Pakistan’s e-commerce Market is worth $7 billion and is projected to cross $9 billion by 2027, but it’s little more than 0.1 percent share of the global market of $5 trillion.
It has been one of the most funded verticals in the ecosystem over the years and also the earliest one, but there are still concerns that despite its evolution into niche players, fundamental problems still prevail.
How you end up receiving your order is a big part of the customer experience in e-commerce and how swiftly the seller gets their capital back to reinvest in the business is also a big part of their business but in between, sits Pakistan 3PL industry where nobody has been able to capture the market.
In addition to legacy players like Pakistan Post, TCS Express, M&P and Leopards Courier Services, some new startups like Trax and PostEx are also gaining traction with tech adoption. Lastly, some mobility and food delivery companies have also their own logistics wings like Bykea, InDriver, and PandaGo have also ventured into this space.
Key indicators like fulfillment time, fulfillment success rate, and the percentage of cash on delivery (CoD) orders have improved but core problems and resistance to digital payments have been dragging the industry since its inception and through a number of new players coming into the courier industry, it’s still an uphill battle for these companies to scale.
Why Need a Trade Body?
The challenges encountered by the sellers and consumers in dispatching and receiving the orders are numerous. The biggest cited problem is courier companies even the names, holding payments for sellers for as long as two weeks which is of course because some of them are having their own liquidity problems that they are failing to address over the years.
Courier companies also often find themselves cutting their prices out of competition and not just with each other since there is no barrier to entry. A few riders can get together and start deliveries for a zone at unimaginably low prices and businesses also opt for them to cut their own costs only to lose their whole money when such ‘companies’ sometimes disappear after collecting CoD payments for some time.
The problem at the moment is the price war and industry is suffering because of it and that is because there is no barrier to entry whether it’s domestic or international which is critical to put a check and balance in place,” said Amir Basrai, CEO Penta Express talking to ProPakistani.
He added that they operate in five countries other than Pakistan and all have their respective association or regulatory body except Pakistan. He pointed out that there has to be a set price where you cannot operate below that bar and that is an industry practice internationally with severe punishments for violators.
He also that industrial trade bodies or organizations will bring the industry on one page, and it will also be better to have a single voice or platform to discuss matters with respective authorities, especially regarding customs in the case of international couriers.
Lost In Transit
I’m sure some of you must have ordered something online only to get a call from the rider of a courier company that he is in a nearby street, and you can come to take the parcel from him or better, pick up the order from their office. It adds to a terrible experience in a space where the customer is always looking for more comfort.
Sellers we talked to stated that their return ratios are only higher due to the unprofessional riders and inefficiency in courier management. The rider will have an argument with the consumer over who should come to the other and after a disagreement, will mark that the consumer refused to receive only for the seller to find out later that it was the courier.
“There are still several bottlenecks in the industry with respect to tracking, inventory management solutions, capacity constraints, and lack of integration between different tech stacks of e-commerce and logistics players,” said Rauff Hanif, a fellow at Reflect Ventures.
He said that although the portion of digital payments has improved over time, there still needs to be increased transparency and more efforts in regard to promoting digital payments and documentation of the industry.
Basrai pointed out that 74 percent of their orders are on cash delivery payments while 25 percent are through unorganized ways of payments i.e., direct bank transfers to sellers while only 1 percent are through cards and the industry can hardly grow like this.
He also revealed that their average fulfillment time is 2–4 days with up to 93 percent fulfillment success rate which I personally believe is an improvement over the industry averages a few years back.
“Cash on delivery has also a cost to it with theft and other factors due to which rider management gets tough. You also need the capital back in your account as soon as possible to reinvest in the business. The question is whether and how consumers will accept these payment gateways.”, added Basrai.
There also seems to be a lack of reverse pick-up service & replacement and built-in functionality on the portals to check whether customers can open the parcel or not. Riders or customers will have to call support to confirm which adds to a lot of friction in the process.
On the other hand, our consumers have not matured a lot as well since the dawn of civilization. Some order stuff online but would stall the delivery for days for weird reasons and after that would decline outright. There is also the problem of informal addresses that makes it all more of a cultural problem rather than a technical one.
‘Delivering’ Confidence
Some new players like Trax are solving some problems like the delay of payments, reverse pick-up, and high return ratios and at least the sellers seemed really satisfied with their services. But new players have a concentrated footprint for now.
Trax claims to serve 650+ destinations nationwide on its website while the legacy companies cover nearly two to three times this number and here comes the issue of scalability.
When TCS and other players scaled nationwide and even in rural areas, there were hardly any costs in operating or having a franchising model there, but it does not make economic sense in current times. The business has evolved from traditional envelopes, small parcels, letters and gifts. Startups also have to move more cautiously in the current startup funding environment.
More than two decades since the inception of e-commerce in Pakistan and we still hear stories of people ordering one thing and getting another.
It’s important because it hurts the trust of the consumer in the ecosystem and is one of many reasons digital payments are still nowhere near getting their rightful share in the market since consumer fears he or they may not get the appropriate customer service if the amount is paid upfront.
So, somebody has to regulate this space, and it’s better that the retail e-commerce and courier industry comes together and do it on its own than to expect the government which often does more harm than good. It will also enable streamlining the penetration of payment gateways by imparting trust with consumers in the ecosystem and payment gateways.
There is also a need to be done something about upscaling riders professionally to provide a better experience to the consumers, so they don’t regret ordering something online.
Tracking and backend management has also a lot of gaps as well as parcels are often missing from both ends and would be returned to the seller without a reason.
The cost of establishing brick-and-mortar retail has skyrocketed over the years and since Pakistan is not getting any cheaper with time, e-commerce presents the only viable way for people with business instincts and unique product ideas to start their venture but unless the above problems are fixed, it will be a distant dream.
