do business. It has transIormed the whole business
landscape Ior both individuals and businesses. According to Internet orld Stats, 2010 Internet
users in Pakistan have increased signiIicantly Irom 2000 to 2009 by 133,900 to 18,500,000
respectively. Though the E-commerce trend is still in immaturity stage in Pakistan, increase in
the internet users opened many opportunities Ior business-to-business, business-to-consumer and
peer-to-peer e-commerce in Pakistan providing products and services to a great segment oI
population. Rozee.pk, Pakheels.com and Beliscity.com are Iew examples oI E-
Business Success in Pakistan.

Coming to India, it is showing tremendous growth in the Ecommerce. Tradeindia.com one oI the
major ecommerce portal in India has about one million registered buyers and it has the growth
rate oI 35 every. Indiamart.com claims revenues oI Rs. 3.8 billion and has a growth rate oI
50 every year. ith the middle class oI 288 million people, online shopping shows unlimited
potential in India. Today E-commerce is a byword in Indian society and it has become an
integral part oI daily liIe in the country.

The people in Pakistan are slowly getting aware oI the Iact that business on the internet is less
costly and are more beneIicial while in India this awareness is speedy. Pakistan has a number oI
barriers to electronic commerce, including inadequate inIrastructure, lack oI security Ior online
transactions and comparatively less awareness. Pakistan also Iaces less government support Ior
online projects, while Indian organizations are Iully supported by government. The inIrastructure
in India is much better due to Ioreign Iunding, availability oI low cost resources and better
communication setup.
What Pakistan Needs to Boost Ecommerce in the Country:
In order to bridge the divide, Pakistan needs to Iollow a pragmatic approach improving on some
iI not all oI the Iollowing measures.
Connectivity Networks to be available easily, i.e. affordable access.
E-leadership #eadiness to be a national priority lead by people with strong practical
experience.
E-Business Climate tll be the ultimate result of eadership. %he healthier the
usiness Climate is, the better growth industry will see.
Broadband subscribers ntroduce more economical broadband services. #ecently the
have been introduced but pale when in comparison to what the first world nations offer to
their citi:ens.
Knowledge !eople should be more computer literate. !ractical use of computers to
made compulsory at school and college level.
Improved Security overnment should encourage usage and ensure that security
related issues are not a cause of concern which hinders adoption.
Cyber Crime radication. overnment should take serious action against cyber crimes.
%he regulated cyber space will not open the doors for locals to shop safely but will also
encourage foreign investments